According to suspicious activity reports (SARs) submitted to the Financial Crimes Enforcement Network (FinCEN), 2011 saw an all-time high in alleged claims of money laundering, consumer loan fraud, debit card fraud, mortgage loan fraud and casino fraud.
Since 2007, the SAR numbers have ranged from 1.2 million to 1.3 million total, but in 2011 they jumped to over 1.5 million. Analysts say that these cases of fraud can be directly related to the financial meltdown.
“The financial meltdown that took place from 2007 to 2009 uncovered all the skeletons, what was taking place in the marketplace, from mortgage financing to Ponzi schemes,” Curt Novy, a mortgage and real estate analyst in San Diego, Calif, told ABC News.
He added that in a good economy, these frauds are overlooked. But during an economic downturn, people take a closer look at the books.
“Massive fraud isn’t discovered in good times,” he explained. “It’s when the market changes, and financial institutions start looking closer, when the checks stop coming in, they take a closer look at what’s going on.”
The financial meltdown bred this culture of fraud, what ABC News called a “perfect storm” of financial ruin. Both financial criminals and those reluctant to commit fraud were drawn in as a consequence of the meltdown.
“You have well-educated person in a position of trust and influence and high up in an organization and all of a sudden has this motivation because they are caught between a rock and hard place, and you can imagine what they do,” fraud and forensic consultant Harry Cendrowski said.
Many of these fraud cases are so large and complex that investigators suspect it may take the next decade for the full cases to be reviewed. Some cases involve hundreds of properties, which can take three to four years to compile evidence in preparation for a trial.
“A typical fraud case may have a 100,000 to 200,000 pages of case discovery and FBI recordings are often used,” Novy said.
While fraud peaked in 2011, the FBI is only pursuing a fraction — 3 percent — of the total 90,000 suspected mortgage loan fraud cases. The FBI is choosing to investigate the large-figured cases.
“About 70 percent of our cases are more than a million dollars. We are going after big fish as far as putting cases together, and we’re going after people on the inside because of fiduciary responsibility and the element of trust that they’re violating and doing the most damage,” FBI financial crimes chief Tim Gallagher told ABC News.
Many criminals used the housing boom and bust as a way to con people using false foreclosure assistance. Fake companies used spam emails to send scams demanding $1,500 to $2,500 for foreclosure assistance, according to the FBI. Criminals also made money by incorrectly purchasing short-sale homes from banks , then “flipping” them to make a profit.
“This was more along the lines of individuals identifying houses they think they can get a short sale on, and then not disclosing to the bank the fact that there are higher offers out there. They get the bank to agree to a short sale and then flip the property for a higher price to the other bidders,” Gallagher said.
“This is what banks are telling us,” Gallagher adds, regarding other cases of money laundering and illegal schemes funnelling money into different bank accounts. “They’ve seen a rise in suspicious activity that appears to be money laundering.”
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