Fraud Friday — Top Five Warning Signs

January 2, 2015

By Bob Coleman
Editor, Fraud Friday

To start off 2015 I want to take a step back and discuss the top five warning signs of bank fraud I have observed this past year.

Photoshopped or fake documents. This is the number one fraud issue. Unfortunately, I can’t point to a warning sign. So, I guess I am saying any document submitted to the bank should be viewed with appropriate skepticism. Cross check with the tax returns. Do a deposit verification. You may wish to adopt the SBA Inspector General attitude that all SBA equity injection documentation is assumed fraudulent, and it is up to the lender to “prove” the accuracy of the documents. I have written too many stories of lenders supporting loans and lines of credit with monthly statements showing significant stock holdings, only to find out the statements were photoshopped.

2) Complex Transactions. Fall back on Watergate’s Deep Throat line, “Follow the Money.” If the transaction is so complicated with intercompany receivables and revenue transactions between entities, “for tax reasons,” and you can’t see where all the cash flow is, a “no” could save you millions of dollars.

3) Take a second look at the long-time, trusted employee. Again, there were too many stories of the long term bookkeeper ripping off the company of hundreds of thousands of dollars. The credit union president, the community bank president and the loan officer, each making fictitious loans and pocketing the cash.

4) This one is a little surprising — a spouse with an interior decorating company. I have written at least three articles where the banker’s spouse uses a shell business to funnel bribes from customers. Nominal, if any work was performed for large chunks of cash.

5) Loan Broker Fraud — Yes, there are a number of good loan brokers, and yes, there are also a number of bad loan brokers. Vet your loan brokers as you would any employee.

May you have none of these issues, and a prosperous 2015!