Love That Strawberry Pie

Over my career I have seen my share of frauds. From day one, working in the audit department of my first bank fresh out of college, one of my first assignments was working with an experienced auditor. We investigated loans in process fraud, though at that time I could have fallen right over it and never understood what it was.

All the frauds I saw over the years seemed to have certain things in common involving the employee committing the fraud. At times, it was the one individual you thought least likely in the bank to commit the fraud. I remember it was often the most outgoing and nicest person to the auditors...the very person you would least suspect...not the grumpy one who grunted at you every once in a while.

One of the fraudsters I recall was an employee who always made homemade strawberry pie for the auditors when we came to town. Us auditors, who were constantly travelling and eating out for every meal, loved that strawberry pie. The pie ended though, when it was discovered this employee had been taking funds from the accounts of elderly employees with “hold at bank” statements who never returned to retrieve them.

With all the regulatory and information security issues facing banking these days, it is not surprising we seem to be seeing more articles on actual bank insider frauds. Banks have their resources and audits so in tune to regulatory and information security audits and are so lean in terms of human resources, the area of insider fraud seems to not be given the attention as in the past.

Just a few things to think about in this area are:

  • Are you mandating and enforcing a consecutive number of days vacation policy?
  • Is someone in your bank assigned the duty of investigating deposit account activity on employee accounts?
  • Are employees prohibited from processing their own transactions?
  • Does your bank have a code of conduct/conflict of interest/insider trading policy and are employees, officers and directors trained annually on these polices?
  • Does your bank have and do your employees know the process for internal reporting of potential employee fraud activities?
Obviously, more areas can be added to the above list. But next time you think about fresh strawberry pie, think also about the state of your bank’s preventative and detective controls for insider fraud.