When dates don't match

Anatomy of a Bank Fraud


By James E. Muir, CFE, CPA

Discrepancies between the dates on three bank loans and the resulting mortgages turned a routine audit into a laborious search for possible fraud. The result may have staved off collusion between a loan officer and the mortgagee.  

During the course of the large loan review, three new loans - all made to the same borrower - appeared on the list. This wasn't an uncommon event. Because turnover within the large loan selection was normal, loans to borrowers were always in a constant state of flux between advances and repayments. The bank had classified these loans as substandard but again, this wasn't uncommon because loans do go bad from time to time. The only information our team had at this point was that these three loans now fell within the scope of our loan review due to two factors: the aggregate balance of the loans qualified the borrower for the large loan review and the adverse classification also flagged the loans for review.

The bank had loaned the money to the borrower for constructing houses. The loan documents indicated that the borrower was constructing one of the houses to be his personal home. After inspecting the documents - the notes, mortgages, title opinions, and other pertinent papers - we were concerned about one area in particular.

 

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