Slashdot Mirror
72% of Banks Say Their Employees Committed Fraud
yahoi writes "The financial crisis appears to be exacerbating fraud by bank employees: a new survey found that 72 percent of financial institutions say that in the last 12 months they have experienced a case of data theft by one of their workers. Meanwhile, most banks don't want to talk about the insider threat problem and remain in denial, says a former Wachovia Bank executive who handled insider fraud incidents at the bank and has co-authored a new book called Insidious — How Trusted Employees Steal Millions and Why It's So Hard for Banks to Stop Them that investigates several real-world insider fraud cases at banks." The article dispels one assumption that might commonly be made about such insider fraud: "Interestingly, it's not the stereotypical offshore or outsourced employee who's most risky to their organizations. Nearly 70 percent of financial institutions say their full-time employees are most likely to pose an insider fraud threat..." Technology workers placed third in the roster of the job categories most abused.
Is that not counting executives?
If 72% of financial institutions say they've experienced data theft, how do "most banks" remain in denial? It sounds like "most banks" just admitted it.
Also, I'm not sure data theft is the same as fraud.
Is this really a case of it being unexpected? Banks, which handle lots of money and are generally unwilling to pay for honest talented staff see mishandled cash? What a surprise!
Next article, "Investment Bankers are overpaid for the returns they generate on their transactions!"
"Trust, but verify."
These people are in positions where they have to have access to the information to do their jobs. Locking them down so they can't get to the data without a partner would double labor costs (much more expensive than the 1-4% quoted in TFA.)
So the best answer is: give them the access they need, tell them you're logging it all, log it all, and *analyze the freakin' reports!* There are so many reports out there in most businesses that just get ignored. But we're talking about the early warning signs of theft, and they can't be ignored without consequences.
John
Seriously, if there are humans in involved and money involved, corruption ain't far behind.
www.voiceofthehive.com - Beekeeping and Honeybees for those who don't.
The article dispels one assumption that might commonly be made about such insider fraud...
Am I the only one that is concerned that our financial institutions are assuming things relating to their security policies? Because it's common knowledge in our industry that most security threats come from inside, not outside, the organization.
#fuckbeta #iamslashdot #dicemustdie
That bank workers steal money like I steal stationary from work isn't some giant revelation.
Doesn't seem to be hurting profits though. At least in Canada we may not have that big of a problem.
I tried to think of a good sig, and this wasn't it.
I recall a bank hitting my brother's account with a long list of overdraft fees when he never bounced a single check. Turns out that one month he was trying a new budget strategy where he wrote all of the checks for that month's expenses and dated them for that day. At that time, he didn't have the money in his account to cover those checks. But he never sent them out until after he and his wife had deposited money to cover those checks. The checks were presented to the bank at a time when the money was actually in the bank. They paid all of those checks and then charged him $20 for each one that was dated as described. He never bounced a check. The checks were never presented to the bank when there weren't sufficient funds in the account. How did they justify that action? Who knows...
And even now, banks are playing games with other fees and charges. Who writes checks any more anyway? Your bank may already be doing this... How many transactions per month are you allowed to have before they start charging transaction fees?
All these companys want you to be totally loyal to the company. The job comes before your life, friends, and everything else. They demand loyality above everything.
And yet... are most companys loyal to the employee? Fuck no! You're 100% replaceable. We don't really need YOU. Get back to work or you're fired. Sick? Come to work anyway! You did such a great job on that project. have some perks! more money? no. you wont get more money.. but look! pizza on fridays! wooo!
Nobody should be suprised that many employees have a crap attitude about their jobs. And will steal any chance they get.
You want real loyality from employees? PAY US MORE. We don't work here for our health or because we like it or for the perks or the lovely 'family oriented' way you do business. We work here because you pay us.
And now with the economy fuckup. The first things to go are perks and pay raises. Yet you still want the same loyality from the employees.
Good luck with that. We're gonna steal anything not bolted down. Get all we can before the company gets rid of us.
I'm a contract employee at one of the top ten banks in the nation, employed in website development. Within the first week I was given the keys to the kingdom in spite of the bank never even performing a rudimentary background check. Also in the first week, I discovered that it would be absolutely trivial for me to steal the credentials of every single user of the site and completely cover my tracks. It has now been MONTHS since I brought it to the attention of the people who I answer to and there is still not even a proposed solution to the problem. Scarier still is that any one of 75-80 people could do this and it does not even require collusion. This to me shows the "high regard" that banks have for your money.
The other 28% must be small banks, or in denial. If just 1 percent of the population is criminal, you have to anticipate 1 criminal for every 100 people you hire. IANA statistician, but even if you have well under 100 employees, the odds are still pretty good. I think it would be like the birthday problem, where the odds of somebody in a relatively small class having the same birthday as you are surprisingly high.
Of course, I'm not sure what percent of the general population would commit bank fraud if they had the opportunity. That doesn't matter of course. People who are likely to commit bank fraud will, of course, seek out jobs at the bank. As the famous bank robber said, "that's where the money is".
For all intensive purposes, "whom" is no longer a word. That begs the question, "who cares"?
They're in denial because they are not aware of the full seriousness of the issue.
I discovered something that amazed me. I was trying to resolve a client's quite simple software issue. I worked with managers of two large banks (tens or hundreds of thousands of commercial accounts). I discovered that one of the banks had no technically-knowledgeable employees, except for computer maintenance staff. They used contractors for everything else. The contractors with whom I talked had little technical knowledge.
The other bank had either no one who was technically-knowledgeable or just a few people.
They don't have just have problems with fraud, they have problems in every area where technical knowledge is needed. They cannot resolve modern problems because they have little or no knowledge of them, and they don't want to learn. Technically knowledgeable people are apparently seen as an annoying necessity.
With employees of a third large bank, at which I have personal and business accounts, I found that I could get a laugh by saying I saw their web site and thought that high school students should not write web sites for banks. Later the web site was improved.
Has anyone seen my red stapler?
Orwell was an optimist.
It seems the motive is typically to get a "loan" by a lower level employee which will be paid back at some point. It would seem that the employees are in fear to actually ask their own bosses to aid them in a situation of financial strife.
Isn't that what banks are about? Making loans?
It seems that inside the banks their is a pervasive culture of fear/shame/envy by staff of the owners. The fact that management seems to be unable to get inside this situation is indicated of a manager/employee relationship meltdown.
If I owned a bakery and my employees were stealing bread to feed their families cause I pay them nothing -- that in most peoples mind is a hint about how my relationship as owner to my employees is going.
If they are stealing bread but are not starving but in fact well off thats something else - envy and greed.
In any case a Bank which gets public assistance like in "too big to fail" or some other way should begin to be held publicly accountable for internal losses -- tangible assets and data privacy breaches. Till today no one is really reporting this number out of fear in losing the public trust. When the bank fails of course the horse it out the barn doors already.
I've seen this happen to a co-worker. She was generally quite out-going and talkative. But she started being quieter over time. One day it was announced that she no longer worked at the company, and through the rumor mill I found out that she had embezzled about 5 grand (mid 90's dollars) with the help of her boyfriend. She discovered by accident that some vendors would double-pay an invoice if a second copy was sent by mistake. Thus, she decided to send fake invoices to vendors with a history of double-paying, but with her boyfriend's bank account as the bill-to address of the 2nd copy. Eventually somebody noticed the bogus addresses.
The problem is that they didn't file formal charges because they wanted to protect the reputation of the company. They did confiscate all her future benefits, though; so it was probably a net loss to her.
However, by not prosecuting they set themselves up for a second attack. For another employee of the same accounting department made off with about 25 grand a few years later. I'm sure the second guy factored in the non-prosecution of the first attempt.
I'm not sure how to solve it, other than perhaps making prosecution mandatory. But I doubt companies want that kind of legal complexity for gray areas or where the evidence is weak.
Maybe some kind of "secret victim list" in prosecution, but that goes against the concept of jury-by-peers. The chance of one out of 14 jurors (with 2 alternates) spilling the beans is fairly high. And there's other issues with public disclosure laws.
Table-ized A.I.
I have applied to many banks to work as a teller; its a nice, cushy job that pays ok and is respectable. I have never been offered a job. I found out through some friends that banks will not hire anyone with bad credit; I kind of wondered why, as, if an employee tried to steal anything, they have a fuck-ton of cameras and security systems in place at any bank. I happen to have bad credit, so they assume that might try to screw them or something. It kind of sucks, but seeing this story, it makes a lot more sense.
I imagine that outsourcing to 3rd-world countries increases the risk because the payoff is much higher relative to the local currency (more purchasing power) and it's much more difficult to prosecute across the ocean.
This is not saying that 3rd-world employees are "more evil", but rather the relative temptation is higher and the risks of formal prosecution is lower.
Table-ized A.I.
I guess it's only fraud when the bank is the one getting ripped off.
When they're handed hundreds of billions of dollars of taxpayer money to shore up bad debt and open up the faucet of commerce, but then instead decide to stop lending and hoard the cash... that's... something else? Right?
it's a jaded fact that corruption is quite common in every activities of humanbeings,not the least when the economy is in recession.the crucial problem is whether or not there have been an effective system to pull the plug on it.
72% of banks say employees have committed fraud. Other 28% are lying or naive.
"Interestingly, it's not the stereotypical offshore or outsourced employee who's most risky to their organizations.
that was not somebody attempting either a subterfuge or the implantation of a subliminal suggestion.
You see, it may very well be true that "offshore" employees in banking have less culpability, thus far...which - entirely coincidentally, I'm sure - corresponds directly to the amount of penetration into banking that offshoring has - thus far.
Interestingly, don't you think that such statistics provide a a nifty argument for offshoring banking?
Who gathered and "analyzed" this "data", again?
Orwell: "In a Time of Universal Deceit, telling the Truth is a Revolutionary Act"
I once overheard Bankers speaking and they do blacklist persons if they hurt the institution enough.
Though no charges were filed often the reference is veiled: "let go due to irregularities in performing the job" which is a whopping hint to the next employer they were doing low level fraud or in the more sinister case it was a recommendation for a let go employee -- to a competitor.
The links of the article which I read point to fiscal gain in some form.
The theft from banks indeed may involve customer data or physical equipment such as staplers -- but more likely are laptops which get "stolen from a mid level managers rental car. Even then data and equipment has to be fenced into cash or laundered somehow.
From what I read the really involved fraud starts with noticing the cash not being properly guarded/accounted for between two events: such as deposit by the customer and the actual putting the money into the system such as at the counting machine, etc
This then leads to an employee taking advantage when that employee notices opportunity for mucking with invoicing, money transfers, accounts, "ownerless" land titles & mortgages, abandoned safety deposit boxes and the like.
But the point I was trying to say is what % is stealing out of desperate need but ashamed to ask for help and what is criminal?
If it is a high percentage of criminal then that is a real societal problem. It can and has happened to be systemic and from the top as in the Madoff ponzi.
The other 28% just don't know about it.
In a bar one evening I pointed out ''how simple it would be to send a few million to a bank in Rio''. I was told ''Who wants to live in Rio?''. They were not interested in trying to fix it.
About that time I did some work at a bank in London. Every morning the director of securities arrived in the IT department with a list of errors from the overnight run (all audit trailed, etc). He got a programmer to fix them which he did by running up an SQL interpreter. There was no oversight, the director walked away before this was completed, there was nothing to stop the programmer from doing it whenever he wanted. The programmer was employed through an agency, not a bank employee.
I met someone at a social function, asked him what he did: ''I am a banker, I get to rob people legally'' -- at least he was honest!
I could go on. This sort of stuff is endemic.
I had a friend years ago that was a detective on the Las Vegas Robbery squad. He told me that the average armed robber gets away with something like $5,000. The average electronic bank robbery gets away with over $500,000. He also told me that they almost never ever catch anyone committing a robbery by computer, but they get most of the people sooner or later that commit armed robbery. He was talking about both inside jobs (mostly involve some sort of computer) and outside computer attack type robberies here to clarify.
He said it was not so much tracking down a suspect, but that the nature of the electronic / insider robbery often lacked the traditional physical evidence that would really lead to a conviction. The banks and businesses don't really want to cooperate for PR / insurance / liability reasons. The nature of the evidence is not very compelling to a jury. Often it is difficult to properly get warrants across multiple jurisdictions in a timely manner and in such a way that the evidence can be used in court. Most importantly it just all around cost more money to investigate and prosecute, as it requires very expensive and specialized skills that most police departments (including the FBI) really do not have the resources to do properly. There is not a lot of political motive at the top of law enforcement and everyone else to do unless it is a really high profile robbery type thing that they have to do.
Living in Chile
someone was stealing other people's food out of the refrigerator. they decided that the thief was 'just hungry' and we should all chill out.
but they wont give health insurance to the janitor.
the guy that runs the technical division has no degree and people are 'proud' of this, like Palin proud.
This headline is missing the point that all banks commit theft, that's what keeps them in business and pays for their excessive bonuses.
Anyone that thinks otherwise doesn't understand fractional reserve banking.
Until we have money that is based on some real commodity money has no inherent value, it's just a points system ungrounded in reality.
Stealing the money is the management's job.
Sent from my ASR33 using ASCII
"72% of Banks Say Their Employees Committed Fraud"
is much better than
"Banks Say 72% of Their Employees Committed Fraud"
The world belongs to those who get up early. - I'm far from being the king of Earth then
A VERY close relative of mine works in compliance in the finance industry. He worked for a credit card company that was going under and cooking the books. He told the truth in his report to the regulators but nothing happens very quickly. The company was then taken over by ex-management of another credit card company who quickly discovered the real situation.
Now they could have used him to help them sort things out, but instead of that they started cooking the books themselves, realised he knew too much and made him redundant. He fought it as unfair dismissal but didn't get very far, he had a case but would have ended up costing as much as he would get.
The irony is that he now works in compliance at the company where the new management of his previous company had escaped from, where part of his job is uncovering what the previous lot were up to.
My take on all this is that the financial services industry is rotten from one end to the other.
Si hoc legere scis nimium eruditionis habes.
"You'd think the banks would have been smart enough not to buy their own BS and not own those MBS's themselves..."
Those who were making millions of dollars a year did not care if buying trashy securities would eventually bankrupt their banks. First, they didn't care about the company for which they worked, only about themselves.
Second, they often talked of "moral hazard" and laughed about it. They knew the U.S. taxpayer would pay for their damage.
The recent financial fraud was only a continuation of the Savings and Loan kind of fraud. Both were deliberate schemes.
With such math from a bank executive who needs fraud?
The bank executive's math is fine, he just used bold differently.
"[...] 72 percent of financial institutions say that in the last 12 months they have experienced a case of data theft [...]. Meanwhile, most banks [...] remain in denial, says a former Wachovia Bank executive"
http://marriedmansexlife.com/
Because fractional reserve banking itself is fraud, not much different than counterfeiting: it hurts us all and puts the profits in the hands of a few.
At some point in time someone somewhere said: "Gee, I wish I could lend out money I don't have and collect interest on money I don't have." and fractional reserve banking was born. It's all one big fraud.
As a Sys Admin at a community bank I can tell you a few things that are setup to supposedly prevent this. All banks that are insured by the FDIC have to be audited by state and federal auditors on a year to year rotation. Most of the procedures they follow look like they were written in the early 90's. They are very trusting and data can easily be forged and turned in. Most of these auditors seem to have little to no education in Computer Science or related fields, especially in security. They tell me that all open source software is prohibited as it is not secure, but that is a cover up for their inability to regulate it or create procedures to audit it. Our last audit consisted of 1 day of asking about 20 questions, they said that IT is on the bottom of the list this year as they are focusing more on loans and lending practices. Sometimes I worry a little about banks with lesser educated staff and how prone they are to internal and external attacks.
If the US Government REALLY needed $5 trillion dollars, it would just issue bonds, or if necessary print the currency. Sure, it might not get 3% interest rates, but it could borrow the money if it had to. A $100 dollar bill probably costs a few cents to print, so that is always an option as well. Sure, it would cause inflation, but the total amount of cash in the economy is just a drop in the total GDP.
Sure, if I were in charge I'd be doing things a little differently. I'd probably bail out the banks, but when bailing out a bank I'd also do the following:
1. Government assumes ownership of bank. Existing owners/shareholders are paid for any assets the bank held after deducting the estimated costs to clean up. Most likely the shareholders won't get a dime.
2. Executives at the bank are generally imprisoned and fined. That includes recent past executives (last few years) who had anything to do with the mess. The Board of Directors (and recent board-members) are also potentially punished. There has to be deterrance so that other banks have incentive to clean up their acts.
3. Government cleans house, stabilizes the bank, and sells it off somehow.
The solution to fraud isn't to give those who perpetuated it more money...
If the FDIC needs to pay out more than half of the funds insured by it, I don't care what you have your money in, if you can't grow your own food you are in for a world of hurt.
The truth is that all men having power ought to be mistrusted. James Madison
I thought the MAIN business of Banks was to defraud their customers. So why isn't this 100%?
> if only they were redeemable in gold and silver as once US constitution stated...
1) Gold will not solve the problems. It does not address any of the real problems.
Can all you idiots stop thinking gold is going to somehow magically avoid those problems, there's no magic in gold. The financial problem was caused by poor/bad regulation. Heck the US federal reserve still refuses to answer good questions about where some trillions of money went. Go google for "federal reserve trillions". There's also cheating and bad regulation in the stock markets - a privileged bunch get to see stuff 30 milliseconds before the others - see http://www.nytimes.com/2009/07/24/business/24trading.html
Basing your currency on gold will not save you when there's poor regulation and corrupt people in high places. Just because the currency was backed by gold would not have stopped people from bundling risky loans into a High-Grade Structured Credit Strategies Enhanced Leverage Master Fund and selling it to old ladies who have a different understanding of what "High Grade" and "Enhanced" mean.
I know a guy who does some finance stuff, and he says he's not providing liquidity or any of the bullshit finance people spout to justify their existence. He says he's just transferring money from the stupid to the smart (him). He says at least he is honest about it - to a few of us at least ;).
They used gold back then and the serfs still got screwed by the barons, and economies still went bust. Looks like the current batch of serfs are still too stupid to understand what is going on. And "barons" like my friend will just have you all as snacks.
2) Gold is too useful to use as currency.
Yes it is rare, and that is the big problem. If all the countries in the world started using gold as a currency, it would be too expensive to use for some stuff where it is really useful (or it would make things more expensive without good reason).
Think about it. How much gold is there to go around for the 6 billion people in the world?
Estimates of the total amount of gold available (that is already produced in reasonable purity) in the world range from to 161,000 tons to 311,000 tons. That roughly works out to about 25g to 50g of gold for each person in the world. Or 5 to 9 trillion US dollars (assuming USD1035 per troy ounce). Yearly production is only about 260 milligrams per person.
At current prices that's like saying everyone in the world has USD830 to USD1700 on average. And worse every year they only gain USD9 in net worth. But there's a lot more money, _goods_ and services out there so if you base your currency on gold, it means that 50g of gold will end up costing a lot more, more so if the world population continues to increase, or people are productive in other ways ;).
Then gold will end up more expensive to use for a lot of useful things we are currently using it for, and maybe even too expensive in some cases. And for what benefit?
So it's a stupid idea ok? Except for those who have bought a lot of gold when it was cheaper and are trying to push the prices up.
This weekend there was an article in the travel section of NYT about how US credit cards are being denigned in Europe because we don't use Smart Card with pins to prevent fraud. The US credit card rep said it was because fraud was not such an issue in the US. HaHa. They are also in denial about that also or they just don't want to admit it.
You really have absolutely no idea of what you're talking about, do you? In this market, that's dangerous.
Actually, I did understand everything you wrote - I just happen to disagree.
As far as "printing money" goes, the $5 Trillion necessary is a significant chunk of GDP.
Guess what the effect of $30 per gallon for gasoline would do to the economy?
Probably not a whole lot when minimum wage is $500/hr. Nothing really changes except the number of zeros on price tags and salaries. It isn't like the change would happen overnight - since not every bank would fail overnight. In fact, there really aren't any indications that they're suddenly all going to go completely insolvent with not even a dime to back up their deposits. Even so, I'm all for increasing the amount of reserves to reign things in a bit.
Please get a slight clue of what your talking about if you want to survive this economic crisis.
I'm not sure what exactly I have to be worried about. My primary asset is my ability to work, and that isn't affected at all by government policy (unless they start breaking kneecaps). Sure, maybe the amount of times I can eat out in a month might change, but I doubt that my very "survival" is at stake. I'm sure I could figure out how to fix farm equipment somewhere to earn my room and board if the whole country collapses.
I don't see any risk of hyperinflation. The only people who really have anything to worry about are those nearing retirement or with tons of cash in the bank.
These are the same banks that are feasting on usurious interchange rates that all merchants pay to let their customers use credit cards. These are the same banks that want to foist off all responsibility for securing their credit cards onto the people least equipped, i.e. the card holders and the merchants, by inventing PCI security standards. Yeah, this makes sense, 72% of the banks have insider fraud, but as they tell us the biggest security flaw is at the merchants location.
At one of the banks, I talked with the top manager of IT. The work would benefit the banks. I got the impression that there weren't many people under him who did anything more than repair computers and routine updates.
You have limited supply of canned goods, medicine and water and a neighbor that hates you
If things are actually that desperate, then you'd have the food, water, and medicine, and no neighbor.
God invented whiskey so the Irish would not rule the world.
Sorry, if you did understand this you'd have realized how silly it was to make the claim that the Fed can always just issue bonds. It can't. There are limits.
Well, in practice yes. However, I'm not convinced that we're facing them anytime soon. It just comes down to how much interest you're willing to offer. If Uncle Sam offered to pay $2M next week for a $1M bond today, lots of people would be happy to buy it.
Your understanding is also quite flawed when you dismiss inflation by claiming that wages will raise. Wages don't simply do that when you have massive unemployment and global wage arbitrage.
When you're talking about essentials for survival (food/clothing/shelter/medicine), there really isn't that much arbitrage. If you need a doctor it doesn't help you that the ones 5000 miles away are paid less. If you need food it doesn't help that people who live in some area devoid of farmland 5000 miles away would be willing to work crops cheaper. And, if necessary I'm sure the government would institute trade restrictions if necessary.
Plus, you're neglecting the fact that any economic meltdown that actually bankrupted the US treasury would almost certainly leave every other country on the planet in very dire straits. It isn't like the Ethiopians are suddenly going to be able to buy our homes for pennies on the dollar, and even if they did it isn't like any Sheriffs are going to actually evict people.
Most of this stuff is super-hypothetical. Nobody would let it get that far. You'd see imposition of martial law and a command economy before you'd just see everybody sit down and accept that they're going to starve to death.
As far as oil goes - sure, I'm all for reducing dependence on oil. However, I don't think that it is suddenly going to disappear. You'd see a nuclear war before you'd see starvation on account of insufficient fuel to manufacture fertilizer.
Maybe conditions are different in the U.K.?