Reports of people using fake bank statements to fraudulently obtain loans are rife. In this guide how to spot one and the best ways to prevent fraud.
Reports of people using fake bank statements to fraudulently obtain loans are rife.
During the global COVID-19 crisis, one of the U.S. Congress' pandemic-relief measures was to allow forgivable loans through the Paycheck Protection Program (PPP). Unfortunately, nearly $100B was lost to bad actors who claimed to run small, cash-strapped businesses.
A common thread emerges in such situations: fraudsters capitalize on the crisis to steal money using bogus documents (which they can easily get online).
Among them are fake bank stubs. Criminals use them to fraudulently obtain loans in their victims’ names, sometimes emptying their bank accounts.
Bank statement verification empowers lenders to reduce this common type of fraud and protect themselves and their customers from the resulting losses.
In this guide, you'll learn why people create false bank statements, how to spot one, and the best ways to prevent fraud.
Whether you operate a small business or large lending organization with millions of customers, the chances of people submitting fraudulent applications for mortgages or other loans are high.
When verifying loan applications, most lenders ask for more information through a person’s identity documents, recent bank statements, or utility bills, among other documents.
Bank statements, in particular, tell a lot about the applicant. Lenders scrutinize bank documents to look for details like:
All these factors go into the lender’s decision to approve or reject a loan or credit application.
For instance, if the applicant’s bank statement shows that they’re exceeding their overdraft limit regularly, the bank may question their trustworthiness.
Other factors, like direct debits, may show the applicant’s reliability and consistency. While missed payments for credit cards or personal loans may demonstrate that an applicant might not meet payment deadlines.
Lenders have several reasons for wanting to see their customers’ bank statements. But usually, they want to learn more about the person and their spending habits. The applicant’s most recent spending or saving habits will show through their bank statement and can be the difference in whether the lender will approve or deny the loan.
Specifically, a bank statement shows the lender:
Bad actors—whether they’re trying to open a credit card account or take out a loan—use altered or fabricated documents disguised as original bank statements to commit identity theft. Others use falsified bank statements to misrepresent their finances on residential rental applications, and other illegal activities.
According to Europol, the European Union's law enforcement agency, forged documents may be used for profit. But such crimes often support terrorism, migrant smuggling, and human trafficking.
Through web tutorials and YouTube videos, fraudsters create fake bank statements and other false financial documents, ripping off unsuspecting victims of their hard-earned income or savings.
Take Porshia Thomas, a woman who fraudulently obtained a $291,000 PPP loan between April and September 2020.
Thomas admitted to committing a felony bank fraud charge using bogus Wells Fargo bank statements and Internal Revenue Service (IRS) forms with false employee and wage information.
She also had a fake letter from the bank's 'branch manager,' verifying that her company, Couture Trading Inc., had an account with the lender. Thomas registered the business and applied for the PPP loan through a series of false claims.
Through Couture Trading, Thomas received $291,600. She bought a car, beauty products, and paid $75,000 to someone listed in her company’s documentation.
Legitimate banks or lending institutions can be unwittingly or knowingly induced to issue, verify, and/or approve fake documents, used for fraudulent schemes.
Such illegal activities almost always involve using, issuing, or relying on documents that aren’t typically used in the transaction they’re intended for.
According to U.S. law, forgery (which includes faking a bank stub and passing it off as an original statement) is a federal crime. Depending on the type of document that was altered and the exact charges, punishments for individuals convicted of forgery are jail time and paying fines of up to $10,000, or both.
If a lending institution is involved in a document falsification scheme, punishments range from imprisonment of up to 30 years and penalties or fines of up to $1 million—or both. Some lenders suffer reputational damage, lawsuits from their customers, or in extreme cases, the lending institution could be dissolved altogether.
To reduce fraud and its resulting losses or damage, lenders need to identify fake bank statements. Sadly, the manual document verification methods bank employees use can’t keep up with the standards set by fraudsters.
But you can quickly spot a fake bank stub by checking for:
Fake bank stubs can be hard to spot, especially with the sophisticated tools and templates fraudsters use to create documents that resemble the real deal.
It's difficult to catch or weed out fake financial statements, but bank managers can start by:
Fast-growing lenders and fintecs fight bank document fraud using fraud detection software, like Inscribe.
Through its AI-powered technology, the tool checks bank statements for manipulation to determine if they're genuine or fraudulent.
With Inscribe, bank managers can spot fake bank stubs that slip by, saving them time (spent on manual document reviews), money (financial losses, fines, or penalties), and their reputation.
Talk to our one of our experts to learn how our document fraud detection tool can help you recognize and prevent fraud when verifying the validity of bank statements.
Check out our other guides on document processing:
See how you can automate manual document reviews, improve fraud detection, and start approving more customers with confidence.
