Re:MyPayrollHR CEO Arrested, Admits to $70M Fraud
by toast0 on Friday September 27, 2019 @03:14PM
(#21095344)
> Can someone explain why banks don't have systems in place to detect this kind of fraud? It seems like even the most minimal communication between banks would help detect it.
The US banking system is built on a foundation of batched communication, with batches arriving via mail several days later.
Each bank is operating as an independent ledger, with no global awareness; so, while each bank can see the deposits may be coming from the same account, they wouldn't necessarily see that the check redemptions were going into the same account. It's not unreasonable to get a series of checks from the same person, or to make a series of payments to the same bank.
Because of the delays are inconsistent and sometimes complex, it's more convenient to act on the shared fiction of deposits being immediate, and take escalating punitive action when the fiction unravels. Ex: large fees for both despotiting a check that is not honored, and writing a check that is not honored when presented. If it happens frequently, your account may be limited to transacting only in fully cleared funds, and you may be blacklisted from banking through credit reporting companies, or referred to law enforcement.
However, there have been several changes to shorten clearing times in (somewhat) recent times, including Check 21 in 2004, which allowed all checks to be processed as images instead of paper, and Same Day ACH starting in 2016, with planned enhancements through 2021. As the clearing window shortens, kiting becomes less feasible and useful.
The US banking system is built on a foundation of batched communication, with batches arriving via mail several days later.
Each bank is operating as an independent ledger, with no global awareness; so, while each bank can see the deposits may be coming from the same account, they wouldn't necessarily see that the check redemptions were going into the same account. It's not unreasonable to get a series of checks from the same person, or to make a series of payments to the same bank.
Because of the delays are inconsistent and sometimes complex, it's more convenient to act on the shared fiction of deposits being immediate, and take escalating punitive action when the fiction unravels. Ex: large fees for both despotiting a check that is not honored, and writing a check that is not honored when presented. If it happens frequently, your account may be limited to transacting only in fully cleared funds, and you may be blacklisted from banking through credit reporting companies, or referred to law enforcement.
However, there have been several changes to shorten clearing times in (somewhat) recent times, including Check 21 in 2004, which allowed all checks to be processed as images instead of paper, and Same Day ACH starting in 2016, with planned enhancements through 2021. As the clearing window shortens, kiting becomes less feasible and useful.