When you think of financial fraud, you might envision money laundering activities conducted by members of organized crime syndicates. Or you might think of how a stolen identity helped thieves take your money or leverage your credit cards. In truth, the laws intended to help financial institutions thwart financial fraud are broad enough to cover these acts and much more involving everyday criminals — some who are not so smart, and some who are so sophisticated that it takes time to bring them down.
Last month, a used car dealer in Florida pled guilty to bank fraud for a check kiting scheme that defrauded an unnamed financial institution of over $1 million. The crime happened in 2011, and I’m willing to bet that the bank’s Know Your Customer (KYC) policies and its internal processes for approving check drafts against uncollected funds have since been tightened.
Also this past month, a woman who embezzled money in 2014 from her employer was convicted of transferring money from a corporate account into her personal account at First Hawaiian Bank. She was not authorized to write checks on her employer’s account…leaving the bank’s processes for proper accounting procedures open to question. In this case, the woman stole a much lesser amount, $25,000, but any theft of this type gives the financial institution a black eye.
A third example last month represents the worst type of bank fraud, that which is perpetrated by employees; it’s often one of the hardest types of fraud to detect. During an internal audit conducted by Peoples United Bank in Connecticut, the bank discovered that its associates changed the terms of commercial real estate loans without proper approvals. This not only left the bank open to unacceptable risk because the associates gave customers more favorable loan terms than what guidelines required, it negatively impacted future revenues.
CEO of the Alacer Group. Sharing the latest news in financial crimes and best practices that enable financial institutions to prevent money laundering.