How to spot fake bank statements?

Alloy's 2024 Fraud Benchmark Report shows that nearly 57% of banks, fintechs, and credit unions lost over $500K in direct fraud losses in 2023. This does not include indirect losses for financial institutions, such as lost customers, money spent on fraud detection, and loss of reputation.  

Thorough verification of bank statements has become inevitable for financial institutions to detect fake bank statements and avoid losses. While manual verification can detect fake bank statements to a certain extent, relying solely on this process may only sometimes be accurate and effective. 

Automating the verification process using advanced technologies like Optical Character Recognition (OCR) and AI can improve efficiency in fraud detection. This technology helps to detect even sophisticated forgeries in bank statements. 

In this blog, let's discuss signs of fake bank statements and the motivations behind them. We also examine the manual and automated process of detecting bank statements to help you choose the best method. 

Understanding bank statements: their role and importance  

A bank statement is a document that summarizes all the financial transactions that happen in a particular month. It helps analyze spending patterns, reduce expenses, and monitor fraudulent activities. You can download bank statements through your bank's website and store them in a PDF format. 

a. Components of a bank statement 

• Bank information: Bank name, address, and contact details
• Account information: Account holder's name, address, and contact details
• Deposits and withdrawals: This section includes deposits and withdrawals such as salary, rent, and utility bills with their date, amount, and summary
• Transactions: Bank statements also show the transactions to different people and services with their date, summary, and the particular amount

b. Significance of bank statements

• Budgeting and planning: Individuals and businesses use bank statements to analyze income, expenses, and spending patterns to reduce costs. This helps them allocate a budget for investments, tax, and monthly expenses.
• Detecting fraud: Verifying bank statements helps you find unusual or suspicious transactions on your bank account, which you can inform the bank of to detect fraud and prevent monetary loss. 
• Loan applications: Lenders and financial institutions request six months of bank statements to assess the creditworthiness of loan applicants. They approve and reject loans based on information such as income and assets from the bank statements. 

The Art of Detection: How to spot fake bank statements? 

a. Manual verification

The manual verification process involves hiring manual labor to verify bank statements. They scan the bank statements manually to confirm their authenticity. Here's how you can detect fake bank statements manually. 

• Look for typographical errors in bank name, address, spelling, and account holder's details
• Check if there is any variation in formatting, template, and font types
• Verify unusual and suspicious transactions
• Numerous round figures and incorrect opening and ending balances indicate fake bank statements

Humans may be unable to spot the nuanced manipulation in the bank statements. Inscribe’s 2023 fraud report states that the human eye can detect less than 10% of document fraud. Fraudsters employ advanced technologies like AI and ML to produce fake bank statements, and hence, a manual verification process is not a reliable solution.  

b. Technologies for automated verification 

The software effectively automates the verification process to detect fake bank statements, but it requires human verification in the final stages. 

Let's understand how an automation tool works. The automation tool uses Optical Recognition Technology (OCR) to verify bank statements. It scans, reads, and verifies fields in the bank statements with 100% automation. However, this technology can verify statements only based on a template-based approach and businesses need to create templates to verify different formats of bank statements.

On the other hand, Docsumo uses Intelligent Document Processing (IDP) to verify bank statements, wherein OCR integrates with Artificial Intelligence (AI) and Machine Learning (ML).  

Automation tools with ML technology can detect subtle differences in the margins, layout, design, and logos of fake bank statements as they learn more authentic statements. They then validate the extracted data, increasing accuracy to more than 99%. 

Advantages of using automated verification: 

• High accuracy rate: The verified data undergoes automatic validation. It is then sent to the humans for final verification. Advanced automation tools offer a 99+% accuracy rate
• Speed: With automation, businesses can verify documents at scale within seconds 
• Efficiency: Automating the verification process improves efficiency as organizations make decisions faster
• Detecting the escaped forgeries: Fraudsters use Artificial Intelligence (AI) to produce fake bank statements. These fake ones seem like legitimate statements. Differentiating and detecting such sophisticated forgeries require the help of technologies like OCR, AI, and Machine Learning (ML). Automated verification assists in spotting fake statements that escape the human eye

Red Flags: Common signs of a fake bank statement

a. Formatting and typographical errors 

Legitimate bank statements maintain uniform consistency in formatting, colors, template, font type, font size, and margins throughout the document. It could be a fake bank statement if you notice inconsistencies in these branding areas. 

Moreover, typographical errors in bank names, addresses, currencies, spelling information, and date formats raise suspicion as authentic statements have no errors. 

b. Altered numbers

Fraudsters produce fake statements stating a high income to get approved for loans. In such cases, it's essential to cross-verify or double-check the information with other documents like payslips and tax reports. 

Also, fraudsters use numerous round figures to calculate the total sum easily, but any authentic statement represents a mix of whole and round figures.  

c. Reconciliation

Another easy technique is to add the transaction details and check if the amount matches the total sum. This process can detect fake bank statements as fraudsters may have incorrect ending balances when they make up statements for months.  

d. Account number verification

Verifying the bank account number can reveal if the statements are fake if you notice anything suspicious. Contact the customer service team to check if an account matches the personal and transaction details stated in the statements. If there is no such account, then that is a clear indication of made-up bank statements.

e. Suspicious transactions

Legitimate statements represent a month's regular transactions, such as income, utility bills, online purchases, rent, and education fees. Transactions that are different from these are highly suspicious. Here's a list of suspicious transactions that denote fake bank statements:

• Unusually large transactions that indicate a potential case of money laundering
• Transactions that lack a clear source
• Increase in cash deposits within a short period that doesn't have any purpose with the account holder
• A large transaction is divided into repetitive small ones to launder money 

f. Pattern recognition

Look for unusual or repetitive patterns in spending habits, cash flow, frequent transfers, and uncommon recipients. 

The Why: Motivations behind fabricating bank statements

a. Achieving unwarranted financial advantages

Fraudsters produce fake bank statements and exaggerate their income and assets to meet the eligibility criteria for loan applications. To decide the loan amount, lenders verify income, cash flow, debt-to-income ratio, and previous loan repayments.

Another reason why fraudsters create fake statements is to enjoy the government benefits for low-income people. They fake their identity and high salary to access these benefits with low-income status. 

b. Concealment

Businesses and entities sometimes tamper with bank statements to hide financial losses and debts, as they are responsible to investors and stakeholders for the funds they receive. 

Companies are not transparent about their poor financial health when unexpected losses occur. Thinking that the loss is temporary, they send fake statements to investors to avoid losing their trust.   

Sometimes, the senior executive's salary or compensation is directly proportional to the business performance, and to enjoy high compensation, they pay external auditors to fake their bank statements. They either inflate profit and revenue or deflate expenses to manipulate their bank statements. 

c. Pursuing education

Students or their families produce fake bank statements to pursue education in standard institutions. This shows that they can afford or manage the expenses required for education. Fake bank statements indicating a decent amount of income help them to apply for reputed educational institutions. 

d. Money laundering

Fraudsters use bank statements to launder money obtained from illegal activities such as drug trafficking, corruption, and terrorist funding. They direct the funds to a legitimate cash-based business, which is recorded in bank statements and used for investments and assets.  

The Impact: Consequences of using fake bank statements

a. Legal consequences

The lender or financial institution offering loans can take legal action against fraudulent activities. In the case of forged documents, lenders can file a case, and the applicant must face it in the courtroom. Depending on the case, the court might order the accused to pay the amount with penalty charges.  

b. Financial integrity at risk

Not only fraudsters but lending institutions that fail to detect fake bank statements (knowingly or unknowingly) can suffer from penalties. The Consumer Financial Protection Bureau ordered Bank of America to pay $12M for using false mortgage data for reporting. Though the context here differs, failing to monitor fake transactions and statements invites regulatory fines.

Verification Strategies: Ensuring the authenticity of bank statements

Let's see how Docsumo’s bank statement verification software helps your workflow.

• Preparation: Upload at least 50 statements to train your OCR model before verifying. This prepares the model to detect fake bank statements by learning their layout, design, template, and structure. 
• Document Ingestion: Upload the bank statements that need verification from your mail and scanners. 
• Specification: Specify the fields or mention the criteria that need verification. It could be the applicant's name, account number, or transactions. 
• Verification: Docsumo's advanced algorithm scans and verifies the bank statements to detect fake ones by looking for errors and inconsistencies. It immediately sends signals in case of any susceptive information.
• Validation: The extracted data then undergoes automatic validation. Then underwriters or team members can once again verify the final data.

Uphold financial security using Automated Bank Statement Verification Software 

Relying on manual verification means leaving high chances for fraud and financial losses. Docsumo’s verification software can detect fake bank statements with more than 99.5% accuracy. 

Docsumo verifies every aspect of bank statements, such as layout, margins, fonts, design, logo, branding, and transaction details, to effectively detect fake bank statements. The result is a 65-70% reduction in operational costs and improved productivity.  

To know more, sign up for a free trial of Docsumo.  

FAQs 

1. What are the key indicators of a fake bank statement?

The key indicators of a fake bank statement are typographical errors, low-resolution logos, improper formatting, repetitive round figures, and suspicious transactions. 

2. Can digital bank statements be faked as easily as paper ones?

Yes, fraudsters are easily faking digital bank statements using ready-made templates that look like authentic ones and advanced image editing software like Adobe Photoshop. 

3. How can businesses protect themselves from the risks associated with fake bank statements? 

Businesses can level up their verification process using automation technology to avoid risks. Automated verification detects sophisticated forgeries and subtle differences like layout, margins, design, and mismatched logos. 

4. Which is better for detecting fake bank statements? Manual verification or automated verification? 

Though manual verification can detect fake bank statements, it is not 100% reliable. Automated verification is a better option as it ensures 99% accuracy, reduces operational costs by 65-70%, and eliminates correction.  

5. How to automate bank statement verification to detect fake statements? 

Invest in an automation tool like Docsumo that uses OCR, AI, and ML to verify data and start to train your OCR model. Upload and detect fake bank statements with 99.5% accuracy.