How does bill discounting fraud happen?

On Behalf of | Aug 30, 2021 | Firm News

When someone promises something, accepts money and doesn’t deliver, fraud charges may follow. Such actions reflect a typical example of consumer fraud, something many people are familiar with. Other forms of fraud exist, and they may be more prevalent than people realize. New York banks sometimes deal with people who engage in bill discounting fraud, an attempt to “beat the banks” out of money based on deception and misrepresentation.

Bill discounting fraud explained

Banks have many rules to protect the institution from fraudulent behavior, but some scams do work. Bill discounting fraud involves someone representing a company and using the bank to procure payments from customers. The person may open a business account and use the bank to collect payments from customers.

Yes, both the bank and the business’s customers become the “marks” in the scam. If things work out well for the fraudster, he or she may ask the bank to extend credit lines to the account. The scammer may then take the money collected from customers and significant advances on the loan.

Such fraudulent behavior could lead the scammer into serious legal trouble. Once the bank finds out what’s happening, it will contact law enforcement.

Running such a scam in the modern age

Today, there are many ways a bank could verify the identity of the fraudster. The bank may take additional steps to determine whether a company is real. That said, mistakes happen, and even a diligent bank executive could make a mistake. Bank and mortgage fraud incidents happen, but getting away with the crimes could prove impossible.

That’s not to say innocent people commit errors that present the impression of fraud. Those wrongly accused of bank fraud would then need to prove their innocence.

Those who are guilty of fraud may consider plea bargains. Otherwise, a guilty verdict may result in significant jail time.