JUDY ANN F.

GAZZINGAN BSAC 3 MAY 22, 2021

Research on any articles or news relative to many types of bank frauds.
Some examples are hacking of the system of banks, using credit cards to
purchase bulk of orders, etc. What then are the benefits generated from
PDIC? What are the solutions resorted by the bank officials or any concerned
institutions i.e BSP?

Bank fraud is a criminal act that occurs when a person uses illegal means to receive
money or assets from a bank or other financial institution. Bank fraud is distinguished
from bank robbery by the fact that the perpetrator keeps the crime secret, in the hope
that no one notices until he has gotten away. The term bank fraud also refers to
attempts by a person to obtain money from a bank’s depositors by falsely pretending to
be a bank or financial institution. To explore this concept, consider the following bank
fraud definition.

Definition of Bank Fraud

Noun
1. The act of using illegal means to obtain money or other assets held by a
financial institution.
2. The act of obtaining money from people by posing as a financial institution.
Origin
1300-1350        Middle English fraude 

What is Bank Fraud

The criminal offense of bank fraud is deliberately engaging in a secret scheme or
deception intended to defraud a bank or financial institution, to obtain money or
property owned by the bank or financial institution. Bank fraud is considered to be
a white collar crime. In the United States, a criminal charge of bank fraud generally
applies when an individual knowingly executes, or attempts to execute, at act (1) in
order to defraud a financial institution, or (2) to receive money, assets, credits,
securities, or property from a bank or financial institution using false information,
pretenses, or insincere promises.

Types of Bank Fraud

There are dozens of ways in which an individual can commit bank fraud. Some of these
schemes are more complex, and affect more people or institutions, garnering harsher
penalties than others do. Common types of bank fraud include:
 Bank Impersonation – one or more individuals act as a financial institution,
often by setting up fake companies, or creating websites, in order to lure
people into depositing funds.
  Stolen Checks – fraudsters may obtain jobs that provide access to mail, such
as the post office, mailbox stores, a tax authority, or corporate payroll
company. After stealing checks, they open a bank account using an
assumed name, and deposit the checks.
 Forgery – forgery occurs when a person alters a check by changing the
name or some other information on the face. Altering the amount of the
check, such as adding a zero to the end of a number, can turn a $20 check
into a $200 check, putting more cash into the forger’s pocket. Forging a
person’s signature in order to cash or deposit a check also falls under this
category.
 Fraudulent loans – an individual who takes out a loan, knowing that he will
immediately file bankruptcy, has committed bank fraud. The same is true if
the borrow uses a false identity in order to become approved for a loan, or
forges information on a loan application.
 Internet Fraud – as it relates to bank fraud, internet fraud occurs when
someone creates a website for the purpose of posing as a bank or other
financial institution, to fraudulently obtain money deposited by other people.

Bank Fraud Cases

One example of how perpetrators of bank fraud cases are punished is the 2003 case in
which a man by the name of Marko Nikoli of Ohio appeared at the St. Paul Croatian
Federal Credit Union and presented fake documents to support his loan request for
$250,000. A co-conspirator that worked inside the credit union approved the loan, and
the funds were deposited into Nikoli’s account. The money was then transferred almost
immediately to another account in Macedonia via an international wire transfer. Two
years later, Nikoli request another $250,000 loan, which was approved by the same co-
conspirator, and transferred to an off-shore account. The credit union collapsed, being
declared insolvent in 2010. Nikoli was arrested and in 2013, and charged with bank
fraud and money laundering. After pleading guilty and avoiding trial, Marko Nikoli was
sentenced to 27 months in federal prison, and ordered to pay $1 million dollars in
restitution to the St. Paul Croatian Federal Credit Union.

Bank Fraud Investigator

Although many financial institutions employ their own brank fraud investigators, and
local law enforcement is often involved in investigating such crimes, it is the U.S. Secret
Service that is responsible for maintaining stability and integrity of the country’s
financial framework and payment systems. In its role as bank fraud investigator, the
Secret Service investigates such crimes as:
 Counterfeiting
 Identity Theft
 Check Fraud
  Automated Payment Systems Fraud
 Direct Deposit Fraud
 Check Forgery and Alterations

Bank Fraud Punishment

Any type of fraud subjects the perpetrator to serious penalties, the severity of which
often depend on the monetary amount of the fraud, whether the fraud was committed
against a protected class of person, and whether the crime is classified as a state or
federal crime.
Bank fraud is almost always a federal crime. This is because most banks are protected
by the Federal Deposit Insurance Corporation (“FDIC”), a federal program that protects
consumers’ deposits in banks and other financial institutions. According to the FDIC
laws and regulations regarding bank fraud punishment:
Anyone who “knowingly executes, or attempts to execute, a scheme or artifice”
 To defraud a financial institution; or
 To obtain any of the moneys, funds, credits, assets, securities or other
property owned by, or under the custody or control of, a financial institution,
by means of false or fraudulent pretenses, representations, or promises;
faces a fine of up to $1,000,000, and may be imprisoned up to 30 years.
It is possible for some lesser charges to result in bank fraud punishment of 5 to 10
years, as well as steep fines, restitution, and probation. It is common for bank fraud
punishment to include more than one form.
For example:
Owen and Nichole go in together in a scheme of stealing, altering, and cashing checks.
By the time they are caught, they had swindled consumers and three different federally
insured banks out of more than $220,000. While Nichole takes a plea bargain to provide
information on how the two accomplished their crimes, in exchange for a lighter
sentence of 8 years in federal prison, Owen holds out and goes to trial.
After being convicted of several counts of bank fraud by a jury, Owen is sentenced to
22 years in federal prison, and ordered to make restitution in the amount of $110,000,
his half of the total stolen by bank fraud.