I'm working on our BSA procedures and want opinions on the following scenario:
An employee steals money from another employee while at work and there was another individual that witnessed this happen. The money is taken from the individual personally, not out of a teller drawer or vault. Would this be considered insider abuse? This is the closest thing I have seen to a definition of insider abuse and it isn't real clear:
https://www.fincen.gov/sites/default/files/shared/sar_tti_23.pdf "What is Insider Abuse?
The specific term “insider abuse†is not defined in the BSA, but appears in SAR
rules issued by Federal financial regulators. For example, regulations of the Federal
Reserve, Federal Deposit Insurance Corporation (FDIC), Office of the Comptroller
of the Currency (OCC) and National Credit Union Administration (NCUA) require
banks to file SARs on insiders, for “insider abuse involving any amount . . . and the
bank has a substantial basis for identifying one of its directors, officers, employees,
agents or other institution-affiliated parties as having committed or aided in the
commission of a criminal act, regardless of the amount involved in the violation.â€11
The term “institution-affiliated party†is further defined as “any director, officer,
employee, or controlling stockholder (other than a bank holding company) agent,
shareholder, independent contractor (including attorney, appraiser, or accountant)
. . . who knowingly or recklessly participates in the conduct o f the affairs of an
insured depository institution.â€12The General Accounting Office13 (GAO) reported that absent a “universally agreed upon definition of the term ‘fraud and insider abuse’ it would adopt the term as
defined in a 1988 Federal Home Loan Bank Board (FHLBB) Report to Congress:14
“ . . . individuals in a position of trust in the institution o r closely affiliated with it
have, in general terms, breached their fiduciary duties; traded on inside information;
usurped opportunities or profits; engaged in self dealing; or otherwise used the
institution for personal advantage. Specific examples of insider abuse include
loans to insiders in excess of that allowed by regulation; high risk speculative
ventures; payment of exorbitant dividends at times when the institution is at or near
insolvency; payment from the institution funds for personal vacations; automobiles,
clothing and art; payment of unwarranted commissions and fees to companies owned by a shareholder; payment of consulting fees to insiders or their companies;
use of insiders’ companies for association business; and putting friends and relatives
on the payroll of the institutions.â€15
Other published definitions include:
• Self-dealing, undue dependence on the bank for income or services by a board
member or shareholder, inappropriate transactions with affiliates, or unauthorized
transactions by management officials. “Insider†refers to principal shareholders,
directors, executive officers, and other officers or staff who, as a result of their
position, are able to influence operations or decisions within a bank.16
• A general term that encompasses various activities which may or may not be
lawful. While an abusive situation usually violates one or more banking laws
or regulations, legal violations are not a necessary element. Insider abuse
includes the broader range of actions where an insider takes action or fails
to take action; where the bank is harmed, takes on additional r isk, or loses
an opportunity; and where the insider or a related party somehow benefits
because of his position.17
• “Insider abuse is abuse that falls short of being a criminal act.18 It occurs when
an insider (as defined by Regulation O)19 benefits personally from some abusive
action he/she takes as part of his/her position at the bank. Not all insider violations
are necessarily abusive; the violation must be accompanied by personal gain to
the insider to be considered abusive. Insider fraud is a criminal act. Such action
includes embezzlement, falsifying documents, and check kiting.â€
• Unlike insider abuse, insider fraud does not have to benefit the individual
perpetrating the crime. For example, if a bank president falsifies loan
documents to improve the apparent creditworthiness of a borrower, this is
fraud – even if no personal gain by the president can be identified.â€20"