Do you have any inactive bank accounts? Then you are at risk. A ghost bank account referred to in the headline is actually an abandoned, inactive, or even fake bank account – and while you are unlikely to have the latter, you may still have some accounts you don’t use anymore. The problem is that such accounts can be used by criminals or fraudsters for unlawful purposes. They get access to them by bribing a dishonest bank officer or stealing your identity and engage in things like money laundering using your account with you being completely unaware. Read a more detailed article on ghost bank accounts and the associated risks – and close your bank accounts if you are not planning to use them any longer!
A Ghost Bank Account: More Details
A ghost account is widely known as a bank account opened under a fake name, and this is illegal, of course. However, the term also refers to an account that has not been used for a long time but remains fully operational. There are usually special procedures in place at different banks that set a deadline for account inactivity and then automatically close it. If there is some money in such an account, it is written off as income or transferred to the state as unclaimed property.
Keep an eye on all your bank accounts to prevent them from losing an active status and being used for unauthorized transactions – and stay informed about any changes regarding your accounts!
2 Stories About Ghost Accounts
The first story happened in Bengal, India. Fraudsters organized a money laundering scheme that involved the profits obtained from livestock smuggling. They set up 231 ghost accounts using the identities of villagers and transferred the funds to Calcutta-based banks. Specialists examined the account opening documents and discovered that 200 signatures out of 231 were faked by the same person. The scammers took personal details from welfare documents they got from villagers.
The second story involved a major South African bank where some of its employees used non-active accounts for personal purposes. The bank did not specify the number of employees involved or the number of accounts used. However, it is clear that such events do a lot of damage to the bank’s reputation and call for more vigilance on the banks’ and customers’ part.
The Illegal Nature of Ghost Accounts
Opening an account under a fake name is a serious offense that may result in fines or imprisonment. Make sure to adhere to all the laws and regulations when you open a bank account and provide true-to-life information when you complete customer forms.
Opening a ghost bank account has become really hard in recent years as banking institutions across the globe have adopted stringent Know Your Customer (KYC) procedures. An individual or an entity that applies for a bank account needs to fill out a customer questionnaire. The financial institution manager has to check the customer’s identity using the submitted documents and verify all the data provided in the questionnaire using databases. The documents of beneficial owners need to be verified as well. In addition, the account is constantly checked for legitimacy purposes after it has been opened.
Illegal Use of a Ghost Bank Account
Here are typical examples of how a ghost bank account may be abused:
- Tax evasion. Ghost accounts can be used by wrongdoers to conceal their assets from tax authorities and understate their tax returns.
- Money laundering. Ghost bank accounts may also be used by criminals to make a series of transactions aimed at making the funds appear legal. The ultimate goal is to hide the real source of money.
- Fraud. Abandoned personal bank accounts can be used by fraudsters to defraud other accounts by accepting payments for goods/services that have never been provided.
- Theft. Ledger bank accounts can be used by thieves who steal money from legal entities by transferring money from the corporate account to a ghost account.
It should be clear that ghost bank accounts are not illegal by themselves – it is the activities conducted with their help that can make them illegitimate. If you have any doubts as to the legitimacy of your actions, you’d better engage a professional consultant.
Risks Connected With Ghost Bank Accounts
Ghost accounts (and anonymous (numbered) accounts) are prohibited in the majority of countries as they are associated with the following potential risks:
- Loss of funds. If the account is spotted as the one used for unlawful activities, all the money will be seized.
- Legal consequences. Possessing a ghost bank account used for illegitimate purposes will result in fines or even imprisonment.
- Damage to the reputation. An individual or an entity that uses a ghost bank account will tarnish its reputation and may have trouble opening accounts or obtaining loans in the future.
- Difficulty tracking operations. Ghost bank accounts are not very easy to track, and detecting and preventing their unlawful use is a challenging task.
- Difficulty accessing money. If regulatory authorities detect a ghost bank account, you will hardly be able to access the funds kept in it anymore as it will simply be closed immediately and the funds will be confiscated as illegal ones.
- Too much attention from authorities. Ghost bank accounts are as anonymous as is possible in the present-day world, which means that they attract more attention from regulatory authorities.
As you see, the risks and consequences of having a ghost bank account can be quite severe, which is the reason to avoid them, use transparent channels to carry out your operations, and keep an eye on inactive bank accounts to close them on time.
Examples of Penalties
Penalties differ from country to country, and here are some examples just to give you an idea:
- A former US financial advisor was sentenced to 10 years imprisonment for appropriating 20 million US dollars from customers using ghost bank accounts.
- A man from the UK laundered 100 million pounds earned on drug trafficking operations using a ghost bank account and got an 8-year imprisonment.
- A man from Australia had to pay a fine of 300,000 AUD and spend 5 years in prison after he laundered 3 million dollars and evaded paying taxes.
Click on the above link to find out more and keep an eye on your inactive accounts!