Bank fraud is a crime that has been around as long as banks themselves. Anytime there is a large amount of money floating around, there are going to be people trying to figure out ways to get to it.In the United States, and most other developed countries, bank fraud is a serious problem that causes billions of dollars in damages every year, and is considered a federal offense. In China bank fraud is even punishable by death.Bank fraud is defined as attempting to wrongfully take money or property from a Federally insured financial institution. That doesn’t mean the banks are the only victims though. Millions of people every year fall victim to monetary damages that are caused by bank fraud.
There are two main categories when it comes to bank fraud, but there are countless ways that the crime can occur. Types of bank fraud can be categorized to inside and outside bank fraud.
Insider Bank Fraud
Insider bank fraud is perpetrated by someone who works inside, or has access to restricted areas or information inside of the financial institution. Insider bank fraud can be difficult for banks to defend against, since so many people are put in a position of responsibility with the banks money. Some of the more common forms of insider fraud are:
- Identity Theftt: When a bank employee steals personal information from customers in order to sell the information or to make fraudulent purchases using a stolen identity.
- Illegal Insider Trading: This occurs when an insider has authority to make investments on behalf of the bank, and engages in high risk trades without the bank being aware of it. A series of illegal trades gone wrong can cause enough damage to put a bank out of business.
- Fraudulent Loans: Fraudulent loans can occur when a loan officer within a bank forges documents, creates false entities, or lies about the ability of the applicant to repay in order to “borrow” a sum of money from the bank that they never intend to repay.
- Fraudulent Institutions: This is a form of fraud where an entire bank is fraudulently created. The bank is illegal, and uninsured. The scam revolves around people making uninsured deposits to the bank, only to have the bank, along with their money, eventually disappear.
- Forged Documents: A forged document claiming that a sum of money has been transferred to another account or something similar can be valuable to a con artist who doesn’t want the bank to notice any missing money.
- Wire Fraud: It’s common place for banks to wire large sums of money on a daily basis. An insider can fraudulently wire money to a personal account at an offshore bank. It may take a bank months or even longer to notice the missing funds.
Whenever people are put in a position to handle large amounts of money, and the opportunity for fraud presents itself, it is always a serious threat. Banks and financial institutions are constantly updating security to prevent insider fraud. The documented cases of fraud have been on the decline over the last couple of decades. While computer tracking and improved security certainly deter fraudulent practices, the threat still exists, and insider fraud still occurs on a regular basis.
Fraud Perpetrated By Outside Parties
Bank fraud is not limited to those working inside the institutions. Banks, and their customers, have been long time targets for con artists. Here are some of the more common ways that fraud can be accomplished by individuals without insider access to the banks.
- Check Fraud: There are a variety of ways to commit check fraud. The basic premise is that a check is forged, or deposited and then withdrawn before the check can be returned for non sufficient funds.
- Credit Card Fraud: Credit card fraud is a very common crime. Credit cards can be stolen or created with a fake identity. Thousands of dollars can be fraudulently spent before the bank or the victim catches on.
- Fraudulent Accounting: Documents can be forged to inflate the perceived value of a company. This is used to attract large investments from the banks, when in reality the company may be worthless and never intends on giving the bank any return on their investment.
- Stealing Identities: Identity theft doesn’t only happen due to banking insiders. Personal information may be stolen via fake documents, phishing for information on the internet, through computer systems, or through various other avenues. The information is then used to take out loans or apply for credit cards using the victims personal information.
- Money Laundering: Money laundering simply refers to hiding the source where a sum of money originates. There are many ways for someone to launder money through a bank. Purchasing and selling securities, using the funds as collateral on the loans, and even writing off the money as business expenses are all common forms of money laundering.
Protecting Yourself From Bank Fraud
While the term “bank fraud” refers to criminals stealing money from financial institutions, that doesn’t mean their aren’t individual victims as well. For most people, the biggest threat is having their identity stolen. Once a thief gets a hold of your personal information, they may take out loans or make credit card purchases in your name. In many cases by the time anyone catches the fraud, the thief has already made off with thousands of dollars. This results in a loss of finances as well as damaged credit that may take years to repair for the victim. The best way to attain optimum ID theft protection is to closely monitor your credit reports and bank statements. If you see anything suspicious, or lose any personal information, report it to your bank at once.