Banks and financial institutions have substantial access, power, and control over individuals’ wealth and finances. The temptation for some individuals who work at banks or finance institutions to tamper with clients’ accounts and funds sometimes leads to unfortunate circumstances. In general, banking fraud involves the use of illegal means to obtain money, property, or assets held by a bank or financial institution. It also encompasses situations in which an individual falsely poses as a bank for the purpose of obtaining another individual’s investments or deposits.
In virtually every instance, banking fraud constitutes a criminal offense subject to monetary penalties and incarceration. There are many different ways that bank fraud can be carried out. One of the oldest and most traditional forms of banking fraud is money laundering, which was made infamous by Al Capone. Money laundering involves taking large sums of illegally obtained money and filtering it through a legitimate business or source in order to make the money seem legitimately earned, or clean. Common sources of laundered money include drugs and organized crime.
One of the most common incidences of bank fraud is stolen checks. Perpetrators will open bank accounts under false identities and then acquire blank checks from an entity, organization, or individual. Often, employees abuse their access to sensitive financial information at their workplace and steal blank checks from their employers. The perpetrators will fill out the blank checks and deposit them in the falsified bank accounts. Other wrongdoers attempt to make forged or altered checks. For example, if someone finds a lost check, they may attempt to modify the recipient of the check in order to deposit it in their own account or cash it. Forged signatures are another common instance of bank fraud.
Accounting fraud is another common type of banking fraud. Accounting fraud involves modifying, tampering with, or falsifying information in a company’s accounting ledgers and records. Perpetrators can alter the books in order to make it seem like the company is worth more or less than it actually is. Some businesses may use altered books to seek investments, or to fill out loan applications. A popular and well-known example of accounting fraud is the Enron situation, in which Enron was found guilty of “cooking the books” to make it seem like the company made profits each quarter. In reality, the company was severely in debt.
A form of banking fraud that unfortunately affects many individuals is credit card fraud. In some instances, the wrongdoer steals a credit card or fails to destroy a lost credit card found in public. In today’s technological world, wrongdoers need only copy the credit card number and expiration date to make purchases online. Fortunately, many credit card companies employ account monitoring systems that notify a client when unusual spending activity has occurred. Additionally, some individuals seek to obtain funds unlawfully by impersonating a client of a bank. After obtaining some basic information about the individual, the perpetrator can use the information to apply for credit cards, open accounts, and make financial transactions in the victim’s name. In some situations, an employee of a bank or financial institution conspires with the wrongdoer by providing personal account information and details, including social security numbers.
A purely digital form of banking fraud is Internet fraud, or phishing. Phishing operations send fake email messages to individuals that appear to be from the individual’s bank or financial institution. The email typically instructs the recipient to go to a fake website for the purpose of entering personal data and information. These websites can be very deceptive, often appearing to be legitimate websites for the individual’s bank. There are a number of other Internet-based banking fraud schemes, including viruses that search unsuspecting users’ computers for the purpose of locating personal information stored on the computer’s hard drive.