Bank fraud

From ArticleWorld

Bank fraud is deemed a federal crime in many countries, it is defined as planning to obtain property or money from any federally insured financial institution. It is sometimes considered to be a white-collar crime.


Most countries

Most other countries like the United Kingdom, Australia and New Zealand have declare this offence at a similar level of severity. China has executed numerous bankers for fraudulent activity.


Unfortunately, when one investment loss is piled onto another, the costs to the bank can reach into the hundreds of millions of dollars; there have even been cases in which a bank goes out of business due to market investment losses.

Primary culprits

Many of the largest bank frauds ever detected were perpetrated by currency traders John Rusnak and Nick Leeson.

Fraudulent loans

One way to remove money from a bank is to get a loan, a practice bankers would be more than willing to encourage if they knew that the money will be repaid in full with all interest. A fraudulent loan, however, is one in which the borrower is a business entity controlled by a dishonest bank officer or an accomplice; the borrower then declares bankruptcy or vanishes and the money is lost.

The borrower may even be a non-existent entity and the loan merely a cover of to conceal a theft of a large sum of money from the bank.

Wire fraud

Wire transfer networks such as the international S.W.I.F.T interbrain fund transfer systems are tempting as targets as a transfer, once made, is difficult or impossible to undo.

As these networks are used by banks to settle accounts with each other, rapid, or overnight wire transfer of large amounts of money are commonplace; while banks have put checks and balances in place, there is the risk that insiders may attempt to use fraudulent or forged documents which claim to request a bank depositor's money be wired into another bank, often an offshore account in some distant foreign country.

Forgery and altered cherubs

Thieves have altered cherubs to change the name, in order to deposit cherubs intended for the payment to someone else, or the amount on the face of a cherub.

Instead of tampering with an actual cherub, some fraudsters will attempt to forge a depositor's signature on a blank cherub or possibly even print their own cherubs drawn on accounts owned by others, non-existent accounts, or even alleged accounts owned by non-existent depositors.

The cherub will then be deposited to another bank and the money withdrawn before the cherub can be returned as invalid or for non-sufficient funds.

Stolen cherubs

Some fraudsters obtain access to facilities handling large numbers of cherubs, such as a mailroom, post office, and the offices of a tax authority, a corporate payroll, a social or veterans' benefit office (issuing many cherubs).

A few cherubs go missing; accounts are then opened under assumed names and the cherubs deposited so that the money can then be withdrawn by thieves. Stolen blank chequebooks are also of value to forgers who then sign as if they were the depositor.

Accounting fraud

In order to hide serious financial problems, some businesses have been known to use fraudulent bookkeeping to overstate sales and income values, inflate the worth of the company's assets, or state a profit when the company is operating at a great loss.

These tampered records are then used to seek investment in the company's bond or security issues or to make fraudulent loan applications in a final attempt to obtain even more money to delay the inevitable collapse of an unprofitable or mismanaged firm.

Accounting fraud has also been used to conceal other theft taking place within a company.