Fourteen key types of Banking Fraud

All types of banking fraud refer to the act of using illegal means to obtain money or other assets held by a financial institution. With online banking fraud on the rise, more fraudsters are becoming implicated in scams. But what are the differences between these types of financial fraud? How do you know if you’ve been caught up in one, either as a victim or perpetrator?

Examples of Bank Frauds

1. Skimming

Skimming is the illegal process of duplicating the information found on the magnetic strip of a credit card. This usually happens when a credit or debit card is lost or stolen as the fraudster can skim the data located in the magnetic strip or use the card online by using the card details.

While scammers can’t withdraw cash without the card pin, they can use the card to pay via contactless if this feature is enabled on the card. It is also possible to scan contactless cards through bags using an RFID reader, which is more likely to happen in busy areas such as cities and public transport. Additionally, some retailers and merchants have been known to abuse customer bank information by stealing copies of the credentials while using the card during a purchase.

2. Card not received

This occurs when a bank sends out a new or replacement card to a customer, but it is intercepted along the way. It most commonly occurs in shared residences (such as a block of flats or a house share) if the post is not sufficiently secure upon arrival.

If the card is new, the PIN code should be sent in a separate letter, but this won’t stop a scammer from using the card for contactless or online purchases. Card not received fraud can be harder to detect because the targeted individual might not notice the card is missing at first.

3. In-person (stealing card and PIN)

In-person fraud – often committed by looking over an individual’s shoulder using an ATM or distraction tactics – can be a dangerous type of financial fraud because it can sometimes mean that the scammer will have access to their target’s bank card and PIN.

Sometimes the scammer may engage the target in conversation to learn more identifying information about them. Like skimming, the card can be used in various ways, but with the addition of the PIN and any other information, the options are opened up to include shopping in face-to-face retail.

4. Phone bank fraud

Similarly to online banking fraud, this type of banking fraud attempts to convince the target to voluntarily give away information or transfer their money into another account. The scammer will usually try to convince the target that they need to move money to prevent themselves from losing the money, protecting their assets. They may even make up fake offences and demand that the target pay fines for ‘committing’ them.

5. CEO fraud 

CEO fraud, also known as Business Email Compromise (BEC) or whale phishing, is a type of financial fraud that occurs when a fraudster impersonates a senior manager or CEO to pressure an employee to make a payment.

The way CEO fraud works is usually via an email to the accounts team of a company that appears to be from a senior member of staff. The email requests an urgent payment to a partner or supplier.

A recent example involves The Scoular Company. They were victims of CEO fraud and lost more than $17 million after fraudsters, claiming to be the company’s CEO, sent emails to an employee instructing them to transfer funds to what appeared to be the company’s accounting firm. However, this was a fake request and the funds were sent to a scam artist.

6. Invoice fraud

This bank fraud example targets businesses by impersonating a supplier, usually via email, asking to update the bank details invoices are paid into. This might look entirely innocent if the fraudster has hacked the supplier’s info, as the request will appear to be authentic.

A notable example of invoice fraud dates back to 2013-2015 when Facebook and Google were victims of fraud that cost them more than $100 million. In this particular case of online banking fraud, a Lithuanian hacker impersonated an Asian manufacturer and sent fake invoices to the tech giants.

7. Online banking fraud

Online banking fraud can come in many guises, including phishing, malware attacks, catfish scams and clone websites. With so much banking done online, it’s not surprising that this is a common type of bank fraud.

Fraudsters are becoming highly skilled at creating convincing emails and websites, making it difficult for victims to protect themselves. An online bank fraud example may involve the scammer posing as bank staff and telling the target that their account has been compromised and they need to transfer money to another account. Or, a scammer may ask their target to ‘confirm’ their PIN, account password or verifying details over email, again posing as legitimate bank staff.

8. APP scams

Authorised Push Payment (APP) scams include any scam where the target must willingly decide to move the money out of their account. It is a common tactic used in some types of financial fraud, but it can also be accomplished over the phone or face-to-face. Usually, the scammer will inform the target of a change in their account (often a data breach that puts their money at risk) and ask them to either confirm their password, PIN or other sensitive information to prove who they are.

APP scams are an example of bank fraud that can be more difficult to recover from. Banks often won’t automatically refund any money lost if they believe that the target gave it out willingly or was negligent with their information, even if they were under pressure to do so.

9. Counterfeit card fraud

This is a more common type of financial fraud in countries that have not yet fully adopted chip and PIN systems for bank cards. Like in skimming, the scammer will take the information from the magnetic strip, but with counterfeit card fraud, they will then transplant that onto another magnetic card to continue using it.

10. Card identity theft

This type of bank fraud can involve taking over a legitimate bank account and impersonating the owner or using stolen or faked documents to open an account under someone else’s name.

11. Loan fraud

Similarly to card identity theft, this type of financial fraud involves taking out a loan under someone else’s name using stolen or faked documents. This can be to utilise another person’s better credit or to avoid paying the loan back.

12. Cheque fraud

There are three main types of cheque fraud.

1. Counterfeit cheques – entirely fabricated but used to withdraw money from a legitimate account.
2. Altered cheques – legitimately written out but have their details changed without the account owner’s consent (such as changing the beneficiary or the amount).
3. Forged cheques – legitimate bank cheques which have been stolen from their owner and had a signature forged.

13. Non-delivery of goods

This scam involves the sale of a product that then never arrives – it is not the fault of a postal or courier service, but the recipient of the money had no intention of sending the product. In an age of online shopping and small businesses, the non-delivery of goods becomes a very real issue.

14. Insurance fraud

This involves creating an insurance policy using stolen or faked documents or selling an insurance policy under false pretences. For more information, see our banking and insurance fraud page.

A 2019 study from Lloyds Bank found that millennials are most likely to be conned by different types of financial frauds while over 55s lose the most money per scam. The study shows that 18-34-year-olds lose an average of £2630 to fraud, generally conducted by scammers impersonating bank staff, police, or HMRC personnel.

For more information on this and other different types of financial frauds, such as investment fraud and money transfer scams, please explore our blog.

If you believe you are suspected of any type of banking fraud, think you have been implicated or are being investigated for a scam, please contact our team of specialist fraud barristers today.