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Internal Theft & Filing SARs
Question: I have a very sticky situation that I could use some help on. My assistant and I have uncovered a problem internally, and after our research we have discovered, and proven, which employee is stealing money from our bank and how she is doing it. We put the whole case together and went to our boss, with all the documentation and proof. We recommended that the employee be confronted, terminated, and prosecuted. Our supervising officer, who has the authority to make such decisions, refused to prosecute - said it would ruin our reputation. And, as a bigger problem as I see it, she also refuses to allow us to file a Suspicious Activity Report.
The employee was confronted, confessed, and was terminated. But no matter how much we tried to convince our boss, she still refuses to file the SAR. Should we contact local law enforcement instead of filing? What do we do now?
Answer: You've described an explosive situation. The law in the form of the Bank Secrecy Act says you MUST report any theft or suspected theft by an employee in any amount. It also says that if you practice "willful blindness" that you can and may be prosecuted.
If nothing else, because I know you are trying to hold your job, put your recommendation to your boss IN WRITING stating that the SAR should be filed as soon as possible. Copy your assistant on that memo, and keep a copy in your file.
Your officer's concern about publicity over the filing of the SAR is unfounded. There will, in all probability, be no investigation because of the filing. However, if other financial institutions file on the same employee, a red flag may eventually go up about that person. No one, including your ex-employee, will know about the filing, because the non-disclosure clause says no one will have any knowledge of the filing except the person who files. If your boss wants no further investigation or prosecution locally, there is no need to contact law enforcement.
My biggest concern on the basis of your conversation with me is YOUR liability. If you know about employee theft and don't report it, and you are the person responsible for reporting it, you could eventually be in very deep trouble. In the description of the division of duties regarding BSA, be very sure it spells out that your boss is the sole individual finally responsible for filing Suspicious Activity Reports. The examiners are heartless when it comes to omissions such as you describe.
Copyright © 2002 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 12, No. 9, 12/02
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