Types of Bank Fraud

Banking fraud is any falsification, theft, misinformation or otherwise illegal method used to obtain money through or from a federally regulated banking system. According to Title 18 of the U.S. Code, bank fraud is punishable by 30 years in prison and/or $1 million in financial penalty. Bank fraud costs the financial industry billions of dollars annually and can be perpetrated by bank employees, bank customers, third parties, or organized crime rings.

Different types of bank fraud may involve various forms of identity theft and can be divided into five categories including electronic, check, international, loan and credit card fraud. Accounting and securities fraud may operate independently of, or in conjunction with the following types of bank fraud. Suspected bank fraud can be reported to the Financial Fraud Enforcement Task Force.

• Electronic bank fraud

Electronic bank fraud can involve identity theft via interception of online banking data or unauthorized wiring of money via a financial institution. Trojan horses, and phishing schemes make use of email to install and manipulate unsuspecting people into divulging personal financial information. After information is obtained, the parties in illegal possession of banking information may then attempt to use it to deceitfully obtain funds.   

• Check fraud

Check fraud has been in existence as long as checks have and has many methods. Some of these methods of bank fraud include counterfeit checks, check kiting, and altering checks.  According to the U.S. Department of the Treasury’s Office of the Comptroller of Currency, organized crime gangs also make use of check fraud to target corporate accounts. A number of methods are employed to prevent check fraud, but the safest way to avoid being victimized by it is to not use checks.

• International bank fraud

International bank fraud may combine check fraud with offshore banking fraud in the form of false lottery payments or check payments.  For example, an alleged lottery winner may be required to provide an upfront fee or transfer of money before the deposited check is identified as fake. When the money doesn’t materialize, the criminal may be long gone with your money. The use of offshore banking institutions may also constitute bank fraud if it involves tax evasion. ‘Prime Bank Fraud’ is also a form of international bank fraud that promises high yields of return for upfront costs via investment in ‘international securities’ that don’t actually exist.

• Loan fraud

Loan fraud may be conducted on the part of financial institutions and borrowers. In the case of borrowers, loan applications may contain false information so as to propel the bank of a false financial security. On the other hand, banks may also defraud borrowers as is the case with mortgage fraud. The U.S. Federal Bureau of Investigation (FBI) tracks and reports information on this and other types of fraud on its website. Mortgage fraud misleads borrowers regarding the terms and costs of a loan product for the purpose of inappropriately or abusively generating revenue.

• Credit card fraud

Credit card fraud is perpetrated when identify theft or false identity is used to unlawfully obtain funds from financial institution via credit card. In many cases of credit card fraud, the card or the identity of the card holder is intercepted using any number of techniques including  sale of false products, phishing, skimming, and mail theft.

1. http://bit.ly/bmmwYX (Federal Bureau of Investigation)
2. http://bit.ly/aBlwo3 (U.S. Treasury Comptroller of Currency)
3. http://bit.ly/ctN5fe (Office of the Comptroller of Currency)
4. http://bit.ly/b8q0PO (spamlaws.com)
5. http://bit.ly/dBzUaP (Securities and Exchange Commission)