Log In




Register

Problems logging in?

Contact us

Welcome to the redesigned Risk Management Plus+ Online, a robust website brought to you by Travelers designed to help you mitigate your management liability and crime exposures. The new Risk Management Plus+ Online includes articles, checklists, best practice minute videos, podcasts, and a sample employee handbook to help you manage not only your employment practices risks, but also cyber, crime, directors & officers, fiduciary, kidnap & ransom, and identity fraud exposures. The site has been redesigned to provide this content in a streamlined and efficient manner.

print   email   Share

Communicating Reasonable Suspicions Of Fraud To Customers

Shortly after a contracting firm's controller pled guilty to embezzling $8.7 million from the firm, the owner and his son filed a lawsuit against the bank that manages their accounts.

They allege bank officers were aware of suspicious financial transactions involving their accounts, yet the officers failed to inform them.

According to the controller's testimony, she embezzled millions from the contracting firm over a 10-year period, using unauthorized checks and straight transfers of funds. She used the funds for personal expenses, as well as capital for a business she launched with a partner. She covered up her theft by falsifying accounts payable records to show the payments were made to legitimate vendors.

Investigators found email evidence that the bank began to have concerns about suspicious transactions in 2014. However, the lawsuit states bank officials discussed their concerns only with the controller, which resulted in strengthening the controller's ability to continue her embezzlement scheme.

The U.S. attorney's office is in the process of selling off the fraudster's assets, including property, cars, jewelry, and construction equipment. Torsten Ove "Construction firm hit with embezzlement sues Citizens Bank" www.post-gazette.com (Feb. 18, 2020).

Commentary

A financial institution risks liability when it has valid suspicions of fraudulent transactions yet fails to report them. For this reason, banks must have in place specific reporting procedures should an employee become aware of or suspect any fraudulent transactions.

The bank’s defense is problematic because it noticed irregularities and contacted the wrongdoer instead of contacting the ownership.

This matter illustrates the value of the financial institution’s primary best practice - always involve more than one individual when managing financial operations or, in this case, addressing fraud concerns.

Take the time to review your policies on identifying and reporting suspicious transactions and look for areas of possible risk. Be sure to implement additional reporting steps where needed.

It is important to ask the client to provide the name of who should be contacted if your bank has reasonable suspicion of fraud.

Finally, your opinion is important to us. Please complete the opinion survey:

Twitter Feed