1. Bank Fraud Modus Kinds

7/28/2019 1. Bank Fraud Modus Kinds

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BANK FRAUDSGeneral kinds and

other forms ofmodus operandi


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Bank fraud is the use of fraudulentmeans to obtain money, assets, or other

property owned or held by a financialinstitution, or to obtain money fromdepositors by fraudulently representing tobe a bank or financial institution.In manyinstances, bank fraud is a criminal

offense. While the specific elements of aparticular banking fraud law varybetween jurisdictions, the term bankfraud applies to actions that employ a

scheme or artifice, as opposed to bankrobbery or theft. For this reason, bankfraud is sometimes considered a white-collar crime.
http://en.wikipedia.org/wiki/Bankhttp://en.wikipedia.org/wiki/Fraudhttp://en.wikipedia.org/wiki/White-collar_crimehttp://en.wikipedia.org/wiki/White-collar_crimehttp://en.wikipedia.org/wiki/White-collar_crimehttp://en.wikipedia.org/wiki/White-collar_crimehttp://en.wikipedia.org/wiki/White-collar_crimehttp://en.wikipedia.org/wiki/White-collar_crimehttp://en.wikipedia.org/wiki/White-collar_crimehttp://en.wikipedia.org/wiki/Fraudhttp://en.wikipedia.org/wiki/Bank


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TYPES OF FRAUD

A. Internal Fraud perpetrated by Bank personnel orinsider.

B. External Fraud frauds committed by non- bank

personnel or outside parties.

C. Collusive and organized group in collusion with

Bank personnel.


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Mechanics of bank fraud against banks

1. Stolen checksSome fraudsters obtain access to facilities handling large numbers ofchecks, such as a mailroom or post office or the offices of a tax

authority (receiving many checks) or a corporate payroll or a social orveterans' benefit office (issuing many checks). A few checks gomissing; accounts are then opened under assumed names and thechecks (often tampered or altered in some way) deposited so that themoney can then be withdrawn by thieves. Stolen blank checkbooks

are also of value to forgers who then sign as if they were the depositor
http://en.wikipedia.org/wiki/Chequehttp://en.wikipedia.org/wiki/Cheque


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2. Cheque kiting

Cheque kiting exploits asystem in which, when acheque is deposited to a

bank account, the money ismade availableimmediately even though it

is not removed from theaccount on which thecheque is drawn until thecheque actually clears.
http://en.wikipedia.org/wiki/Cheque_kitinghttp://en.wikipedia.org/wiki/Cheque_kitinghttp://en.wikipedia.org/wiki/Cheque_kitinghttp://en.wikipedia.org/wiki/Cheque_kiting


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3. Forgery and altered

cheques

Thieves have altered cheques to changethe name (in order to deposit chequesintended for payment to someone else) orthe amount on the face of cheques,simple altering can change $100.00 into$100,000.00, although transactions of thisvalue are subject to investigation as a

precaution to prevent fraud as policy.

Instead of tampering with a real cheque,some fraudsters will attempt to forge adepositor's signature on a blank chequeor even print their own cheques drawn on

accounts owned by others, non-existentaccounts or even alleged accountsowned by non-existent depositors. Thecheque will then be deposited to anotherbank and the money withdrawn beforethe cheque can be returned as invalid orfor non-sufficient funds.


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4. Accounting fraud cooked

books

In order to hide serious financialproblems, some businesses havebeen known to use fraudulentbookkeeping to overstate sales andincome, inflate the worth of the

company's assets or state a profitwhen the company is operating at aloss. These tampered records arethen used to seek investment in the

company's bond or security issues orto make fraudulent loan applicationsin a final attempt to obtain moremoney to delay the inevitablecollapse of an unprofitable ormismanaged firm.


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5. Fraudulent loans

One way to remove money from a bank is to take out aloan, a practice bankers would be more than willing toencourage if they know that the money will be repaid in

full with interest. A fraudulent loan, however, is one inwhich the borrower is a business entity controlled by adishonest bank officer or an accomplice; the "borrower"then declares bankruptcy or vanishes and the money is

gone. The borrower may even be a non-existent entityand the loan merely an artifice to conceal a theft of alarge sum of money from the bank.


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6. Fraudulent loan applications

These take a number of forms varying fromindividuals using false information to hide acredit history filled with financial problems andunpaid loans to corporations using accounting

fraud to overstate profits in order to make arisky loan appear to be a sound investment forthe bank.


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7. Forged or fraudulent

documents

Forged documents are often used toconceal other thefts; banks tend tocount their money meticulously so

every penny must be accounted for. Adocument claiming that a sum ofmoney has been borrowed as a loan,withdrawn by an individual depositoror transferred or invested can

therefore be valuable to a thief whowishes to conceal the minor detailthat the bank's money has in factbeen stolen and is now gone.


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8. Impersonation

Impersonation has become an increasing problem; the

scam operates by obtaining information about an individual,then using the information to apply for identity cards,accounts and credit in that person's name. Often little morethan name, parents' name, date and place of birth are

sufficient to obtain a birth certificate; each documentobtained then is used as identification in order to obtainmore identity documents. Government-issued standardidentification numbers such as "social security numbers" arealso valuable to the fraudster.Information may be obtained from insiders (such asdishonest bank or government employees), by fraudulentoffers for employment or investments (in which the victim isasked for a long list of personal information) or by sending

forged bank or taxation correspondence.
http://en.wikipedia.org/wiki/Social_securityhttp://en.wikipedia.org/wiki/Social_securityhttp://en.wikipedia.org/wiki/Social_securityhttp://en.wikipedia.org/wiki/Social_security


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9. Money laundering

Main article: Money launderingThe term "money laundering" datesback to the days ofAl Capone; Moneylaundering has since been used todescribe any scheme by which the trueorigin of funds is hidden or concealed.

While Money Laundering is not a formof bank fraud, the two crimes are oftencommitted together. Criminals oftencommit fraud or other financial crimesand then will launder the funds in order

to disassociate the proceeds from thecriminal activity through which theywere gained. Thus, fraud is consideredby the FBI as a "predecessor" or"collateral" crime to Money Laundering
http://en.wikipedia.org/wiki/Money_launderinghttp://en.wikipedia.org/wiki/Money_launderinghttp://en.wikipedia.org/wiki/Al_Caponehttp://en.wikipedia.org/wiki/Al_Caponehttp://en.wikipedia.org/wiki/Al_Caponehttp://en.wikipedia.org/wiki/Al_Caponehttp://en.wikipedia.org/wiki/Money_launderinghttp://en.wikipedia.org/wiki/Money_launderinghttp://en.wikipedia.org/wiki/Money_launderinghttp://en.wikipedia.org/wiki/Money_launderinghttp://en.wikipedia.org/wiki/Money_launderinghttp://en.wikipedia.org/wiki/Money_laundering


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10. Lapping or misappropriation of cash

receipts and deposits

This is done by Tellers and field Collectors by

withholding cash receipts/deposits for personal use.

Restitution is made by withholding a subsequent cash

receipt/deposit of equal or greater amount, andmisappropriating the difference. The deposit slip bears a more

recent date.

Detection:

> comparing the dates of the official receipts issued against dateswhen deposits/receipts are booked.

> direct confirmation with clients.

> complaint of the client with the Bank.


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WHY EMPLOYEES COMMIT FRAUDS?

A. Laxity in Bank ControlsB. Dire Need of money combined with opportunity

- illness of family member

- gambling

- lifestyle upkeep /high maintenance- over indebtedness

C. Greed or envy

D. Stealing for love

E. Perceived low chance of detectionF. Work culture taking from superiors

negligence or tolerance


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SOME DETERRENTS TO COMMISSION OF FRAUDS

1. Elimination of opportunity

2. Consistent adherence to

prescribed internal controls

3. Self-Audit/ daily review of daily

transactions by branch officers.

4. Managers/officers knowledge

of various modus operandi of

frauds.

5. Officers display of exemplary honesty

and integrity.


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6. Continuing seminar on internal controls.

7. Fair salary scale and benefits package comparablewith other similar institutions.

8. Fair chance for advancement of everybody.

9. Stiff penalty.

10. Fast investigation/immediate action.


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DISCOVERY OF FRAUDS

Frauds are discovered by Auditors, self-audit by branch, anonymous letter, or

Self confession.

Internal auditors unearth frauds usually due to element of SURPRISE and RANDOM

Review of daily transactions.

Branch discovers irregularities thru self-audit, review of daily transactions,

complaints from clients and job rotation of personnel holding sensitive positions.


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SYMPTOMS OR DANGER

SIGNS OF FRAUD

Unbalanced book of accountsBorrowing regularly small amounts from fellow employees.

Placing unauthorized I.O.U. in his cash accountabilities

Excessive gambling

Associating with questionable characters

Acquiring assets beyond salary capacity

Refusing to take vacations and promotions

Carrying unusual amount of money

Rewriting records under the guise of neatness.

Documents

1. Bank Fraud Modus Kinds