Bank fraud

Bank fraud is the use of potentially illegal means to obtain money, assets, or other property owned or held by a financial institution, or to obtain money from depositors by fraudulently posing as a bank or other financial institution. In many instances, bank fraud is a criminal offence. While the specific elements of particular banking fraud laws vary depending on jurisdictions, the term bank fraud applies to actions that employ a scheme or artifice, as opposed to bank robbery or theft. For this reason, bank fraud is sometimes considered a white-collar crime. In order to hide serious financial problems, some businesses have been known to use fraudulent bookkeeping to overstate sales and income, inflate the worth of the company's assets, or state a profit when the company is operating at a 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 more money to delay the inevitable collapse of an unprofitable or mismanaged firm. Examples of accounting frauds include the Enron scandal, World Com and Ocala Funding. These companies "cooked the books" in order to appear as though they had profits each quarter, when in fact they were deeply in debt. Demand draft (DD) fraud typically involves one or more corrupt bank employees. Firstly, such employees remove a few DD leaves or DD books from stock and write them like a regular DD. Since they are insiders, they know the coding and punching of a demand draft. Such fraudulent demand drafts are usually drawn payable at a distant city without debiting an account. The draft is cashed at the payable branch. The fraud is discovered only when the bank's head office does the branch-wide reconciliation, which normally take six months, by which time the money is gone. Remotely created check#Fraud and regulation Remotely created checks are orders of payment created by the payee and authorized by the customer remotely, using a telephone or the internet by providing the required information including the MICR code from a valid check.