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back to article Feds uncover 'bust out' scam that cost banks $80m

Federal authorities have uncovered an elaborate organized crime ring they say recruited some 700 immigrants from the former Soviet Union to defraud banks and other creditors of more than $80m. According to documents filed in US District Court in Denver, the organizers hired the immigrants to be pawns in what's known as a "bust …

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WTF?

Smells fishy

I find it hard to believe that someone could enter the US on a temporary visa and then, on the strength of attesting in an online form that they made $180,000, get an unsecured credit card with a $25k limit. The card issuer would have run a credit score check and found no history and that alone would have been grounds for a rejection. There's more to this story than meets the eye.

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Silver badge
Flame

80 million USD? Small fish, really.

>>Citibank promptly mailed her a card with a $25,000 limit.

Nice. They must be desperate to get something back onto their balance sheet. Maybe Citibank should be investigated for reckless behaviour.

Why does that zombie bank still exist anyway, last time I checked they had just blown 10 *BILLION* USD because their MBAs and sundry retards couldn't properly manage the housing bubble money.

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Anonymous Coward

Re: Smells fishy

It does happen. I entered the US on an H1* visa at 21 years of age and got an American Express card in a couple of weeks. My American colleagues were very impressed as they were all much older and had been refused numerous times.

*Actually it was a B1 visa that had "H1 in lieu of B1" written in biro over it by the embassy staff due to constant stalling by them that by the time I was due to travel the full H1 still hadn't been approved. I had fun with immigration in Atlanta.

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Alert

More fool them

"Nikitina received five cash advances on the card for a total of $24,500. A few weeks later, she sent Citibank a check for $25,000. Although the check was returned for insufficient funds, the fraudulent payment caused Citibank to temporarily increase her credit line. The total financial loss to the bank was calculated at $69,940.94."

So, it looks like a payment of $25K was received (but not cleared) and they raised her limit to $70K?

I dislike criminals of any stamp, but Citibank do not have an ounce of my pity after that behaviour.

O

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Coat

OK so where is the other $100 Trillion

Oh yes those wearn't fradulent loans..... Those where just loans to fine upstanding business that decided to never pay any of the money back.

Hmm struggling to see the difference between the two crimes. I must be fick!

I'll get my coat and head off to the bank. Looks like a golden giveaway down there

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Gold badge
FAIL

A message to bankers everywhere.

Lending shitloads of cash to people without checking that they can give it back didn't work as a business model for you last year or the year before. Guess what? It doesn't work this year either.

Let me help you out with a hint. I don't think that next year is going to be the one where a strategy of flushing your assets down the crapper becomes a winner.....

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Err...

Don't they have 'know your customer' laws like we do in the EU? If this happened over here, the bank would be getting a severe kicking from the regulator*.

* Ok, the FSA are pretty toothless, but they'll give you a nasty suck...

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Silver badge

Someone's not doing his job

It seems to me that, if a bank accepts a credit application at face value, then it can only blame itself for getting swindled.

I would have thought that, in order to accept a credit application, a bank would run all sorts of checks. At the very least, the bank would normally call the employer and verify the salary and hiring date. That really feels like a bare minimum to me.

But apparently they're not even doing that. No wonder we are in an economic crises.

I say send the petty criminals back where they came from, and drag the banks into court for failure to comply with security measures in a time of hardship.

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@KingZongo

You're right, there definitely is more to this than meets the eye:

"The total financial loss to the bank was calculated at $69,940.94"

From a $25k loan?! I'd love to know how that was calculated. Even with interest payments (at inter-bank rates: remember that this is the LOSS to Citi) and cost of staff, a loss of nearly $45k is a bit of a stretch.

Unless, of course, their insurance against default was provided by AIG...

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credit check?

Why were these people able to get a credit card with such a stupid limit on it? As much as I can appreciate the benefits of getting people to self certify to the banks rather than actually going in with evidence of their income but I still can't believe any bank will give you a credit card with such a stupidly high limit with no verification of your income.

Of course, if they start checking the veracity of peoples income claims doing that 50% of people wouldn't be able to get the mortgage they want either.

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Credit too easy ...

I've read several stories about infants or household pets applying for pre-approved credit cards (well, an adult in the house applying on their behalf) and getting them. It's far too easy to get credit cards in the US. It's also a problem for fraud/identity theft when people move out and the pre-approved card application form (with all your details helpfully filled out) turn up in the mail to the previous address.

That said, how did these people expect to get away with this?

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Anonymous Coward

ROFLMAO

@KingZongo, obviously you have no idea how accountancy works, it's not about reality, it's about imagination.

The real reason this is making news is not the scam, well not that particular scam but the fact it's about 10% of the executive bonus budget.

You see when the money comes out of bankers personal pockets it's a real crime and not to be taken lightly.

However when the money comes out of the public purse to keep your mismanaged bank afloat that's okay. And then miraculously, through some accountancy trick, it's not public money anymore, it's banks money.

The truth is, we should be grateful to the banks, because if it wasn't for them, what state of affairs would we be in now. And it's no good asking your local Building Society is it, because they're all either banks, or take a responsible attitude towards money out against money in, and how on earth do you think that business model ever survived.

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Alert

@Jimmy Floyd

It was more than a $25k loan...

" Although the check was returned for insufficient funds, the fraudulent payment caused Citibank to temporarily increase her credit line. The total financial loss to the bank was calculated at $69,940.94."

That would be a case of counting your chickens before you've got any eggs. It's even more stupid than the old magic banknote printing press scam - there's at least some genuine money involved it that case.

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Linux

It is no different over here

I moved over to the UK in February 2004 and for months fought with different banks to setup a bank account.

Then a nice knob-jockey for the Labour party came around to the house and signed me up on the voters register so that I could vote in the elections.

I was always told that I could not open an account due to regulations in this country, even though one of the banks was the same bank I used back in Canada.

To make a long story short once it was discovered I was on the voters register I was immediatly approved for an account, a credit card, and offered more loans than you can shake a stick at. Even though this is the same bank I dealt with in Canada there is no way they would have done this back home, and definitly not with the sort of money they wanted to throw at me over here.

Banks get ripped off because they are greedy.

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Bronze badge

Primitive US banking system?

Nothing seems to have changed since the days of "Catch me if you can" - the movie with that bloke from Titanic in it.

I opened an account in US with Bank Of America in Dallas about 4 years ago, 'cos I was travelling so much to US, I thought it'd be cheaper to Xfer cash from Finland and take it out there. Boy, was I in for a shock!!

I once tried to cash some travellers cheques. I needed two forms of ID. One, Passport. Accepted. Second, my Finnish photo-driving licence (which, Dear Mr. Brown, doubles as the National ID we're all supposed to have in Finland) - REJECTED! On the basis it was foreign!! (OK, so why would a non-foreigner be exchanging travellers cheques, but that's Merkan Mentality for ya. Of course, my passport was foreign, too, but that passed them by. At which point I wondered if I was in a bank, or McDonalds.)

Hmmm....OK, how about my Nokia badge? Yep, no sweat. Even tho' I could've created it with photoshop, and got a dodgy company to put it on a bit of plastic...

Cupid Stunts.

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@ Jimmy Floyd

She sent them a cheque to cover the $25k worth of cash withdrawals and as soon as they had it - without waiting for it to clear - they upped her credit limit to $70k which she promptly used to the tune of $69,940.94

Then the cheque bounced.

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Anonymous Coward

DEAR BANK MANANGER

MY NAME IS ABU ALIYA. I AM A BONA FIDE AMERICAN CITIZEN, AND VERY TRUSTWORTHY. I HAPPEN TO BE IN RECEIPT OF A LARGE INCOME $180,000 (ONE HUNDER AND EIGHTY-THOUSAND USD DOLLARS) WORKING FOR WELL KNOWN LARGE COMPANY ACME. UNFORTUNATELY I AM UNABLE TO SPEND ALL OF THIS AND HAVE THEREFORE SELECTED YOUR BANK AS A RECIPIENT OF INTEREST PAYMENTS WHICH WILL HELP ME TO REDUCE THIS EMBARRASSINGLY LARGE SUM OF SALARY. IF YOU ARE WANT TO BE INTERESTED IN THIS ARRAGNEMENT, PLEASE SEND ME CREDIT CARD FOR $25,000. I WILL ARRANGE FOR THE MONMEY TO BE SPENT AND INTEREST PAYMENTS BACK TO YOURSELVES.

BECAUSE OF THE NATURE OF THIS TRANSACTION IT IS VITAL THAT YOU NOT CALL MY EMPLOYER (ACME). PELASE DO NOT TELL ANY OTHER BANK ABOUT OUR AGREEMENT! JUST SEND ME THE CREDIT CARD IF YOU ARE WILLING.

YOURS SINCERLY

ABU ALIYA

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Thumb Up

@ DEAR BANK MANANGER

LOL

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@Jamie 19

Basic rule of the credit checking, check where people live befor giving credit. As it is a criminal offence to register to vote at an address where you don't live the bank knows they can take you to the cleaners if they have this and it is wrong.

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Happy

love it

"Although the check was returned for insufficient funds, the fraudulent payment caused Citibank to temporarily increase her credit line"

The fraudulent payment caused them to increase the limit??? LOL LOL

Teller A: hey, there is no money in this account the check came from. what should i do?

Teller B: Err.... you have no choice but to increase the limit on the credit card, man. Its Banking 101.

Until these bankers start getting put in jail for the reckless trading that still goes on, the economy will stay in the gutter as no-one has faith in the system being fixed.

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Pirate

"Due Diligence" checks for credit

The problem is not that they could not find anything - that lack of information is what got her approved! A credit company checks police records (denied if anything hits), credit statements (denied if anything shows within last 7 years as default, 3 times overdue, etc), and any records it already has on the person (denied if current/past accounts overdrawn, loans default, late payments, etc).

Because none of these came back with a hit, the person was approved (usually on a probationary term limit). When she paid (on time?), the probationary limit was lifted and her "full" credit limit was realized. This is a common ploy to show encourage card holder loyalty and spending.

As the applicant was a person "legally residing in the US (check here)", the company approved it. If credit companies were actually required to do research on a person, there would be no "pre-approved" mailings, as it would cost too much to determine if the recipients were "worthy".

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Silver badge

Bah!

"Although the check was returned for insufficient funds, the fraudulent payment caused Citibank to temporarily increase her credit line"

And right there you have the nub of the problem. Or at least, one of the nubs. Another is the "pre-approved credit card application" idiocy. Another is the way that Citibank will sell on the details of this to other banks, who will then fall over themselves to replicate the idiocy.

And now we all know what happens when you prop up an entire banking system on the promise of interest payments to come from people who should never have been loaned money in the first place, and who wouldn't have been if there was even a hint of "due dilligence" in the application vetting process.

Cue The Who: Won't Get Fooled Again. Again.

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Bronze badge

What I think

The crooks should go to jail and the banks fined another $80mil that comes directly out the CEO pockets and out of and dividends. Six month suspension of the sale of the stock should help to .

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Stop

erm

@Kingzongo more to meets the eye indeed.

@I didn't do IT . Right about some points, wrong on others.

Background: Moved to california from UK about 5 years ago. 6 figure salary, legal permanent resident. I got the essentials; social security number, drivers licence and ID, apartment in wealthy area of silicon valley and lived for 5 months. I met the san jose area director for citibank and he hooked me up with a bank account. The bank got used to me getting nice paychecks every two weeks. After the 5 months, I Went to the bank and asked for a credit card. Denied. While they do check if nothings bad hits, american credit scores (from 550 to about 800 odd) are seriously hurt if no credit history shows up. Mine was rock bottom as I was new and there was nothing my mate could do to help, even seeing the amount i was being paid directly into his bank. He gave me some advice, so I took out a car loan (not from citibank btw), planted a 20% deposit on a $38k car and got royally raped for 14.9% interest. It took me 3 years of payments on low limit (read $800) credit cards and the car loan to get a 700 credit score, after which credit card companies were offering lines of credit in the region of $8,000 per card. I was able to change my car loan and get interest around 7.5% which is much better, but nothing like the 0% other people seem to get.

So im wholly not convinced this woman can waltz into the USA with no credit history, a fictional number on paper and walk away with a $25k citi card. What seems more likely is a "friend" involved in this circle who can override a credit line or approval for a bank/card provider who would give higher limit cards to the members of the scheme. Once one bank gives a high limit card, other banks do tend to follow suit, however its getting that high lmit card early seems difficult without someone higher up in the banking chain. Once you have these lines of creidt, you can use bust out schemes to run up one card, pay the balance with a balance transfer cheque from another card, run it up again, rinse. repeat. send more cheques. etc.

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Coat

Attention Linguists

Is banker rhyming slang for anything? Anyone got any suggestions?

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Grenade

Now you know why we are in this recession. Banks.

Interesting.

I'm an American Citizen and I could never have gotten a credit limit of that type simply by claiming to make $180,000 a year. They didn't run a credit check and find no credit history? Pathetic. I have no sympathy for a bank that gets itself ripped off by foreign criminals. If the banks and their execs were held to a higher standard and prosecuted by the law, this nonsense would never happen. That won't happen though, because the Banks are greedy.

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FAIL

@DEAR BANK MANAGER

You laugh but it actually happened.

http://www.nytimes.com/2009/02/21/nyregion/21scam.html?_r=1&ref=business

"In October, Citibank received two dozen faxed requests for money to be wired, and it transferred $27 million to accounts controlled by the conspirators in Japan, South Korea, Australia, China, Cyprus and the United States, the complaint says."

I saw some other reports that said Citi was able to stop at least some of the payments, but still...

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