| According to US federal law, bank fraud is knowingly | | | | done to conceal a theft |
| committing or trying to commit some deceitful | | | | 3. Identity theft - A corrupt bank employee may give |
| scheme to... | | | | personal info to an identity thief who could obtain |
| 1. Defraud a financial institution; or | | | | credit under the victim's name. |
| 2. Obtain funds, assets, credits, etc., under the | | | | 4. Making fraudulent loans - A bogus company or one |
| control or custody of a bank or financial | | | | that soon declares bankruptcy takes out a loan with |
| institutionthrough fraud, misrepresentation, or false | | | | the collusion of a corrupt bank officer. |
| promises. | | | | 5. Rogue trading - Perpetrated by a highly placed |
| The maximum penalty for bank fraud is $1 million. | | | | bank exec, rogue trading involves using the bank's |
| The maximum punishment is 30 years. The court | | | | funds to make speculative investments to make a |
| may mete out one or the other or both. | | | | quick profit. If the speculation pays off, the rogue |
| Not Necessarily a Bank | | | | trader pockets the profits. If losses come one after |
| Although the crime is called "bank fraud", it's a | | | | another, a scandal may ensue, and/or the bank may |
| mistake to assume that the law applies only to fraud | | | | collapse. |
| against banks or financial institutions. The second | | | | 6. Uninsured deposits - Some banks are not licensed |
| subsection of the law also includes funds that are in | | | | to operate and are therefore uninsured (or vice |
| the "control or custody" of the bank. So the bank | | | | versa). For instance, in 2002, a Washington bank |
| need not be the loser in the fraudulent act. | | | | called Chase Trust Bank was found to have no |
| For instance, a perpetrator engages in fraud that | | | | license after it was exposed to be unrelated in any |
| results in victims mailing him checks, which he cashes | | | | way to New York's Chase Manhattan Bank. |
| at a bank and pockets. The perpetrator could be | | | | 7. Wire fraud - Banks use wire networks to conduct |
| charged with bank fraud. Forging checks (or the | | | | business among themselves. Wire transfers are |
| endorsements on them) could also be subject to | | | | nearly impossible to undo and are thus vulnerable to |
| charges of bank fraud. | | | | corrupt insiders. |
| Making False Statements | | | | Outsider Bank Fraud |
| Federal prosecutors often charge perpetrators of | | | | Following are a dozen common schemes perpetrated |
| bank fraud with making false statements to financial | | | | by people who are usually outside the financial |
| institutions. Making such false statements is defined | | | | institution, but nonetheless charged with bank fraud: |
| as | | | | 1. Accounting fraud |
| 1. Knowingly making a false statement, or overvaluing | | | | 2. Booster checks, where un-cleared checks are |
| property | | | | credited to boost a credit balance |
| 2. To influence in any way | | | | 3. Check kiting, where cash that's in transit (i.e., |
| 3. The action of a bank or financial institution. | | | | nonexistent) is stolen |
| This is also a federal crime and carries the same | | | | 4. Duplicating or skimming card data, copying |
| maximum penalties as bank fraud. | | | | magnetic stripe info off a card for duplication |
| Insider Bank Fraud | | | | 5. Forgery or altering checks |
| There are seven bank fraud schemes commonly | | | | 6. Fraudulent loan applications |
| perpetrated by persons operating within a financial | | | | 7. Identity theft |
| institution. These are | | | | 8. Internet fraud |
| 1. Demand draft fraud - Typically perpetrated by a | | | | 9. Money laundering |
| corrupt bank employee who makes a demand draft | | | | 10. Prime bank fraud |
| payable at some distant location without debiting any | | | | 11. Stealing checks |
| account. It's cashed at the remote branch. | | | | 12. |
| 2. Forging or making fraudulent documents - Usually | | | | |