A bank’s decision to remove cash counts from its internal controls led to a nearly decade-long teller collusion scheme at one of its branches.
It probably would have continued undetected had it not been for major damage to the branch’s building due to a flood. When bank management from the main office came to oversee the cash count and relocation of the vault and ATM, they discovered a shortage of over $500,000 in the vault compared to the bank’s general ledger. The scheme was perpetrated by the branch manager, senior teller and several subordinate tellers.
Over the course of a number of years at the branch, short term loans were floated to branch employees. The senior teller involved in the plot would “sell” cash to the vault as a “plug” number and deposits were recorded in the ledger, but no cash actually went into the vault and the personal checks held for these “loans” were never deposited. Because the branch manager was involved and knew cash counts were not done, the fraud was easily managed and covered up as quarterly self-audits and daily documentation were falsely approved.
The bank’s branch audit schedule also helped to foster the scheme. Audits were only completed every 4-5 years, and audit processes that were in place were only followed sporadically. In fact, even when cash levels were found to be over $150,000 out of balance at the branch’s most recent audit, an investigation was not triggered.
Basic internal controls are implemented to prevent theft. Had the bank not discontinued cash counts as part of its internal audit, the ongoing theft may have been averted, potentially saving the bank hundreds of thousands of dollars.
As one employee simply explained how and why the plot continued for so long, “It was easy, convenient and addictive.”
Any discussion relating to policy language and/or coverage requirements is non-exhaustive and provided for informational purposes only. For details on coverage provided by your specific policy, please refer to your policy.