Common Types of Banking Frauds

Common Types of Banking Frauds
Common Types of Banking Frauds

Thanks to developing technology, the banking industry has undergone a tremendous transformation. However, the industry is still prone to various fraud forms as scammers develop new ways of defrauding people. Banking institutions and clients should always take precautions to protect their resources. Generally, banking fraud is using illegal methods to obtain assets or funds held by a financial organization. The following are common types of banking frauds that you should know.

Identity Theft

A person may obtain your financial or personal details to commit fraudulent activities like unauthorized purchases or transactions. This is usually a crime known as identity fraud, which can damage a person’s reputation, funds, or credit score. According to Brad Kern, identity scammers use computer technology to target their victims. They usually get people’s information by using hard drives of discarded or stolen computers, infecting other people’s computers using information-gathering malware, or even hacking networks or computers. Moreover, identity fraudsters can also obtain personal or financial details by using deceptive text messages, emails, or social media.

Money Laundering

This usually occurs when criminals deposit illegally obtained money into a bank account and try to make it appear as if it was obtained from a genuine source. For example, a person selling illegal drugs may pretend that the money comes from a legitimate business and deposit it in their business account. The general public, including banking institutions, should report cases of money laundering activities to avoid facing legal charges.  

Loan Fraud

A loan fraud usually occurs when an individual presents false details to get a loan. It can also happen when someone steals another person’s identity and seeks a loan using their details. Loan fraud can also occur when a scammer draws money from someone with a line of credit.

Bill Discounting Fraud

Although bill discounting fraud is quite rare, it may create financial problems for a banking institution. It usually happens when a scammer opens an account and convinces the institution to start collecting bills from their clients. Unfortunately, the portrayed clients are usually fraudulent and always pay the bills. After the fraudster gains trust from the financial institution, they request the institution to grant them the bills in advance. When the institution does that, the scammer disappears and fails to pay the money back.

APP Scams

Authorized Push Payment scams are those where the victim willingly decides to transfer cash from their account. It can be accomplished face-to-face or over the phone. Typically, the fraudster informs their target of a change in their account details and requests them to either confirm their PIN, password, or other sensitive details to prove their identity. Generally, financial institutions don’t compensate for these scams since they believe the target was negligent with their details or gave them willingly.

Protecting your details is an effective way of avoiding banking fraud. Such details include dates of birth, next of kin information, passwords, PINs, and account numbers. Always report suspected scams to respective banking institutions and authorities immediately for further action. It is also recommendable to update your banking passwords and PINs frequently to protect them from falling into wrongful hands.

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