• 12
  • December
    2011

Prosecutors believe that 94 individuals exploited a banking loophole to perpetuate a checking fraud scheme that resulted in somewhere between $450,000 and $1 million in losses to TD Bank.

According papers filed with the court, three people were primarily responsible for the scheme. Since August 2009, they, along with six other leaders, recruited over 80 individuals to open savings accounts at a number of TD Bank branches under their real names. The individuals used small sums to open the accounts.

Once established, they would deposit worthless checks into their savings accounts. Then, before the checks bounced, they transfer money to their checking accounts and go to ATMs and withdraw as much money as possible. In some instances, individuals traveled as far as Atlantic City, New Jersey, and Connecticut, to casinos where the ATM limits were $5,000 or more.

This scheme utilized a little known banking loophole regarding savings accounts. When checks are deposited into checking accounts, the funds are not available for withdrawal until after the check has cleared. However, this does not apply to savings accounts. Checks deposited into savings accounts are immediately available for withdrawal - or transfer to a checking account.

According to state prosecutors, the three head bosses received most of the money, and the account-holders were each paid a few hundred dollars for use of their names and accounts.

The bank, in conjunction with the U.S. Postal Inspection Service, has been investigating the matter for 18-months.

Each of the 94 defendants faces charges of grand larceny or conspiracy; some face both.

Source: ABC News, "DA: 94 People Charged in NYC Check Fraud Ring," 12/8/11.