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 but really just provided a fake bank statement for PPP loan benefits.
A common thread emerges in such situations: fraudsters capitalize on the crisis to steal money using bogus documents (making fake bank statements online is easy these days). Among them are fake bank statements. 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.
This guide will provide you with insights into the motives why people create fake bank statements, techniques to identify them, and effective strategies for preventing fraud.
Why do lenders ask for bank statements? How do they use them?
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:
- Regular income
- Expense history
- Monthly payments
- Cash in hand and cash reserves
- Direct debits
- Overdrafts or bounced checks
- Undocumented sources of gifts, withdrawals, or large deposits
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:
- Where the applicant’s money comes from
- How much money they have in their accounts
- Whether they can be trusted with the loan amount
- The number of assets they own so they know how much to loan them
- Their ability to meet the loan obligations (deposit and monthly installments)
Why might someone need/create fake bank statements?
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 a fake bank statement to misrepresent their finances by showing a fake bank account balance 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.
How fake bank statements can negatively impact a bank or lender
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.
How to spot a fake bank statement
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:
- Few, poorly drafted documents or absence of proper documentation for a major transaction
- Additional documents that make little sense with the bank statement and other transaction paperwork
- Unusual appearance or texture, blurred typography, poor paper quality, an unsophisticated appearance, and unprofessional-looking graphics
- Errors such as antedating or postdating, spelling, grammar (odd phrases or terms), and incorrect or unusual headings
- Disproportionate figures or amounts with the person or situation with which it’s connected
- Absence of a bank stamp to certify the statement
- Forged signatures that don’t match the bank specimen
What are the best methods to prevent fraud when verifying the validity of a bank statement?
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:
- Requesting complete identity documentation in advance
- Checking for consistency in dates, grammar, amounts/figures, identities, signatures, and other important details
- Considering the content, purpose, and source of the statement
- Ensuring bank employees are well-trained and understand how to look for fake business bank statements.
- Consulting independent information sources, security, and legal or risk management departments when performing due diligence regarding bank statements and their contents
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.
How to Detect a Fake Bank Statement FAQ
1. How to create a fake bank statement?
Creating or using fake bank statements is illegal and unethical. It can lead to severe consequences, including criminal charges, fines, imprisonment, and damage to your reputation. Moreover, using fake documents for any purpose, such as fraud or misrepresentation, is a violation of the law and can result in serious legal repercussions.
If you need legitimate bank statements for any legitimate purposes, I recommend contacting your bank or financial institution directly. They can provide you with official and accurate statements that you can use for legitimate reasons.
Always remember to conduct yourself ethically and within the boundaries of the law. If you have concerns or require financial assistance, seek advice from appropriate legal and financial professionals.
2. How to edit a fake bank statement?
Fraudsters may use document editing software, photoshop, or online document editing services to edit bank statements. By doing this illegal and unethical service, it can lead to severe consequences, including criminal charges, fines, imprisonment, and damage to your reputation. Moreover, using fake documents for any purpose, such as fraud or misrepresentation, is a violation of the law and can result in serious legal repercussions.
If you need legitimate bank statements for any legitimate purposes, I recommend contacting your bank or financial institution directly. They can provide you with official and accurate statements that you can use for legitimate reasons.
3. What are the reasons why someone would want to falsify a document?
It's important to note that these reasons do not justify or excuse the act, as falsifying documents can have severe consequences, including criminal charges, loss of credibility, and damage to one's reputation. However, here are some general hypothetical reasons why someone might be tempted to falsify a document or create a fake credit card statement:
Financial gain, avoiding legal consequences, covering up fraud or misconduct, improving employment prospects, immigration purposes, insurance fraud, academic dishonesty, and identity theft.
It's crucial to emphasize that falsifying documents is illegal and unethical, and the potential consequences far outweigh any perceived benefits. Engaging in such activities can lead to criminal charges, financial penalties, and irreparable damage to one's personal and professional life. If you encounter situations where falsification of documents is suspected or evident, it is essential to report it to the appropriate authorities for investigation and resolution.
4. What are novelty bank statements?
Novelty bank statements are fake or fabricated financial documents that resemble genuine bank statements but are not issued by any legitimate financial institution. These statements are usually created for novelty or entertainment purposes, and they are not intended to be used for any illegal or deceptive activities.
People may use novelty bank statements for various non-serious purposes, such as:
Gag gifts, pranks, and jokes, movie or theater props, personal record keeping.
It is crucial to emphasize that novelty bank statements should never be used for fraudulent or deceptive purposes. Using fake bank statements to deceive others or engage in illegal activities can lead to serious legal consequences. It is essential to respect the legality and integrity of financial documents and to only use them responsibly and for legitimate purposes. If you need legitimate financial documents for any official or legal reasons, always obtain them from the appropriate financial institutions or authorities.
5. How do fraudsters open bank accounts?
Opening a bank account fraudulently is illegal and punishable by law. Banks and financial institutions have strict measures in place to prevent fraudulent account openings and to protect their customers and the integrity of the banking system.
However, it is essential to understand some of the common methods fraudsters may use to open bank accounts illicitly, so individuals and institutions can be aware and take necessary precautions:
- Identity Theft: Fraudsters may obtain personal information, such as Social Security numbers, birth dates, and addresses, through various means like data breaches, phishing scams, or social engineering. With this stolen information, they can impersonate individuals and open accounts in their names.
- Fake Documents: Some fraudsters may create counterfeit identification documents, such as driver's licenses or passports, to appear legitimate when opening accounts.
- Collusion: In some cases, bank employees may collude with fraudsters to open accounts without proper verification or documentation.
- Synthetic Identity Fraud: Fraudsters may combine real and fake information to create synthetic identities that are difficult to detect as fraudulent.
- Online Account Opening Vulnerabilities: Cybercriminals may exploit vulnerabilities in online account opening processes to bypass identity verification measures.
- Account Takeover: Instead of opening new accounts, fraudsters may try to take control of existing accounts through various means, such as phishing or social engineering, to commit fraudulent activities.
It is crucial for banks and financial institutions to implement robust customer identification and verification procedures to prevent fraud. Additionally, individuals should be vigilant about protecting their personal information, regularly monitor their financial accounts, and report any suspicious activity to their bank and relevant authorities.
6. How do underwriters verify your bank statements?
Underwriters verify bank statements to assess a borrower's financial stability and creditworthiness during the loan approval process. The verification process is crucial for lenders to ensure that the information provided by the borrower is accurate and that the borrower can afford the loan.
The specific steps and methods used to verify bank statements may vary slightly from one lender to another, but the general process typically involves the following:
The borrower typically provides written authorization to the lender, allowing them to access their bank account information for verification purposes. Then the borrower submits their recent bank statements. The underwriters review the submitted bank statements to assess the borrower's income, expenses, and overall financial stability. They analyze various aspects, such as average balances, income deposits, regular expenses, and potential red flags. At this point, underwriters may contact the bank directly to confirm the authenticity of the provided bank statements. They may request an official verification letter or contact the bank's verification department to verify the account details. Underwriters also cross-check the information on the bank statements with other financial documents submitted by the borrower, such as pay stubs, tax returns, and asset statements, to ensure consistency and accuracy. They also look for any signs of irregularities or discrepancies that may indicate potential fraud or misrepresentation.
It's important to note that underwriters must adhere to privacy regulations when accessing and verifying bank statements. The process is intended to protect both the lender and the borrower and to ensure responsible lending practices.
If you are applying for a loan and have concerns about the verification process, it's essential to communicate openly with your lender and provide accurate and truthful information. Trying to mislead or provide false information can lead to loan denial and potential legal consequences. Always act ethically and transparently throughout the loan application process.
