Cross-Firing Scam

AAA

DEFINITION of 'Cross-Firing Scam'

A type of scam in which a business transfers money between its various departments or shell companies in order to give lending institutions the impression that the business is financially healthy. A cross-firing scam seeks to exploit the difficulty in obtaining clear information on all transactions as different lending institutions may be involved. As a result, it makes creditors believe the company is still solvent, which is often not the case.

INVESTOPEDIA EXPLAINS 'Cross-Firing Scam'

This type of fraud may also occur by having one department charge a shell company for work rendered, while having the shell company simultaneously charge the department for a different set of work. A cross-firing scam may be difficult for auditors to track due to the number of transactions flowing between the various components of the business. Tracking this sort of fraud is also made more difficult if inadequate information is available about the nature of all companies involved, or if the exchange is made between foreign companies.

RELATED TERMS
  1. Corporate Fraud

    Activities undertaken by an individual or company that are done ...
  2. Securities Fraud

    A type of serious white-collar crime in which a person or company, ...
  3. Pairing Off

    An illegal practice of a brokerage firm offsetting short and ...
  4. Parking

    A form of kiting shares that a brokerage commits by moving long ...
  5. Salad Oil Scandal

    One of the worst corporate scandals of its time. It occurred ...
  6. Kiting

    1. The act of misrepresenting the value of a financial instrument ...
RELATED FAQS
  1. No results found.
Related Articles
  1. Personal Finance

    4 History-Making Wall Street Crooks

    Find out how these Wall Street high-rollers landed themselves in hot water.
  2. Bonds & Fixed Income

    Tales From Wall Street's Crypt

    Wall Street continues to attract fresh hordes of ghoulish people committing the same old crimes.
  3. Personal Finance

    Top 8 Ways Companies Cook The Books

    Find out more about the fraudulent accounting methods some companies use to fool investors.
  4. Entrepreneurship

    Ivar Kreuger: Businessman Or Scam Artist?

    Match monopolist Ivar Kreuger started as a brilliant businessman, but his high-flying lifestyle led to some shady dealings.
  5. Markets

    Financial Statement Manipulation An Ever-Present Problem For Investors

    The SEC has taken steps to eliminate this type of corporate fraud, but it remains a real risk for investors.
  6. Fundamental Analysis

    The Best 5 Online Accounting Systems For Small Business

    Running a small business can be difficult, but thanks to these online accounting services, taking care of payroll doesn't have to be.
  7. Investing

    Understanding Cost Accounting

    Cost accounting is the method of financially allocating expenses to goods that are manufactured for resale. Cost accounting is also referred to as managerial accounting, because managers use ...
  8. Investing

    What are Prepaid Expenses?

    A prepaid expense is an asset on the balance sheet. Due to accounting principles, expenses are often accrued on the balance sheet and expensed in a later period.
  9. Investing

    What's a Sunk Cost?

    A sunk cost was incurred in the past, is independent of future events and cannot be recouped. Economists teach that sunk costs should not be considered when making a financial decision. Rather, ...
  10. Investing

    What are Fixed Costs?

    Fixed costs are business expenses that do not change as the level of production goes up or down. They are one of two types of business expense, the other being variable costs. Variable costs ...

You May Also Like

Hot Definitions
  1. Prepaid Expense

    A type of asset that arises on a balance sheet as a result of business making payments for goods and services to be received ...
  2. Gordon Growth Model

    A model for determining the intrinsic value of a stock, based on a future series of dividends that grow at a constant rate. ...
  3. Cost Accounting

    A type of accounting process that aims to capture a company's costs of production by assessing the input costs of each step ...
  4. Law Of Supply

    A microeconomic law stating that, all other factors being equal, as the price of a good or service increases, the quantity ...
  5. Investment Grade

    A rating that indicates that a municipal or corporate bond has a relatively low risk of default. Bond rating firms, such ...
  6. Fringe Benefits

    A collection of various benefits provided by an employer, which are exempt from taxation as long as certain conditions are ...
Trading Center