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This blog focuses on topics such as identifying fraud, reducing evictions and lowering bad debt in the multifamily housing industry.

3 Ways to Identify Fake Bank Statements

Prospective tenants can use fake bank stubs to misrepresent their finances on rental applications, costing property managers thousands in losses. We are going to offer some tips on how you catch these fraudsters before they become an issue.

How to fight fraudulent rental applications

Unfortunately, the problem of fake bank stubs being submitted with rental applications hasn’t gone away. In fact, it’s worsened during the pandemic, according to Snappt’s “2020 Effects of the COVID-19 Pandemic on Residential Rentals Survey.” The percentage of fraudulently altered applications has increased from 15% before the pandemic to 29% in September 2020. One in 10 fraudulent applications used to go undetected. Now, it’s one in four. The increase in the number of undetected fraudulent applications can partly be attributed to the difficulty in detecting fraud when documents are uploaded via online applications. 

#1 – Make sure the numbers add up 

 

Once you have the applicant’s bank statements from the previous 30 to 90 days, compare the pay amount and employer on their direct deposits with the details on their bank stubs. If they deposit their paychecks themselves, compare their take home pay with their check deposits. And when considering their current rent, since most people pay rent by check, the amount on their bank statement should be consistent with the rent they listed in their rental application. 

 

When running over the numbers, keep one thing in mind. People who create fake bank statements will often use round numbers. Whether we’re talking about a paycheck amount or a rent payment, a rounded number is unlikely. If the bank statement contains multiple rounded numbers, that could be a red flag.

 

#2 – Talk to a bank rep

If you’re uncertain whether you’ve received a fake bank statement or not, one way to get answers is to reach out to a bank representative. Call the bank – using a number you’ve obtained yourself and not the one written on the application – and ask a representative to confirm the details in the bank statement supplied by the applicant. 

If the representative isn’t comfortable supplying that information, you can email the document to them and ask for a confirmation that the bank issued the bank statement. Unfortunately, you may not get much support from the bank. While some banks try to prevent manipulation of documents by applying security features to PDF files, these measures are typically centered around protecting investment accounts. 

#3 – Look for inconsistencies and errors

 

The first potential red flag involves the bank statement’s appearance. Are the font type and size consistent with what’s on other bank documents? Is the bank logo on the statement of low resolution or different than the logo on the bank’s website? Someone creating fake bank statements may get lazy or sloppy with any or all of these details. Then, look at financial inconsistencies. Does the math make sense? Does the ending balance on one bank statement match the beginning balance of the following statement? Is there an excess of funds but also an excess of overdraft fees? Are there withdrawals that look suspicious? Any of these could mean more research is needed. 

Proactively preventing fraud is an additional, but highly necessary step in protecting your rental investments. Hopefully these tips can help you to minimize the risk of renting to dishonest tenants.

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