Criminals who commit fraud against banks are violating Title 18 of the United States Code, Section 1344: Bank Fraud. Anyone who defrauds a bank directly or obtains any money or other valuables in a bank’s care by false pretenses is subject to a fine up to $1 million, imprisonment for up to 30 years, or both. Traditional types of bank fraud continue, and new ones have appeared along with advances in technology.
The misuse of checks for criminal purposes appears in several ways. Counterfeit company checks, including false payroll checks, are drawn on legitimate company accounts. In many cases, organized criminals will use innocent dupes to deposit the counterfeit checks to their accounts. They are enticed by the promise of keeping a large amount after turning over the rest of the cash to the criminal. Another crime involves forging signatures and altering the payment amount on authentic company checks.
Check kiting is another widespread illegal activity. Kiting involves setting up checking accounts, with small initial deposits, at several banks and then writing checks for large amounts on each of the accounts. The account owner withdraws funds after each deposit and continues to write insufficient funds checks to cover the withdrawals. More elaborate versions of kiting exist. Check kiting takes advantage of “float,” which is the amount of money in the U.S. banking system that is counted two times, for a brief period, because of latency or delays in the processing of checks.
Criminals use fraudulent emails, called phishes, or webpages that appear to be legitimate communication from banks. The emails and webpages attempt to entice victims to disclose their personal bank account information or risk cancellation of their accounts. Some of these fraudulent communications use familiar bank logos in their impersonations.
Empty Envelope Fraud
This is the practice of falsely obtaining funds from an automated teller machine. During nonbusiness hours, an account holder will use an ATM to make a deposit to his account. The deposit envelope is empty, but the depositor records the transaction on the ATM in some dollar amount. Bank policy allows cash withdrawals up to some set amount. The depositor thus receives cash after depositing an empty envelope. This kind of fraud will probably not result in criminal prosecution, but it could cause the bank to cancel the person’s account and report the incident to the credit bureaus.