Various Scams Related to Commercial Banks

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There are two types of banks that operate in the United States. They are central banks and commercial banks. The former functions as a welfare-oriented financial institution and is governed by state representatives. Central banks are also responsible for controlling and regulating the entire banking mechanism of the country.

This is where commercial banks enter the frame. The central banks exercise oversight when it comes to commercial banks and their business practices. Commercial ventures like JP Morgan Chase and Goldman Sachs have a profit motive which drives their enterprise towards their objective.

Regardless of whether the bank is central or commercial in nature, as with any institution that manages money, both enterprises are prone to corruption and fraud. We will focus on the fraudulent activities that can occur at commercial banks. In particular, we will define each technique and how it transpires.

ATM Fraud

TheBank ATM machine abbreviation ATM means Automatic Telling Machine. It serves as an outlet for customers of the bank to withdraw cash from their accounts at the respective bank. The bank issues a bank card to the customer when they open an account. Once they make a deposit and obtain their card, customers can acquire a specific amount from an ATM using their card.

An ATM scam refers to any fraud that is conducted using the bank card at the disposal of customers. The perpetrators of the crime use the card to withdraw funds quickly from the customer’s account using their PIN number. A PIN (Personal Identification Number) is a four digit numeric which is used to access bank accounts. It must only be known to the owner or holder of the bank account.

An instance of ATM fraud will involve unfairly gaining access to an innocent consumer’s PIN i.e. card skimming and gaining access to their funds as a result. The most common method used by criminals is theft. They steal the ATM card and use it to their advantage.

Furthermore, a new method called card trapping is adopted by miscreants is to trap the card when it is inserted inside the ATM card reader using a loop. In cases where the customer departs momentarily to seek assistance, they remove and collect the card in the owner’s absence or withdraw the cash from the customer’s account there and then.


Man fishing metaphore illustrationPhishing is defined as a cybercrime where unsuspecting targets are part of a correspondence, which is aimed at luring them in to provide sensitive data. Victims of such scams are contacted through email (very popular among thieves), phone calls, or text messages in a bid to exploit their information; such as personal information like credit card details and login credentials.

They may also be lured in a more sophisticated phishing scam called Search Engine Phishing, where the individual innocently searches for an item to buy and clicks on a link that is actually a fraudulent website but looks legitimate.

Once this information is obtained, it is used to access their accounts and then scammers can wreak havoc with the data at their disposal. Pecuniary loss and identity theft are just two crimes that spring to mind. This can affect customers of commercial banks as well. Clients are advised not to share information unless they are performing a transaction online or they are at the branch in person.

An example would be when banks send emails sporadically to their customers citing promotions, offers, and updates related to their services. This is one area in particular where phishers can exploit gullible clients (elderly are more at risk). Criminals may send a spoof email which will appear to look just like a real email from the bank. They bank on such emails to extract valuable information from unwilling customers. The latter should exercise due caution though.

How to Spot a Fraudulent Email

If you receive an email that has a high level of urgency, it can potentially be a phishing attack. In addition, look out for spelling and grammar errors, as well as if the greeting is listed as ‘Good Day’ or something similar. Banks and financial institutions will never address you by ‘Good Day’. Related to this is that generally, these phishing emails will never address you by name because they don’t have it.

That is not all. Scammers may attach a form or provide a link in the email that they say needs to be completed by you. If you are even the slightest bit suspicious - DON'T OPEN IT! The attachment may contain a virus and if it is a link, It may redirect you to an illegitimate website. Like the emails which contain their links, these websites are also meticulously crafted by scammers in a bid to acquire your private information, as well as download a virus.

You should be vigilant when reading emails and your suspicions should arise when the email content sounds questionable and/or if it comes from someone you know, but you have no idea why this person would be contacting you regarding this subject. Under these circumstances, never open the attachment or click the link! Call your financial institution for confirmation instead.

It is imperative for customers to be mindful when dealing with any medium that invoilves sensitive information. Such details are too precious to be placed in the wrong hands. Scammers may perform illegal activities using the funds they obtained from customers of commercial banks. Alternatively, they may throw caution to the wind and enjoy shopping sprees.

One example where scammers practiced phishing was at Chase Bank in Indiana, United States. When an acquisition took place, phishers found an avenue to exploit customers. They obtained thousands of email addresses and used these to accumulate a wealth of information from customers, who were unassuming and unaware. Scammers delineate urgency in these emails, which appeared to be authentic since the bank was in the midst of being purchased by a larger bank.

Cheque Kiting

Check kiting is another type of fraud that affects commercial banks. Kiting involves gaining access to deposited funds from one account prior to collection in another account from which they are drawn. This scheme includes multiple checking accounts at a variety of banks.

For example, assume that a person writes a check from his checking account. We’ll call it ‘Account 1’. He then deposits the check he just wrote into ‘Account 2’ in a different back. He then follows up by depositing a check from Account 2 to Account 3. The fraud that is being perpetrated is that none of these accounts have the available funds from where the check is being debited from, but the scammer tries to extract the money that the bank deposited into the account from the check before it is confirmed that the other bank account had insufficient funds to cover the check.

It is known that a lot of people do this; however, most of them have the honest intention of getting to the other bank to put in the money before it is deemed insufficient. This is called playing-the-float.

This action is considered fraudulent if the person writing the checks has no intention of putting the money back in.

Posted On September 8, 2018