This article mentions a method of fraud that yielded $2,000,000 from fake certificates of deposit.
That didn’t stop Beane from following the video’s advice and using fake accounts to create $30 million worth of certificates of deposits at banks. From those fraudulent forms, he managed to withdraw $2 million and place an order for half-million-dollar mobile home, complete with two bathrooms and marble flooring.
This link also cited another article (autoplay video) which explains the fraud a little better:
They allege Beane concocted a scheme last year to use automatic delays in the banking system of transfers of money from one bank to another – essentially an online method of the old-fashion check-kiting scheme – to buy Certificate of Deposits using the Federal Reserve Bank’s routing number and a fake checking account number, quickly liquidating the CDs and stashing the money in his USAA accounts.
USAA allowed its members to make immediate withdrawals – before the transaction was approved and funded.
I am baffled at how this scam works. The best order of operations I can figure out is that:
- The fraudster goes into a bank to buy a CD
- The fraudster uses fake checks with a valid routing number but a bad account number. Does this make the bank think the check is "good enough" to accept?
- The fraudster then cashes out his CD. I assume he does this online or at another branch.
- Some days later the bank tries to cash the check and finds out the routing number, account number, or account owner is fraudulent. The bank is left holding the bag.
I can't see modern banks not capturing a lot of identifying information about a customer, even for small transactions. Are there fewer requirements to "know your customer" with smaller CD accounts? Is the scam using small CDs or large ones?
Very few places will let me purchase a product with a check without extra ID verification or waiting for it to clear. Why would a bank sell a CD and allow it to be cashed out, without similar constraints?