Bank & Banking Related Fraud
Check fraud accounts for yearly losses of at least $815 million, more
than twelve times the $65 million taken in bank robberies annually.
Check kiting is when in-transit or non-existent cash is recorded in more
than one bank account. The crime usually occurs when a bank pays on an
For example, a bum check is deposited into an account. Before the cash
is collected by the bank, a check is written against the same account
and deposited into a second account, or cashed. The increased use of
wire transfers allows this type of scheme to be perpetrated very
At least two companies solicit uninsured deposits on the Internet.
Netware International advertises itself as a "Constitutional" bank and
FocusInternational.com, Ltd., is a West Indies company seeking deposits
for an unidentified bank.
They lure depositors by offering high rates of interest, or promising
offshore secrecy. Neither company is authorized, supervised, or
regulated by any U.S. State or Federal bank or financial institutions
regulator. Deposits in these companies do not have the protection of the
Federal Deposit Insurance Corporation or any other state or federal
Credit Card Theft and Fraud
One con, while in jail serving a state prison term for credit-card
theft, actually perpetrated yet another credit card scam over a seven
month period, using a technique that allowed him to hide the fact that
he was calling from jail.
He would start off by calling the county-run nursing home saying he was
a Bell Atlantic technician and that he needed the person to dial a
special code to test the lines. When the person pressed the requested
numbers, he would be connected to an outside line that he used to call
When he called the businesses, he would tell them he was a credit-card
representative and that he needed customers' names and phone numbers to
verify recent transactions. With that information he then called the
cardholders and posed as a credit company employee, saying he needed
personal information to check for fraud.
With this personal information and the credit-card numbers, he then
requested and received more credit cards with which he made about
$25,000 worth of purchases of such things as sports memorabilia,
flowers, and gift certificates. He also bought calling cards so he could
continue the scam.
Some of the items were given to other inmates in exchange for helping
with the fraud while other items were shipped to friends to be held for
him until he got out of jail.
Duplication of Card Information
Credit card "double scan" machines can copy info from the magnetic strip
of your card and create a new duplicate card for which your account will
be billed for any purchases. Try to keep your card in sight when
possible to avoid this problem.
While card issuers have fraud detection software which picks up unusual
spending patterns, smaller purchase "skimming" can be subtle and
prolonged, compared to the flurry of spending when a card is stolen
Keep a record of your account numbers, their expiration dates, and the
phone number and address of each company in a secure place.
Void incorrect receipts and destroy carbons.
Save receipts to compare with billing statements.
Open bills promptly and report any questionable charges promptly and
also in writing to the card issuer.
If you realize they've been lost or stolen, immediately call the issuer.
Many companies have toll-free numbers and 24-hour service to deal with
By law, once you report the loss or theft, you have no further
responsibility for unauthorized charges. In any event, your maximum
liability under federal law is $50 per card. If you suspect fraud, you
may be asked to sign a statement under oath that you did not make the
purchases in question.
A booster check is a non-sufficient fund (NSF) check used to make a
payment to a credit card account. One group used "booster checks" to
"bust out" legitimate credit cards. They used credit card "convenience
checks" issued by the banks and credit card companies to inflate their
credit card limits; or to "bust out" the credit card to double or triple
the established line of credit.
Because banking laws require financial institutions to immediately post
credit payments even before the check has been cleared, they would use
the window of time between the posting of the credit card payment and
the discovery of the bad check to go on a spending spree and purchase,
among other things, large amounts of gold coins from legitimate coin
They would also go to store owners who knowingly aided the bust out
scheme, who would "swipe" the credit cards through point-of-sale credit
card terminals located at their businesses. While these transactions
would appear to be legitimate, no merchandise would actually be
Because it takes only seconds for a credit card company to transfer
funds to a store owner's bank account, a collusive merchant is able to
immediately dispense funds from the busted out credit card. The
merchants in this case allegedly issued kickback checks to the card
holder for the amount of the transaction, and they would then receive a
kickback from the card holder which would amount to a small percentage
of the transaction.
The Secret Service estimates the total loss in this one case is between
$10 million and $15 million.
Falsification of Loan Applications
While scheming to defraud four banks and a credit union, one con opened
checking and savings accounts using a false name and a fraudulently
obtained new social security number. He then applied for seven loans for
the stated purpose of financing the purchase of motor vehicles.
He also submitted false documents concerning his employment and income,
including fake tax returns. By producing fictitious records including
motor vehicle appraisals, insurance documents and invoices he obtained
approximately $380,000 in loans for the purchase of a 1976 Rolls-Royce
Silver Shadow, a 1978 Ferrari model 308 GTS convertible, a 1992
Mercedes-Benz model 300SE, a 1995 Mercedes-Benz model SL320 and a 1994
Mercedes-Benz model 500SL.
He also applied for and was issued multiple credit cards and charge
cards. In just seven months he ran up charges leading to losses of at
For example, he used an American Express account to pay $27,000 towards
the purchase of an item of jewelry, used an MasterCard to place a $5,000
down payment towards the purchase of a 1955 Mercedes-Benz 300SL Gullwing
with a purchase price of $203,000 and a 1964 Ferrari 250GT Lusso
convertible with a purchase price of $153,000, and then used the
American Express account to pay $320,000 towards the purchase of these
two antique automobiles. He also used various VISA and MasterCard
accounts to obtain substantial cash advances and used the American
Express account to pay $93,600 towards the purchase of a Patek Philippe
Moon Phase watch with a purchase price of $95,600.
Laxity of Enforcement
One of the problems with enforcing bank fraud laws is that it is often
relegated to a low priority, or ignored altogether, because the activity
can span several jurisdictions, involve many unidentified subjects, is
non-violent and usually there are few leads.
Normally, the typical bank robber nets $700 and is caught within 24
hours, yet the average check scam involves losses of more than $2,000,
the perpetrators are seldom caught, and there are more than one hundred
times as many cases as bank robberies. Out of 10,000 cases the losses
exceeded $60 million dollars.
Many bank fraud suspects are able to elude arrest by furnishing false
identification when cashing stolen, forged, or counterfeited checks. One
effort to stop this crime is the "Check Print" program which requires
non-bank customers to provide a thumb print, using a clear solution, on
the negotiated check for identification purposes. With this positive
identification, it has been much easier to identify, arrest, and
successfully prosecute bank fraud scams.
Check Security Features
Check manufacturers help deter check fraud by making checks difficult to
copy, alter, or counterfeit. Some useful security measures include:
Watermarks. Watermarks are made by applying different degrees of
pressure during the paper manufacturing process. Most watermarks make
subtle designs on the front and back of the checks. These marks are not
easily visible and can be seen only when they are held up to light at a
45-degree angle. This offers protection from counterfeiting, because
copiers and scanners generally cannot copy watermarks accurately.
Copy Void Pantograph. Pantographs are patented designs in the background
pattern of checks. When photocopied, the pattern changes and the word
"VOID" appears, making the copy nonnegotiable.
Chemical Voids Chemical voids involve treating check paper in a manner
that is not detectable until eradicator chemicals contact the paper.
When the chemicals are applied, the treatment causes the word "VOID" to
appear, making the item non-negotiable.
High Resolution Microprinting. High-resolution microprinting is very
small printing, typically used for the signature line of a check or
around the border, in what appears to be a line or pattern to the naked
eye. When magnified, the line or pattern contains a series of words that
run together or become totally illegible if the check has been
photocopied or desktop scanned.
Three-dimensional Reflective Holostripe. A holostripe is a metallic
stripe that contains one or more holograms, similar to those on credit
cards. Those items are difficult to forge, scan, or reproduce, because
they are produced by a sophisticated, laser-based etching process.
Security Inks Security inks react with common eradication chemicals.
These inks reduce a forger's ability to modify the printed dollar amount
or alter the designated payee, because when solvents are applied, a
chemical reaction with the security ink distorts the appearance of the
Cooperation between Check Manufacturers and Financial Institutions
Participating financial institutions can report all checking accounts
"closed for cause" to a central database, called ChexSystems. This
program prevents people, who have outstanding checks due to retailers,
from opening new accounts.
You can use this information before opening new accounts to spot repeat
offenders and you can also use MICR information from a check presented
with the applicant's drivers license number to check the SCAN file for
any previous fraudulent account activity.
Partial segments courtesy of Crimes
of Persuasion: Schemes, scams, frauds.
Most Wanted Butte County
Law Enforcement Agencies
Butte County District Attorney's Office. All rights reserved