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Bank fraud boom - Fraudsters fleecing millions from bank customers

Published:Sunday | August 10, 2014 | 12:00 AM

Ryon Jones, Staff Reporter

With criminals across the island constantly devising schemes to enrich their pockets at the expense of others, the practice of financial fraud has become a chronic problem, according to figures obtained from the Organised Crime Investigation Division (OCID).

The Sunday Gleaner has learnt that the big business of fraud has reaped in excess of US$58,000 and J$34 million in only the first five months of this year.

Among the foreign exchange stolen, obtaining money under false pretence was the most lucrative, accounting for US$48,000. Fraudulent conversion at J$10 million just edged out debit-credit card fraud ($9.1 million) as the most productive means of swindling local currency from bank customers. False account, forged documents, Internet, third-party transactions were the other means white-collar criminals employed to obtain the funds.

Fraud, by way of the Internet, usually manifests itself through international wire transfers where unscrupulous persons gain access to local accounts, rerouting money to persons or ghost companies abroad.

A Montego Bay used-car dealer, who requested anonymity, became victim of such a scheme a few months ago.

"I was in my office one morning (March 26) and I saw an email come in to my phone saying I sent some wire to Canada," the car dealer shared. "I figured that it must have been a wrong email or something, because I did not send any wire. But no one else had access to my computer; at the time it happened I was the only one sitting in my office."

The transaction of US$137,550 had been sent to Gestiun Alviruis Inc, a company supposedly based in Canada.

No such company

Subsequent checks, however, revealed that there was no such company and, to further compound matters, the car dealer said he has had no dealings with anyone in that country.

The car dealer said though the bank gave assurances that the money would have been returned the following day, all he has got is the runaround; forcing him to not only seek the assistance of the police but retain the services of an attorney to try and recover the funds.

Senior Superintendent of Police Clifford Chambers, head of OCID, said with the advancements in technology, investigating bank fraud has proven particularly challenging for the country's law-enforcement officials.

"There are trends in fraudulent activities happening in financial institutions and this trend is on the basis that they (criminals) are becoming more sophisticated as time passes," Chambers told The Sunday Gleaner.

"They are using more and more sophisticated electronic means to commit these crimes. They are using access to the Internet more to commit these crimes and it, therefore, makes it more difficult to investigate."

A senior official in the banking sector has labelled fraud "one of the few growth industries in Jamaica".

Lloyd Parchment, chairman of the Jamaica Bankers' Association (JBA) Anti-Fraud Squad, said, for example, cheque fraud in all its various formats has been on the increase.

"There has been a spike since perhaps the start of this year and a steady increase; also card fraud and this being debit card and credit card fraud through scanning and cloning activities. I would highlight those as the major areas of fraud," Parchment said.

There has been a huge leap in debit-credit card fraud reports between January and May last year and the corresponding period this year.

Last year, up to May, there were 15 reported cases of credit-debit card fraud, accounting for almost $3.5 million in stolen funds. That figure almost tripled to more than $9 million this year, with all of 57 cases reported.

The OCID statistics show that debit-card fraud is the most popular with 47 cases reported this year, 31 for which no one has been held accountable.

The true figures are even higher, however, as it is acknowledged that many cases go unreported to the police.

Chambers said oftentimes suspected cases of fraud are not brought to the attention of the police as the banks desire to protect their reputation.

"Many times, the financial institutions will reimburse their customers because of the impact or perceived impact it might have on their businesses," Chambers said.

Parchment admitted that image preservation has caused reluctance among some financial institutions to report fraud.

"Some individual member organisations may be reluctant to report fraudulent activities, as some are not totally at the stage where they are committed to reporting fraudulent activities in order to protect their image," Parchment said.

"The majority of the banks that make up the Jamaica Bankers' Association do report frauds; some more than others," the JBA Anti-Fraud Committee chair said.

"There is one particular organisation where their policy is to report all fraud and then, at the other scale, there is one that pretty much refuses to report because of the image risk."

Chambers revealed that if banks refuse to cooperate with the police during their investigations, the finance ministry could be forced to intervene.

"It might result in an order being made by the investigator to the Ministry of Finance for a production order, which is where the financial institutions are mandated to turn over certain information to the public," Chambers explained. "Or it could be done in the form of a court order where an order is made through the court for a financial institution to hand over certain documentation or files in pursuance of an investigation."

Slap on the wrist

The JBA representative believes the sophisticated network of financial criminals is hugely bolstered by the fact that many of the perpetrators feel this is a crime that they can get away with because of the strain on the police force, the slow conviction rate, as well as the seemingly light sentences.

"If we were able to have a quick, smooth process, a lot of these frauds would not be taking place, because, for one, we would be catching the people quickly; and two, they would have been prosecuted quickly. Also, they would have been sent to prison so they are not here to keep repeating," said Parchment.

"People don't realise that fraud is big business and it is quite pervasive in our society. Most of these people that we see perpetrating fraud in our banking environment are repeat fraudsters. The masterminds are people who are full-time employees in fraud," Parchment said.