Vulnerabilities in the System Lead to Bank Fraud
Despite the gauntlet that banks put commercial and private customers through, the banks themselves are not beyond getting cheated by fraudsters who take advantage of vulnerabilities in the system.
Phony Auto Loans = Bank Fraud
In the Greater Atlanta area, fraudsters created a scheme in the form of two, completely fake care dealerships. A group of seven incorporated two prestigious-sounding car dealerships; Platinum Motors Auto Sales and Premier Luxury Motors. Except – there were no cars, business licenses, no employees, no lots and not even a store-front.
The group tricked several banks and credit unions into believing they were legitimate businesses. In the end, they had applied for close to 90 car loans totaling $2.7 million. They pocketed around $1.7 million before law enforcement tracked them down.
The scam was “elegant” and frightening in its simplicity. The fake loan applications would state that they were going to purchase an auto from either Platinum Motors Auto Sales or Premier Luxury Motors. The “dealerships” simply supplied completely fake vehicle purchase orders. When the funds were released, the fake dealerships would then hold the money and the seven would split the money as it came into the accounts.
Forget About Repayment
Obviously, the loans were never paid back. Once the banks and credit unions were aware of what was happening, the FBI and U.S. Postal Inspection Service were notified to investigate. It took up to four years to resolve the case. Six of seven defendants have been sentenced at this date with the seventh soon to be extradited from the United Kingdom. They are receiving sentences ranging from one year to almost five years.
According to Chris Hacker, special agent in charge of the FBI in Atlanta “Bank fraud is not a victimless crime and these defendants will now have time to reflect on their choice to obtain these fraudulent auto loans,” said “The FBI treats these types of financial crimes very seriously and warns anyone considering this type of criminal activity to also consider the fate of these defendants face as a deterrent.”
As official sounding as Special Agent Hacker’s statement may sound, it doesn’t realistically approach some of the root causes of the problem. The fraudsters were, of course, wrong. They deserve every punishment law enforcement has to offer for the crime. However, from an ethical point of view there are more troubling issues.
As we learned with the Wells Fargo situation, bankers – particularly bank loan and retail banking officers – are under constant (and unreasonable) pressure to perform. This is why Wells Fargo paid huge fines for creating thousands of fake accounts attached to the existing accounts of their customers. Lots of new accounts looked impressive for shareholders and brought in additional fees deducted from the legitimate accounts. But it was bank fraud.
Oversight? Hardly
When two new accounts, Platinum Motors Auto Sales and Premier Luxury Motors came calling, with promises of lots of car loan business, the bank officers must have fallen all over themselves to get the business. Much in the same way as with Wells Fargo, no doubt the bank’s salespeople were under at least some pressure to close deals. The unethical pressure to get new business without the proper amount of compliance is quite troubling.
If we step back and think about it, we realize that surely someone might have reported “I just came from a future client with no cars, business licenses, no employees, no lots and not even a store-front. I’m concerned.” It didn’t happen. The pressure to sign new business was apparently more important than due diligence. Fraud and unethical behavior thrive in the absence of oversight.
