Imagine this: Manish wanted to start a business: Except, he had a pretty poor financial record. He had borrowed several loans in the past that he hadn’t repaid – having defaulted on several repayments. He also had several EMIs running. He turned to a friend, Nitesh, and explained his predicament.
Nitesh assured Manish that there was a way after all: One that wouldn’t involve several years of hard work and saving like a squirrel and repaying his previous loans. All they had to do, said Nitesh, was to forge his bank statement to show that he met the financial requirements. Nitesh said they just had to play with his EMI numbers and inflate his salary, so it would all look in order.
Manish agreed readily. Call it folly, call it ignorance, or call it cunning. Manish needed to get his way, so he was ready to go. All that stood between him and his new business seemed like a piece of paper with numbers. Nitesh set about designing the bank statement by meddling with the numbers. It all looked perfect: Manish was convinced that this was as good as a real bank statement. What could go wrong?
Except, the police cracked down on his scam: The bank suspected something amiss in the falsified statement. Manish didn’t get his loan, and along with Nitesh, he had a one way ticket to prison.
Before you think this is a shoddy scam that wasn’t planned well, read on. Tampered bank statements are an unfortunate reality. If you’re in the business of receiving bank statements, you may be vulnerable to receiving tampered ones.
Read on to learn how you can detect bank statement fraud.
Money talks, but is it real?
In recent times, there has been a rise in the number of instances of document tampering. At IDfy, we found that 7% of files uploaded in the course of several bank onboarding journeys were not even bank statements; 10% of the files did not have any header or bank details, and 4% of files had either name or statement date range mismatches.
The effects of such bank frauds can be severe. Think of the Enron scandal of 2001, which culminated in Enron’s bankruptcy at USD 63.4 bn in assets – the largest on record at the time. Financial statement frauds account for 10% of corporate fraud cases, resulting in a median loss of USD 954,000 per incident.
Banksy or Bogus?
Through a combination of high quality technology and design manipulation skills, tampering has – like it or not – become an art form of its own (if you’re thinking of Neil Caffrey from White Collar, you’re on the right track).
On occasion, the tampered statement is inherently a dead giveaway of the fraud. On several occasions, it isn’t as apparent. The good news, though, is that it is not entirely impossible to detect fraud.
Here are some things you can look out for to check if a bank statement has been tampered with:
- Errors in formatting and spelling: Typically, banks use the same template – which means fonts, formatting, colors, styles, spacing, and structure – across all their bank statements. A tampered one, unless remarkably well forged, will demonstrate inconsistencies in one or more of these items. It is also possible that a statement may be mocked up on a former template. It is a good idea to keep up with current formats and styles to remain vigilant. Similarly, you might notice typos and syntax errors that can be a sign of tampering.
- Too many whole numbers: Bank statements usually list out transactions right down to the last digit – they don’t round numbers off. If you’re noticing patterns of too many whole numbers or numbers that have been rounded off, that’s reason enough to pay closer attention to the statement.
- The Bank Statement Reconciliation does not match: On a real statement, the sum total of all deposits, withdrawals, fees, and interest earned should equal the ending balance after working from the beginning balance. On fake statements, there are chances this has not been taken care of while forging & this can throw an error.
- Inconsistent transactions: Typically, authentic bank activities tend to reflect real, predictable patterns of spending and income. However, fake statements might throw up random transactions that don’t align with a typical spending pattern.
- Non-Standard Statement cycle: Typically, bank statements follow a regular cycle: They’re issued at regular intervals. A statement that deviates from the typical windows of weekly, bi-weekly, semi-monthly, quarterly, or annually issued statements throws up a red flag.
- Missing Content: Authentic bank statements have a complete stack of pages that are numbered sequentially. They also carry details of the bank’s address, as well as digital signatures and seals that are verifiable. Tampered statements might be missing some, if not all, of these items.
Getting better at catching the fraud
It is not always as easy to detect the manipulations made. It is also a time-consuming process to manually pore over a document to identify tampering. At IDfy, we’ve developed a Bank Statement Analysis API that can help you quicken things without dropping the ball on accuracy.
For starters, our BSA can check for tampering by evaluating over 20 parameters including fonts, formats, and pixel density among others, and filter out fake salaries using an inbuilt authenticator. It avoids reprocessing with the summary API, offering a preview of the bank statement that helps you detect irregularities or incomplete statements before you process it. This helps you save the cost of processing incomplete statements.
You get to draw out a customized score for your use case, which lets you take a go/no-go decision. The formats are flexible, where you can process everything from scanned PDFs to e-statements drawn via net banking. You can view your analysis in a range of formats including MS Excel and JSON among others.