        COMBATING BANK FRAUD IN ARIZONA: A TEAM APPROACH

                               By

                     Howard D. Sukenic, J.D.
                     Deputy County Attorney
             Organized Crime and Racketeering Bureau
                Maricopa County Attorney's Office
                        Phoenix, Arizona

                               and

                      James G. Blake, J.D.
                              Chief
                    Criminal Trials Division
                Maricopa County Attorney's Office
                        Phoenix, Arizona


     Consider the following scenario. You have a classic
automobile for sale, so you place an advertisement in the
newspaper highlighting the car's outstanding characteristics.
Several prospective buyers call you immediately after the ad is
published. Some of the callers come out to see your vehicle and
find that this "dream machine" looks as good as it sounds. A few
even make bids to buy it. The offers are in the acceptable range,
but fall a bit lower than you had hoped, so you hold out for
something better. After all, everything seems to be going your
way up to this point.

     You advertise the car in the paper for another week. If
nothing better is offered, you will accept the best of the
original bids. As soon as the ad comes out in the Sunday paper
the second time, you receive a call from a very excited
prospective buyer. He claims to have been looking for a car like
yours all of his life and would like to see the vehicle right
away. He makes you promise not to accept any offer until the two
of you have met. Bingo! You urge him to hurry over because
several other people have expressed interest in buying the car.

     Rather than risk losing the chance to buy your car, this
prospective buyer instantly makes you an offer over the
phone--the best one yet because it meets your asking price.
Excited, you accept the offer and arrange the details for the
transaction. He will arrive at your home in an hour with a
cashier's check, and you will transfer the title and give him the
keys.

     Precisely 1 hour later, a cab pulls up to your home, and a
well-dressed, clean-cut man in his late twenties steps out. You
exchange small talk as he examines the vehicle. He can barely
contain his excitement at the prospect of owning this car.

     He pulls out a First Interstate Bank cashier's check for
$19,500 and endorses it over to you. The check looks perfect,
just like the cashier's checks you have seen and used in the
past. In return, you sign over the title and hand him the keys.
The new owner drives off, and you pocket the check for deposit
first thing tomorrow morning.

     The next day, you deposit the check. Three days later, the
bank notifies you that a hold has been placed on your account.
Thinking that a cashier's check must be valid, you call the bank
only to discover that the check is a nearly perfect counterfeit
and, therefore, worthless. You have lost the money, and your car
probably has already been cut up for parts or shipped out of the
country.

     How can law enforcement agencies protect consumers and
financial institutions from such deception? In Arizona, several
agencies joined forces to crack down on financial institution
fraud. The Bank Fraud Task Force (BFTF) can serve as a model for
stopping this multimillion dollar criminal enterprise.

THE PEN IS MIGHTIER THAN THE SWORD

     Schemes like this one cost financial institutions more each
year than bank robberies do. According to statistics prepared by
the Arizona Banker's Association, State financial institutions
lost approximately $11.5 million in 1991 to internal and external
fraud. During the same period, losses due to armed robberies
amounted to only about $1 million (1)--less than one-tenth the
amount lost to fraud. These figures clearly show that a little
finesse can be much more profitable than a lot of fire power.

     Financial institution fraud at its most basic level is the
passing of bad checks. Banking officials estimate that
approximately 1 percent of the 50 billion checks written in the
United States each year are returned due to nonsufficient funds
(NSF). This figure translates into about 500 million NSF checks
annually, or roughly 15 every second. (2)

     At its most sophisticated level, financial institution 
fraud includes embezzlement schemes, commercial bribery, and
counterfeiting. The weapons of choice in counterfeiting are
personal computers, laser printers, advanced system copiers, and
scanners. A scanner can reproduce a document, such as a cashier's
check, which can be modified by a computer operator and reprinted
on a laser printer. Such counterfeits can be nearly
indistinguishable from the originals.

     As previously illustrated, a skillful counterfeiter can
strike a chosen target and leave town long before the victim
discovers the deception. When individual law enforcement agencies
investigate fraud cases without conferring with adjoining
jurisdictions, criminals have an added advantage. They can move
from jurisdiction to jurisdiction, commit similar crimes in each
area, and be gone before any single law enforcement agency can
catch them.

THE BANK FRAUD TASK FORCE (BFTF)

     On March 2, 1992, the Law Enforcement Coordinating
Committee's White-Collar Crime Subcommittee established the Bank
Fraud Task Force in Arizona. (3) Participating agencies include
the Phoenix Division of the FBI, the Maricopa County Attorney's
Office, the Phoenix, Tempe, Glendale, Mesa, and Scottsdale Police
Departments, the Arizona Attorney General's Office, and the U.S.
Attorney's Office for the District of Arizona.

     The task force represents a multijurisdictional group of
investigators and prosecutors that addresses the problems of bank
fraud occurring primarily in Maricopa County. (4) The task force
promotes communication and cooperation between law enforcement
agencies and financial institutions in the area. In the past,
overlapping geographical and investigative jurisdictions made the
process for reporting suspected fraudulent activity quite
confusing. Now, financial institutions only need to alert one
investigative agency--the BFTF--of suspected criminal     
activity.

     Perhaps the most unique and important feature of the BFTF
structure is that no additional investigative resources have been
expended as compared with pre-BFTF investigations. Rather, the
same investigators who worked these cases in their respective
agencies have joined together in a team approach. This more
effective approach has increased the quality of investigations,
as well as the total number of indictments and convictions.

     Some of the task force members--prosecutors as well as
investigators--devote all of their time to bank fraud cases.
Others, however, have additional responsibilities within their
respective agencies due to a lower volume of bank fraud matters
in their jurisdictions.

THE BFTF SYSTEM

     Federal law requires banks to report any fraud loss over
$1,000 and every internal theft regardless of the loss amount.
The BFTF receives criminal referral forms directly from financial
institutions statewide. These referrals alert law enforcement
agencies of suspected criminal activity involving federally
insured institutions.

     The financial analyst permanently assigned to the BFTF
conducts an initial examination of all referrals for
completeness, predication, and supporting documentation.
Referrals are opened and assigned to a task force investigator if
the loss exceeds $2,000 and the financial institution provides
enough supporting documentation to conduct a subject interview.
(5) State and local investigators receive case assignments
according to geographical jurisdictions, while FBI investigators
work BFTF matters in all jurisdictions.

     Information on each opened referral is maintained in a
database and updated at each stage of the investigation and
subsequent prosecution. The database includes the subjects'
names, the names and locations of the victim financial
institutions, the amount of each loss, and the type of loss, such
as forgery, counterfeiting, mysterious disappearance, etc.

     The task force publishes this data in a monthly report and
distributes it to members of the Arizona Banker's Association and
to police investigators and prosecutors on the BFTF. Any other
law enforcement or financial agency that wishes to review the
reports can request to receive them.

     The amount of the loss affects the way investigators conduct
their investigations. If the bank loss is more than $2,000 but
less than $25,000, the investigator immediately attempts to
locate and interview the suspect regarding the allegations made
in the referral. If the investigator obtains a confession that
corroborates the allegations, then the case is submitted      
for prosecution without further investigation.

     The task force has found that this fast-track approach
effectively handles a large volume of cases involving smaller
dollar amounts in a short period of time. In these confession
cases, if the defendant does not enter a guilty plea within a
reasonable time period or if the case goes to trial, the BFTF
investigators and financial institutions provide prosecutors with
additional investigative resources.

     Sometimes, of course, suspects do not confess their crimes.
In these cases, investigators conduct more extensive
investigations using traditional techniques, such as fingerprint
analysis, witness interviews, and handwriting analysis.

     The procedure for handling cases involving losses to the
financial institution in excess of $25,000 varies slightly.
Investigators still attempt to locate the suspect immediately for
an interview with the goal of obtaining a corroborative
confession. However, even if a confession is obtained, the
investigator may use expanded investigative and laboratory
techniques--including latent fingerprint analysis, handwriting
analysis, and additional witness interviews--prior to submitting
the case for prosecution. Investigators base their decisions to
use these techniques on the complexity of the case and the
prosecutor's directions.

     The lead prosecutor for each case depends on geographical    
jurisdiction, dollar loss, and availability. The county handles
cases involving internal or external fraud with losses between
$2,000 and $25,000. The U.S. attorney's office prosecutes cases
involving internal fraud with losses between $25,000 and
$300,000, while external fraud cases of the same or greater
magnitude are filed with the county or Federal prosecutor,
depending on who can handle the prosecution more expeditiously.
(6)

RESULTS

     Since its inception, the task force has investigated cases
ranging from NSF checks to the counterfeiting of corporate and
cashier's checks. The BFTF also has investigated and prosecuted a
number of special cases. For example, a commercial bribery case
involved a bank official who solicited a $42,000 bribe from a
contractor. Unfortunately for the banker, the bribe attempt was
recorded on camera.

     In a 24-month period, the BFTF investigated 714 referrals
from financial institutions involving losses of more than $6.8
million and resulting in 164 convictions. The courts ordered
restitution exceeding $3 million due to the BFTF's efforts, and
task force investigators prevented the economic loss of
approximately $1 million.

CONCLUSION

     Prior to the formation of the Bank Fraud Task Force,
financial institutions had to present their cases to several
different local law enforcement agencies. Overlapping
jurisdictions and disparate investigations led to confusion and
delay--two elements that clever criminals used to their
advantage. By the time a local law enforcement agency received a
crime report, the criminals had moved to another jurisdiction to
pull the same scam. 

     With the coordinated efforts of participating agencies, the
BFTF can get on the culprit's trail while it is still hot.
Criminals no longer can use multiple jurisdictions to avoid
detection. Instead of fraud cases' being reported to many
different police agencies, one task force handles them all.

     The previously presented case history clearly illustrates
the BFTF's effectiveness. The fraudulent car buyer did not get
away. Instead, the case went immediately to the BFTF. It was
handled by a BFTF investigator and successfully prosecuted by a
BFTF attorney. Crime did not pay, and the "car buyer" is
currently serving a lengthy prison sentence due to the efforts of
the Bank Fraud Task Force.              


ENDNOTES

     (1)  Arizona Fraud Loss Statistics for 1/1-12/31/91,
prepared by the Arizona Bankers Association (Revised April 29,
1992).

     (2)  Vinse J. Gilliam, "Taking the Bounce Out of Bad
Checks," FBI Law Enforcement Bulletin, October 1991.

     (3)  The Law Enforcement Coordinating Committee (LECC),
established by the U.S. Department of Justice, serves as a forum
for command personnel from all jurisdictions within a State to
discuss crime patterns and common problems and to devise
techniques for combatting these problems.

     (4)  Annual Report on the Bank Fraud Task Force, Law
Enforcement Coordinating Committee, White-Collar Crime
Subcommittee, July 22, 1993.

     (5)  J. Miles Gooderham, "Bank Fraud Task Force Operational
Guidelines" (unpublished internal document), March 2, 1994.

     (6)  Supra note 4.
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