Check and Credit Card Fraud

Question 1

Common type of credit card fraud?

Answer 1

Advance payments, card counterfeiting, and account takeovers are all forms of credit card fraud

Question 2

The majority of check fraud is committed by which of the following?
A. Individuals

B. Financial institutions

C. Organized crime rings

D. Large corporations

Answer 2

C. Organized crime rings
Since the late 1980s, foreign crime rings have been the cause of the majority of check fraud in the United States. Most major financial institutions attribute more than 50 percent of all check fraud to organized crime rings. The perpetrators are often based in Nigeria, Russia, Vietnam, and Mexico. Most of the Vietnamese and Mexican rings operate in California, notably San Francisco, Orange County, and Sacramento. The Russian and Nigerian rings, centered in the Northeast, spread their criminal activities over a wide area and can be found passing through any part of the United States at any time. While most of these gangs are involved in drug trafficking and violent crimes, check and credit card fraud are considered “safe” crimes. Many individuals involved in these rings know their chances of being arrested and prosecuted are relatively low and the penalties imposed for such crimes are not very harsh.

Question 3

Frank has recently opened several checking accounts, all with different banks. Frank’s plan is to take advantage of each bank’s delayed posting by continually swapping checks from one account to another to create the false impression that there is money available in each account. Frank’s ploy is known as which of the following?
A. Check washing

B. Check kiting

C. Check ring

D. Check skimming

Answer 3

B. Check kiting
In a check kiting scheme, multiple bank accounts are opened and money is “deposited” from account to account; however, the money never exists. Floating makes check kiting possible. Floating is the additional value of funds generated in the process of collection and arises because the current holder of funds has been given credit for the funds before the check clears the financial institution upon which it is drawn. Businesses are most susceptible to check kiting if they have employees who are authorized to write checks or make deposits in more than one bank account. Today, check kiting is more difficult because technology allows for a much shorter float period.