Thread Options
#89905 - 06/19/03 09:16 PM Review of Employee Accounts
Trigger Mike Offline
Member
Joined: Oct 2002
Posts: 81
Does anyone have a sample framework for reviewing employee accounts for evidence of insider abuse/fraud? I'm trying to formalize this audit process and would sincerely appreciate any help. Please e-mail to mrathbun@alliedfirst.com.

Return to Top
Audit
#89906 - 06/20/03 01:26 PM Re: Review of Employee Accounts
Lu Offline
Platinum Poster
Joined: Apr 2002
Posts: 597
I review for unusual amount of deposits. I also make sure that the deposits have been processed and validated by a teller. All employee transactions have to be processed by a teller. I also check that tellers are not processing their own transactions. TGIF!
_________________________
"If you only laugh and enjoy life when your problems are all solved, you'll never enjoy life."

Return to Top
#89907 - 06/20/03 02:25 PM Re: Review of Employee Accounts
MackenzieS Offline
Diamond Poster
MackenzieS
Joined: Jul 2002
Posts: 1,722
Oklahoma
We maintain a worksheet for every employee in a huge binder. Each sheet covers a twelve month period. The number of debits and credits, beginning and ending balance, overdrafts, and any unusual exceptions are noted on this sheet. This allows us to visually determine is there have been any unusual changes to the accounts.

We also keep an eye out for kiting.

Return to Top
#89908 - 06/20/03 06:23 PM Re: Review of Employee Accounts
Anonymous
Unregistered

We presently review each employee account once per year. I look at EVERY transaction and for deposits, I look at their offsets. I make sure that tellers do not process their own transactions. I also look for any unusual transactions that may be an clue to kiting. I keep copies of all statements and copies of items in a "banker's box".

Return to Top
#89909 - 06/20/03 06:29 PM Re: Review of Employee Accounts
rlcarey Offline
10K Club
rlcarey
Joined: Jul 2001
Posts: 75,723
Galveston, TX
For those of you that go though all that trouble of reviewing every employee's account and keeping copious records, how many frauds have you uncovered? It just seems to be a little overkill. I would think that other controls would sufficiently reduce the risk to only warrant random sampling. If you are in a bank of any size at all, you are talking about a huge on-going effort to monitor every employee in this manner.
_________________________
The opinions expressed here should not be construed to be those of my employer: PPDocs.com

Return to Top
#89910 - 06/20/03 06:58 PM Re: Review of Employee Accounts
1111 Offline
Platinum Poster
1111
Joined: Jan 2003
Posts: 580
What if they don't bank with you? Seems like overkill when they do. Are employees aware of all the documentation that is under analysis and retained? Don't you have system exception reports that would indicate unusual activity, even when an employee account is involved?

Return to Top
#89911 - 06/20/03 09:12 PM Re: Review of Employee Accounts
Pale Rider Offline
10K Club
Pale Rider
Joined: Aug 2002
Posts: 34,314
under the Lone Star
Our blanket bond requires monitoring of officer accounts, not all employees. Been doing it for 15 years and have yet to uncover any suspicious activity, but it is one of those things that takes on a life of its own when you have done it this long. And of course the examiners ask for it every year.
_________________________
Societies that do not find work in and of itself "pleasing to God and requisite to Man," tend to be highly corrupt.


Return to Top
#89912 - 06/20/03 09:17 PM Re: Review of Employee Accounts
AnnRoy Offline
Platinum Poster
AnnRoy
Joined: Jun 2002
Posts: 771
South
Has reviewing employee accounts now become a standard review procedure in an IT audit?
_________________________
CAMS

Return to Top
#89913 - 06/23/03 01:21 PM Re: Review of Employee Accounts
Risk Officer Offline
100 Club
Joined: Apr 2001
Posts: 205
Dallas
We sample employee accounts (including loan accounts) quarterly. Sometimes we filter out those with a large number of deposits or other unusual activity for more of a risk-based review. In addition, during each regular audit, we may look at employee accounts for that particular area for a more focused look. While we haven't found any direct fraud through this review, we have uncovered a number of abuses and policy exceptions that would otherwise have been uncovered. Assuming that you have an appropriate internal control structure in place, I agree that a review of all employee accounts every month is overkill based on the risk invoved.
_________________________
My opinions are just that...my opinions.

Return to Top
#89914 - 06/24/03 05:58 PM Re: Review of Employee Accounts
LiL Bit Moore Offline
Platinum Poster
LiL Bit Moore
Joined: Nov 2002
Posts: 624
Texas
It was strongly recommended to me by the OCC at a previous exam to review ALL employee accounts at least quarterly. The bank was in excess of $500M w/ 350 employees. I really balked at the thought and did not expect to find much, but implemented the procedures. In almost every review, we found either fraud or a policy violation of some sort. I was extremely surprised at the results knowing the employees knew they would be reviewed at some point.

Recently at my current place of employment, a rather large case of insider embezzlment was uncovered that had been going on for awhile, and if procedures to review the account were taken more seriously it could have been detected much sooner. I am a believer in the process! There are several ways to review them timely and effectively, but it should be done by someone who can recognize unusual activity and should include review of any account the employee has signatory authority over.
_________________________
An error is not a mistake until you refuse to correct it

Return to Top
#89915 - 06/24/03 06:10 PM Re: Review of Employee Accounts
Risk Officer Offline
100 Club
Joined: Apr 2001
Posts: 205
Dallas
Lil Bit, in the instances where you discovered fraud during the account review, were internal controls missing or did the fraud slip through the cracks?
_________________________
My opinions are just that...my opinions.

Return to Top
#89916 - 06/24/03 08:03 PM Re: Review of Employee Accounts
LiL Bit Moore Offline
Platinum Poster
LiL Bit Moore
Joined: Nov 2002
Posts: 624
Texas
Actually both. The larger, more recent incident was due to lack of controls, but I consider the non-existence of employee account review in that statement also. It could have at least served as a second, if not third line of defense or detection when the primary controls were not properly carried out.

I did however have at least 2-3 other situations at my previous f/i that were not necessarily preventable through internal controls. One case for instance, was a Sr. L/O personally lending money to a large cml borrower to payoff a non-accrual loan. Further investigation led to some other not so up-n-up transactions.

A second case was an employee who had borrowed money from an elderly, fairly incompetent person on several occasions. The she decided to take the money from the customers account without asking on several occasions.

A third case involved depositing money orders purchased at another f/i by forging his/her grandmothers signature on checks drawn on that bank. They would deposit the money orders and then write a check a few days later off of their own account to pay back the grandmother. I have to admit unless the employees mother also worked at the bank we might not have uncovered this whole story.

A fourth case involved a bookkeeper that refunded herself and her brother in-law nsf fees charged to their accounts. We first noticed hers and more research brought up the other account.

I agree controls are your first and best defense, but they are never guartanteed. The larger the bank the more stringent your controls should become, but you have to consider efficiencies also. One compensating control I found to be effective when other controls are no longer efficient is an automated effective review of employee accounts. I have also found that a separate disclosure to all employees annually reminding them their accounts will be reviewed, along with the requirement to provide a list of all accounts to which they have access, can serve somewhat as a deterent. I implemented that requirement after we started finding several issues at the prev f/i and at my current f/i when I first accepted employment to implement the audit department. The looks you get from some when they are asked to complete the form and return to I/A can also be scarry...
_________________________
An error is not a mistake until you refuse to correct it

Return to Top
#89917 - 06/25/03 02:26 PM Re: Review of Employee Accounts
Countess Kiwi Offline
Diamond Poster
Joined: Jun 2002
Posts: 1,815
Minnesota
Are all accounts reviewed, or just a sample of accounts?
_________________________
Do what you can, with what you have, where you are.
~Theodore Roosevelt~

Return to Top
#89918 - 06/25/03 03:28 PM Re: Review of Employee Accounts
LiL Bit Moore Offline
Platinum Poster
LiL Bit Moore
Joined: Nov 2002
Posts: 624
Texas
I now use exception reports that provide information such as number of debits and credits, avg balance, etc., to flag accounts with unusual characteristics. Those accounts and Exec Officer are looked at in detail, while other accounts may be reviewed at random. After implementing this method, I ran reports using previous stmt periods to see if the above situations would have been targeted and all were except for the L/O situation, however, that was found when looking at Exec Ofcr statments.
_________________________
An error is not a mistake until you refuse to correct it

Return to Top
#89919 - 06/25/03 04:52 PM Re: Review of Employee Accounts
MackenzieS Offline
Diamond Poster
MackenzieS
Joined: Jul 2002
Posts: 1,722
Oklahoma
One more consideration is to check your state banking code for guideance. In Oklahoma we don't have a choice, we have to check ALL employee accounts. They recently amended the law where it only has to be conducted quarterly, but since we are considered a small bank we elected to continue the process monthly.

We have uncovered multiple kiting schemes. We have found numerous violations of bank policy. This would include, refunding of fees for a buddy, cashing checks for their own account, one friend lending money to another friend so they would not be in an overdraft situation, etc....

In Oklahoma you do not have to disclose your review process to the employees. Most of them know about it though simply because they have been in banking for a while.

Return to Top
#89920 - 08/01/03 04:53 PM Re: Review of Employee Accounts
Joe Offline
Member
Joe
Joined: Aug 2003
Posts: 74
Overseas
Employees knows that their accounts are being montiored by the auditors and they are too carful.

Return to Top

Moderator:  Andy_Z