Red Flags for Altered or Fabricated Bank Statements

Leg 01Visual inconsistencies on the page

Edited statements often betray themselves in small visual details, because changing one number in a document cleanly is harder than it looks. Compare pages against each other and, where you can, against other statements from the same bank you have seen before.

Zoom in. Edits that are invisible at normal size often show up at high magnification as slightly different letter spacing, a blurred edge, or a background that is a shade off.

• Fonts, sizes or weights that differ between lines of the same table
• Figures that sit slightly above or below the baseline of their row
• Misaligned columns or uneven spacing around a particular amount
• Logos, headers or footers that differ between months from the same bank
• Page numbers that skip, repeat or do not match the stated page count

Leg 02Arithmetic that does not reconcile

This is the most reliable check, because altering a statement convincingly means altering every figure that depends on the change. Fraudsters often fix the line they care about and forget the rest.

Take a hypothetical example. A statement shows a beginning balance of $12,400, total deposits of $71,800, total withdrawals of $66,100 and an ending balance of $18,100. The arithmetic works. But when you add up the individual deposit lines, they total $58,300. Someone has likely changed the summary or added lines without adjusting the other figures. That gap is a question that needs an answer.

1. Check that beginning balance plus deposits minus withdrawals equals ending balance.
2. Add up individual deposit lines and compare to the stated deposit total.
3. Do the same for withdrawals.
4. Spot-check running balances: each line should follow from the previous one.
5. Confirm each month's ending balance equals the next month's beginning balance.
6. Compare the average daily balance printed on the statement with what the daily figures suggest.

Changing one number is easy. Changing every number that depends on it is not.

Leg 03Patterns that look too tidy

Real businesses are messy. Deposits vary by day of week and season, balances wobble, and there are fees, small refunds and odd one-off items. A statement that is unusually clean deserves a second look.

Watch for deposits in suspiciously round amounts on a business that normally takes card payments, transaction descriptors that repeat with unnatural regularity, or a run of months where revenue grows by almost exactly the same percentage. Also look at the absence of normal things: no bank fees, no card processing fees on a retail business, no payroll on a business with staff. Missing activity can be as telling as extra activity.

Leg 04Inconsistencies with the rest of the file

Statements do not exist in isolation. Compare them to the application and to what the merchant told you. Does the stated monthly revenue on the application broadly match the deposits? Does a merchant who said they have twelve employees show any payroll debits? Does the business address match? Do the processor deposits match the processor statements, if you have them?

Also compare against anything you have seen before. If you funded this merchant last year, pull the old statements. Fabricated history sometimes contradicts the real history you already hold.

Leg 05Verifying fairly and without accusation

When something does not add up, the next step is verification, not confrontation. Many funders use direct bank verification methods, such as having the merchant connect their account through a secure read-only service or provide statements directly from their online banking during a call. Ask the funder what verification they prefer and offer it as standard practice: "Our funders verify statements directly. Here is how that works."

A merchant with genuine statements will usually agree without much fuss. If a merchant refuses every form of verification, or the verified figures differ materially from the documents provided, you have your answer. Do not submit the file. Note what happened on the deal record and, where your agreements with lenders require it, tell them.

It also helps to shorten the chain of custody. Statements that a merchant uploads directly through a branded portal, such as the merchant portal in FundPilot, arrive on the deal without passing through forwarded email threads, which removes one easy opportunity for documents to be swapped or edited along the way.

Leg 06Building checks into your process

Make these checks a routine part of every file, not a reaction to a hunch. That way honest merchants are never singled out, and the checks happen even on busy days.

FundPilot's statement underwriting helps because every figure it extracts, whether deposits, balances, NSFs or positions, links back to the exact statement page it came from. When the totals it calculates do not match the summary printed on the statement, you can click through to the source and see exactly where the discrepancy is. Combined with a full audit trail of who uploaded, viewed and changed each document, that gives you a clear record if a file is ever questioned. Keep the human in charge, though: software can surface a mismatch, and a person should decide what it means.