BIFRANCHISE
| Joined: | 2009-02-16 |
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| Posts: | 1281 |
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Financial Institution – organization engaged in receiving, collecting, transferring, paying, lending, investing, dealing, exchanging, and servicing money and claims to money. There are several types of financial institutions, such as banks, trust companies, credit unions, insurance companies, and other repositories. There are several schemes associated with the Financial Institutions Frauds:
1. Embezzlement – fraudulent appropriation of funds or property entrusted to one’s care but actually owned by someone else. There are various embezzlement schemes which have been utilized over time:
a. False Accounting Entries – debiting the general ledger to credit their own accounts or cover up customer account thefts.
b. Unauthorized Withdrawals – making unauthorized withdrawals from customer accounts.
c. Unauthorized Disbursement of Funds to Outsiders – cashing stolen and/or counterfeit items for outside accomplices.
d. Paying Personal Expenses from Bank Funds – causing bank to pay personal bills, then charging these amounts to bank expense accounts.
e. Theft of Physical Property – removing office equipment, building materials, and furnishings from bank premises.
f. Moving Money from Customers’ Dormant or Inactive Accounts – creating journal entries or transfer orders not initiated by customers to move money among accounts.
g. Unauthorized, Unrecorded Cash Payments – causing cash to be disbursed directly to self or accomplices and not recording the disbursements.
h. Theft and Other Unauthorized Use of Collateral – stealing, selling, or using collateral or repossessed property for themselves or accomplices.
2. Loan Fraud – is the HIGHEST risk area for financial institutions. Losses reported by financial institutions in the (both banks and savings and loans) are in the billions. Most financial institutions invest heavily in real estate transactions; a substantial portion of these losses relate to real estate loans. Common Loan Fraud Schemes:
a. Loans to Non-existent Borrowers – knowingly or unknowingly accepting false or inaccurate applications.
b. Sham Loans with Kickbacks and Diversion – making loans to accomplices who then share all or part of the proceeds with the lending officer. In some instances, the loans are charged off as bad debts; in other instances, the bogus loans are paid off with the proceeds of new fraudulent loans.
c. Double-Pledging Collateral – pledging the same collateral with different lenders before liens are recorded and without telling the lenders.
d. Reciprocal Loan Arrangements – causing banks to lend funds to the others, or sell loans to other banks with agreements to buy their loans—all for the purpose of concealing loans and sales.
e. Swapping Bad Loans (a.k.a. “Daisy Chains”) – buying, selling, and/or swapping bank’s bad loans for the bad loans of another bank, creating new documentation in the process and thus masking and/or hiding bad loans by making them look like they are recent and/or good ones.
f. Linked Financing – offering large and usually brokered deposits to a bank on the condition that loans are made to particular persons affiliated with the deposit broker.
g. False Applications with False Credit Information – providing false information about one’s credit situation, and/or overstating the assets.
h. Single-Family Housing Loan Fraud – misrepresenting personal creditworthiness, overstating ability to pay, and falsifying characteristics of the housing unit.
i. Construction (a.k.a. STORY) Loans – loans based on the STORY behind the planned construction before they're willing to loan the money. Because it's a story loan, it's not going to be standardized like mortgage loans. Construction loans typically require interest-only payments during construction and become due upon completion. Completion for homeowners means that the house has its certificate of occupancy.
3. Money Transfer Fraud:
a. Dishonest Bank Employees – having access to correct account identification information can transferring money improperly: to themselves and/or related parties.
b. Misrepresentation of Identity – posing as customers and or as wire room employees in another bank or a branch office and ordering transfers to dummy accounts in another bank.
c. System Password Security Compromised – having legitimate access to sensitive account and daily code information for a limited time and effecting improper transfers through unauthorized access.
d. Forged Authorizations – improperly obtaining or forging bank officers’ and/or customers’ authorization (either oral or written) to transfer money to own accounts when the recipient account is actually in the name of someone else.
e. Unauthorized Entry and Interception – gaining unauthorized access to the wire room and its equipment, or intercepting and/or altering actual transmission.
4. Automated Teller Machine (ATM) Fraud – ATM is a dispensing machine from which the holder of a debit card can draw cash. ATM can also perform other services such as depositing funds and checking account balances. Fraud schemes include:
a. Theft of card and/or unauthorized access to PIN numbers and account codes for ATM transactions by unauthorized persons
b. Employee manipulation
c. Counterfeit ATM cards
d. Counterfeit ATM machines
5. Advanced Fee (a.k.a. “Too Good To Be True”) Fraud – requiring a bank or a customer to pay an up-front finder’s fee in order to gain access to large amounts of money (deposits) at below-market interest rates or to the completely FREE money. This scheme is also known as 419/Nigerian Scheme (named because they violate section 419 of the Nigerian criminal code).
6. Letter-of-Credit Fraud – presenting forged or fraudulent documents to the issuing bank with a demand for payment.
7. Inside/Outside Frauds – co-opting an employee (insider) through a bribe or a threat of violence against the insider or a family member and requiring that same employee to cash certain items, or to insert documents directly into the computer system to affect fraudulent deposits, or to sell copies of documents to individuals who use new computer techniques to make fraudulent items.
8. Account Information Frauds – selling account information to organized rings or insiders.
9. Trading Activities – engaging in trading activities to defraud banks. Usually perpetrated with the assistance of an internal employee or by an employee acting alone, trading can include foreign exchange, securities trading, loan sales, and securitization.
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