References, References, References

One simple thing would cut down on bank fraud: references. Whether you do it by legislation, or just by persuading the banks to require it, no line of credit and no new bank account should be approved online or over the phone unless the institution asks for and checks out two or three references.

"Nate McElowoi just applied for a debit card at our bank. Do you know Nate? Do you know if he is applying for a debit card?"

Obviously, you've got to call your friend up and let him know the bank will be calling. Your friend won't know you are applying for a card unless you tell him.

It is too easy for a fraudster to steal name, social, and address, and then get an account. Making him provide his own phone number and email address does help. And, banks do do that.

But here's why references would be beneficial: It would mean the criminal would have to find someone to participate in his or her crime, and it would provide more of a trail when the account is fraudulently opened. 

Two references, each providing their name, phone number, and email address. And, of course, the bank is required to check them before opening the account. Then, a third reference, providing name and phone number. The bank sends a letter out to this reference with a stamped return envelope. Of course, this reference would not return until after the bank account has been issued. And, yes, the criminal could simply not answer the letter, since the account is already approved. But, the bank would suspend the account and start investigating if there was not a quick response.

Perhaps even better would be to have people protect their identity by having their personal references on file with a credit bureau. When the bank runs a credit check, Equafax provides the references that are on file, and the bank immediately contacts them. That would prevent the criminal from providing false references. 

So, do both. Require references from the applicant when she or he applies for an account, and encourage people to have references on file with Equifax, TransUnion or Experian.