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