Skip to content
BOL Conferences
Thread Options
#2145966 - 09/13/17 09:49 PM SAR-Potential Insider Abuse?
Compnerd Offline
Junior Member
Compnerd
Joined: Oct 2011
Posts: 30
Ada, OK
So if we find a vault was short some $$ at a branch location. All investigations ranging from audits of all drawers, all work, scrutiny of cameras on the teller lines and the vault have been completed and we still cant identify the source of who is off balance.

My first instinct was insider abuse. But we have found none. All the tellers balanced. We have since revamped our process on who goes in and out of the vault at all times, etc. We did not find if there was any potential insider abuse.

Do we need to file a SAR?

Return to Top
BSA/AML/CIP/OFAC Forum
#2145970 - 09/13/17 09:55 PM Re: SAR-Potential Insider Abuse? Compnerd
rlcarey Online
10K Club
rlcarey
Joined: Jul 2001
Posts: 83,227
Galveston, TX
You have an operational loss. You can't pin it on an insider. Somebody might have thrown the money away or failed to verify a currency shipment correctly for all you know.
_________________________
The opinions expressed here should not be construed to be those of my employer: PPDocs.com

Return to Top
#2145972 - 09/13/17 10:07 PM Re: SAR-Potential Insider Abuse? Compnerd
RockChucker, CAMS Offline
Diamond Poster
Joined: Jul 2013
Posts: 1,700
The Country
Agree with Randy, write off the loss and run with your new process that will avoid this issue going forward. No SAR based on the info you provided.
_________________________
A successful man is one who can lay a firm foundation with the bricks others have thrown at him.
-David Brinkley

Return to Top
#2145982 - 09/14/17 10:09 AM Re: SAR-Potential Insider Abuse? Compnerd
Elwood P. Dowd Offline
10K Club
Elwood P. Dowd
Joined: Aug 2001
Posts: 21,939
Next to Harvey
Write a memo to file explaining why you are not filing and go on to what's next.

Keep in mind that if you were to file a SAR on insider abuse you would need to have one or more subjects. It sounds as if you might have several candidates, most of which (if not all) would be innocent.
_________________________
In this world you must be oh so smart or oh so pleasant. Well, for years I was smart. I recommend pleasant.

Return to Top
#2160277 - 01/12/18 01:38 AM Re: SAR-Potential Insider Abuse? Compnerd
bcompliance Offline
Diamond Poster
Joined: Sep 2014
Posts: 1,294
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.”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.”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.”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.”

• 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.”20"
_________________________
CRCM, CAMS

Return to Top
#2160279 - 01/12/18 02:01 AM Re: SAR-Potential Insider Abuse? Compnerd
rlcarey Online
10K Club
rlcarey
Joined: Jul 2001
Posts: 83,227
Galveston, TX
It did not involve bank assets - fire them and move on.
_________________________
The opinions expressed here should not be construed to be those of my employer: PPDocs.com

Return to Top
#2231769 - 02/26/20 06:20 PM Re: SAR-Potential Insider Abuse? Compnerd
banker1976 Offline
Gold Star
Joined: Nov 2005
Posts: 346
Mid-Atlantic
Would the definition of "insider abuse" fall under this scenario:

Employee has a bank credit card. Employee purchases items on the credit card allegedly for bank use, but the bank finds out the items are nowhere to be found and said items were likely purchased for personal use. Employee cannot produce said items when confronted and makes excuses of why the items are not at the bank branch. Employee is later dismissed. The bank is out the amount of items charged, so this would be considered an example of insider abuse, correct?
_________________________
CAMS
CAFP

Return to Top
#2231770 - 02/26/20 06:23 PM Re: SAR-Potential Insider Abuse? Compnerd
bcompliance Offline
Diamond Poster
Joined: Sep 2014
Posts: 1,294
I would file on that
_________________________
CRCM, CAMS

Return to Top
#2231772 - 02/26/20 06:29 PM Re: SAR-Potential Insider Abuse? Compnerd
rlcarey Online
10K Club
rlcarey
Joined: Jul 2001
Posts: 83,227
Galveston, TX
And notify your regulator.
_________________________
The opinions expressed here should not be construed to be those of my employer: PPDocs.com

Return to Top
#2231775 - 02/26/20 06:34 PM Re: SAR-Potential Insider Abuse? Compnerd
ACBbank Offline
Power Poster
ACBbank
Joined: Jul 2006
Posts: 4,344
New York City
Agree with bcompliance and Randy.
_________________________
"100 victories in 100 battles isnt the most skillful. Subduing the other's military w/o battle is the most skillful." Sun-Tzu

Return to Top
#2234432 - 04/08/20 05:25 PM Re: SAR-Potential Insider Abuse? ACBbank
travelgirl1 Offline
Member
Joined: Sep 2015
Posts: 92
Unusual situation on whether or not to file. Based on the detailed definitions of Insider Abuse listed above, I am now thinking I need to file. Originally I thought no because I can't show a "gain" was received by the suspect and he isn't an insider under Reg O. However his actions, and sometimes inaction has cause some financial harm to the bank.

We had a commercial / Ag lender employed at the bank recently for about three months. Towards the end of that three months it was discovered that this person was making loan promises to non-customers & customers on their renewals that he didn't have the authority to make, nor did he process the request through underwriting, appraisal process, document prep. He basically made promises to a couple of prospective borrowers that went no further except these parties thought they were getting a loan. A closing was even scheduled for one and everyone showed up, except the lender - only to find out he hadn't done anything for the loan request. There was also a customer who was allowed to significantly overdraw their account without thought into returning items. This was a new customer that he brought on board. In the end, the bank reached a settlement and the customer made good on most of the account. The bank took an $11,000 loss.

Management believes he was trying to prove himself as the new guy by drumming up these deals when in reality he got in over his head, up and left when he couldn't get himself out of the situation.

So, do I file a SAR? I believe this activity is more civil than criminal but I'm no attorney. Hi didn't follow his duties that he was hired to do. The bank is working with the borrowers to make things right. so far no other losses from those. He did use his financial position to attract new business but the loans never closed and he received no benefit. Also, he did not meet the definition of an insider under Reg O.

Thoughts on the approach to support a filing or no filing?

Return to Top
#2234434 - 04/08/20 05:39 PM Re: SAR-Potential Insider Abuse? Compnerd
BrianC Online
Power Poster
BrianC
Joined: Nov 2004
Posts: 6,694
Illinois
1. For BSA an "insider" is any employee. A teller stealing $5 out of the drawer warrants a SAR. As a third-party auditor, I am considered an "agent" and would be subject to the same SAR requirements as any bank employee.

"Insider abuse2 involving any amount when the financial institution believes it is either an actual or potential victim of a committed or attempted criminal transaction and the financial institution has identified a director, officer, employee, agent, or other institution affiliated party as having committed or aided in the commission of the criminal act;"

2. The FDIC gives us a nice listing of criminal violations. https://www.fdic.gov/regulations/safety/manual/section10-1.pdf

Granting the overdraft without the authority to do so could fall under "Misapplication of Bank funds" since an overdraft is essentially an unsecured loan.

18 U.S.C. § 656 - Theft, Embezzlement, and Misapplication by Bank Officer or Employee

This statute prohibits the willful theft, embezzlement, or misapplication of financial institution funds by an officer, director, agent, or employee of a financial institution with the intent to injure or defraud the financial institution. For example:

• Loans granted by a financial institution officer to fictitious borrowers, • Loans granted based on inadequate or valueless collateral if the loan officer benefited personally or acted in reckless disregard of the institution’s interests, and • Brokered loans where deposits are provided for a fee to fund a loan that is worthless from its inception.
_________________________
Sola Gratia, Sola Fides, Sola Scriptura, Solus Christus, Soli Deo Gloria!
www.tcaregs.com

Return to Top
#2234563 - 04/09/20 11:16 PM Re: SAR-Potential Insider Abuse? BrianC
travelgirl1 Offline
Member
Joined: Sep 2015
Posts: 92
Thanks Brian. Helpful as always.

Return to Top

Moderator:  Andy_Z