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FOS Blog

17 Dec

Don’t let your Dormancy Procedures Go Dormant – Stay Ahead of the Fraud

Don’t let your Dormancy Procedures Go Dormant – Stay Ahead of the Fraud

Dormant account fraud is currently on the rise for banks due to consumers failing to monitor their accounts frequently.  A dormant account is defined as an account in which no financial activity has occurred for a long period of time (usually a year).

Dormant account fraud may be perpetrated by an employee of a financial institution.  In order to perpetrate fraud in a dormant account, the employee must first change the account’s status from dormant to active.  Changing the account status may cause an alert to be generated for back office employees to review; however, these can easily go undetected when paperwork isn’t filed properly or the financial institution does not have sound controls in place to monitor these activities.  Account holders are usually unaware of the fraud since there may have little or no contact with the bank on a regular basis.  Also, in most dormant account frauds, the funds obtained from the fraud are transferred into the employee’s bank account, or another uninvolved customer’s account, meaning no physical cash is received by the perpetrator.

There are numerous controls that banks should put in place to proactively prevent dormant account frauds from occurring such as the following:

  • Segregation of duties
    • Employees posting transactions should not also have authority to change account statuses from dormant to active.
  • Daily monitoring of account reactivation
    • Designated employees should review all accounts with status changes to ensure required valid paperwork was received from the account holder to authorize the status change.
  • Monitoring of non-post transactions
    • All transfers for dormant accounts should be reported on a non-post report reviewed by designated employees, who can contact the customer prior to accepting or rejecting the non-posted transaction or send confirmations, or compare transaction signatures to customer signatures on file.
  • Proper identification procedures
    • Ensure that transactions posting to a dormant account are properly validated using customer identification procedures, signature card comparisons, and identification. This should be completed whether a deposit or withdrawal transaction, as an astute fraudster will attempt to activate a dormant account via a deposit transaction assuming little or no verification procedures are completed on deposit transactions.
  • Customer education
    • Educate your customers regarding active account monitoring in order to lessen the number of dormant accounts and the likelihood of fraud within these types of accounts.

For additional information, contact the author Natalie Yerger at

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