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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/Bank7/28/2019 1. Bank Fraud Modus Kinds
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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opened under assumed names and thechecks (often tampered or altered in some way) deposited so that themoney can then be withdrawn by thieves.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/Cheque7/28/2019 1. Bank Fraud Modus Kinds
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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_kiting7/28/2019 1. Bank Fraud Modus Kinds
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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_security7/28/2019 1. Bank Fraud Modus Kinds
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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_laundering7/28/2019 1. Bank Fraud Modus Kinds
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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.