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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.
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.
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.
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 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?
"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"
Well, I said IANA statistician. Can you show your work? It does make sense that some banks would be able to hire 100 employees under those circumstances and not bump into a criminal; but the exact equation isn't something with which I'm familiar.
If each employee has a 1% probability of being a criminal, the probability of each employee not being a criminal is 99%. If you pick two random employees, 99% of the time the first one will not be a criminal, and 99% of those times the second one won't be either: the probability is 99% * 99%, or 99% to the second power.
Thus, the probability of 100 employees not being criminals is 99% to the 100th power (0.99 ^ 100 = approximately 0.366 or 36.6%).
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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.