Of particular interest and importance to receivers
are bank records, as they are reflective of the actual financial history
of the entity. However, we have identified bank statements in several of
our investigations that have been electronically manipulated to reflect
deceptive and fraudulent statement entries. Both the payee names and
amounts were changed for electronic transfers reflected on statements. In
some cases, fake deposits were placed on the statements, and the balances
manipulated such that they rolled forward. Changes made to bank statements
are virtually impossible to identify without having a copy of the original
bank statement to compare them to.
Bank statements are downloaded from bank web sites in
PDF format by accounting personnel in lieu of receiving them via mail.
This practice is becoming ever more common. In the cases we have seen, the
statements were manipulated using software that is able to crack open the
PDF file, and then editing tools were used to change the amounts, dates,
payees and deposits. The files were then converted back to a PDF file.
PDF’s are editable. Even if the original PDF file is
scanned as an image in bitmap format, a process known as Optical Character
Recognition (OCR) allows users to convert the PDF into a text format.
Acrobat contains an OCR feature, and there are others available on the
web. Even PDF’s that are not in a text format can still be edited through
other means. Techniques such as using screen capture software to take an
image of the file and then editing and resaving it can be used to change
an electronic file. The creator of the PDF can add password protection,
but ultimately this protection can be broken.
Receivers should exercise caution when relying on
even PDF bank statement copies which did not come directly from the
financial institution. The lesson learned is that receivers must remain on
heightened alert in fraudulent schemes when reviewing bank statements
given the ease of electronic manipulation of bank statements.
*Peter S. Davis of Simon Consulting, LLC has significant
experience in complex forensic accounting, fraud detection, bankruptcy
matters and receiverships. Mr. Davis is a CPA, ABV, CFF, CIRA, CTP and CFE,
is conversant in German and has consulted for companies in the U.S.,
Germany and Japan. Erik O’Malley of Simon Consulting, LLC provided
research assistance for this article. Mr. Davis may be reached at