In the days when Internal Auditors were still known as Inspectors, the now standalone Security Section was a function of Inspection Department. Apart from their normal process audits, Inspectors were also called upon to investigate occurrences of fraud and defalcation which have always been an unfortunate aspect of banking. Inspectors really dreaded those phone calls from the Chief Inspector or his deputy which uprooted one from whatever normal audit one might be performing and sent one haring off across the country to a branch where a staff member had been naughty or where an armed robbery had taken place. Arriving at a branch where the bank had lost money through the fraudulent actions of a staff member was singularly unpleasant because everyone knew an investigation would seek to identify the official(s) whose dereliction of duty and failure to implement controls enabled the fraud, apart from securing a watertight criminal case against the defalcator. Everyone knew there would be very difficult and traumatic interviews with this ominous, grimfaced man who had just walked in and everyone suddenly wished they could be elsewhere. I didn’t enjoy being so feared and even hated!
Yet, I actually relished getting a really difficult case which would tax my knowledge of the bank’s controls and force me to really use my brain. I never ceased to be amazed at the ingenuity of the people I encountered in these investigations and at their ability to manipulate or charm their fellow workers. I seldom found desperate or needy people carrying out the frauds – it was almost always someone quite comfortable financially but who greedily wanted more than they were entitled to. I’m not trying to be sexist when I say that the female of the species is more subtle and imaginative when it comes to stealing. That sweetfaced child who charms everyone that interacts with her and is the best loved and trusted person on the staff, so often is the criminal. It was my experience that feminine wiles are the most effective weapons in the arsenal of a female bent on stealing money. Mere men, by comparison, are usually clumsy and unsubtle in their attempts at fraud and more likely to bully than charm the people in their way.
I don’t propose to discuss modus operandi in any great detail except that criminal ingenuity never ceased to amaze me. I’d like to take a look at some of my cases, the methods used and the personality of the criminals.
I was once sent to a smallish country branch to investigate the unlawful withdrawal of funds from a elderly farmer’s account. The old man had failed to submit tax returns for a couple of years and his son, realizing that his father’s bookkeeping had failed, took all his cheques, receipts and statements to a bookkeeper in order to draw up financial statements for Inland Revenue. The bookkeeper approached the bank manager when he could not account for a considerable number of cash withdrawals on the account. There were no cheques or debit slips to account for the drawings in the statements the bookkeeper was using nor could the branch manager find any such slips in the branch filing. Alarm bells were sounded and yours truly who was auditing close by, was sent to investigate.
The branch management had started the ball rolling so I picked up in the search for the missing debits. A thorough but futile search of filing drawers failed to find any misfiled slips while a check of the waste on the days when withdrawals had taken place, showed they had all been encashed. Debits covered a two and a half year period, more than a year back and totaled in excess of R73 000. I forget exactly how many debits there were now but there were dozens. Tracing the entries back, at least 7 tellers had encashed them in this time and several were no longer in the branch. One had even died in the meantime.
Obviously someone in the branch had encashed the debits. I had a brainwave and sat down with the attendance registers covering the period and determined which staff member had been present on every occasion when money was drawn. It took a while but eventually one name stood out. A lady who I shall call Susan (Not her real name) who had been manager’s assistant and had left the branch a full year previously, on transfer elsewhere, was the only one who fitted the parameter.
When her name was mentioned, several staff members had light bulb moments and recalled Susan having cultivated the old farmer, (let’s call him Oom Gert) and had always invited him into her office and had brought him a cup of tea while she went to a teller for him. I managed to contact all the tellers who had been involved but most were rather vague about the transactions – all but two were not prepared to swear that Susan had encashed debits for Oom Gert with them. The most damning bit of evidence came in one of the cash out books – the particular entry had been entered in Susan’s handwriting, which was very neat and distinctive. (She must have been in a hurry!)
I now had ammunition and wanted to confront Susan. I arranged with the management of her current branch to release her in order for her to attend a hearing at her old branch. The lady was dressed to kill when she arrived and looked me in the eye defiantly when I introduced myself. I brought in the manager and two tellers and then confronted her with the evidence. The tellers bluntly accused her of cashing debits with her, ostensibly drawing cash wages for Oom Gert. Her defence was simple – calm denial of everything I threw at her. I had heard that she had a fiery temperament and I did my level best to get her riled up but she must have been chock full of some medication like valium because she never reacted at all.
After an hour in which I had talked myself hoarse, I called off the interview. My parting words to her as she walked out were, “I have been relatively gentle with you but now I’m handing the case to the police. The next knock on the door might well be a policeman and he will be there to arrest you.” She paled slightly but walked off still defiant as ever. I did exactly that – I handed the case to the police and they arrived at her door with an arrest warrant, not much later. She had had a baby during the interim and wailed that she could not leave the child, whereupon the cop told her to collect the baby which could go to jail with her. The thought of her child being in jail was just too much for her and she hysterically collapsed and proceeded to confess to everything.
I actually spoke to the policeman, one Koos van der Merwe (No, really!) and he said he knew Susan well and had been to some rip roaring, well catered parties at their house. I laughingly suggested that he should arrest himself as he had enjoyed the fruits of her crimes! I don’t know what eventually happened to her – I would guess at a suspended sentence conditional on the bank being repaid.
This scenario of a trusted and strong-willed person in a branch being a miscreant is far from rare. I used to think of such people as wolves, circling round a flock of sheep and going for the jugular whenever there was an opening. Some are outright bullies who bulldoze any opposition while others are ostensibly sweet, attractive and helpful people, who lull their colleagues into states of false trust and liking for them. An even more pernicious type is the person who claims to be devoutly religious in order to hide a criminal agenda. I once met such a lady. She was nearing pension and took exception to my using fairly innocuous epithets (Like bliksem) in her presence. I was rather annoyed when, after consulting a Bible in her desk drawer, she placed a scrap of paper on my table on which she had written a Biblical quote. Just a few months after our audit, one of our colleagues returned there to investigate the disappearance of a client’s funds and that paragon of virtue proved to be the guilty party. Turns out she was building a smart new house and needed the funds to complete the project. I don’t know how she managed to reconcile her beliefs with her deeds. Perhaps her twisted version of Christianity enabled her to do what she did after seeking the forgiveness the Bible promises. “The Lord has forgiven me, so why can’t the bank do the same”? I’m sure other auditors will also have heard this phrase after special investigations but unfortunately while it is human to err it isn’t company policy to forgive.
Another sad aspect of defalcations is the tendency of exposed criminals, no doubt in panic, to see suicide as the way to escape retribution. In a couple of cases of my own experience, people went home after I had confronted them and promptly swallowed a bunch of tablets. One has to harden one’s heart as these people seldom deserve sympathy because they have had no thought for the damage their actions cause to other people and their careers. However, in one case, a young girl was caught pilfering small amounts from savings accounts simply because she badly wanted to buy glossy magazines every week but could not afford to do so. While that was pathetic and I actually felt a twinge of pity, I realized that had she carried on long enough, she would have moved on to bigger things and done a lot more damage. I suppressed that twinge of pity quite easily in the end.
I was also called to investigate the activities of managers at times. Oddly enough, some of these misguided fellows did not even personally benefit from their own activities but manipulated bank systems and regulations, to assist ultimately unworthy clients. It almost always started with failure to report allowed excesses over established credit limits and then gradually progressed to manipulating suspense and other office accounts. Moving money between client accounts would follow but eventually the customer’s demands would overwhelm the manager’s ability to keep his parlous situation a secret and the scheme would collapse and come to light. In one case I saw, the manager gained so much confidence from his manipulations that he started helping himself as well as the customer! You have no idea how complex some of these schemes were and how tough it was to unravel them, yet I relished pitting my wits against such criminals.
Not all investigations involved clerical manipulations. I had a case where an agency teller had returned to a branch, had locked his cash container away in a cabinet which was in the vestibule area of the strongroom and had gone home. The next day, the teller was astounded to find the canister had disappeared from the cabinet for which he had the only key and which was still locked. It seemed as if some magic trick had been performed – how could cash disappear from a locked canister cabinet, behind a double locked strongroom door? Patient questioning plotted the movements of everyone concerned with that basement strongroom. I found that after the agency teller had locked his cash away, custodians had locked the strongroom door. An hour later, the door was re-opened in order that tellers’ cash trollies, which were brought down in a goods lift, could be wheeled into the vestibule. As the cash and other intrinsic items were still securely locked behind the grille gate, the custodians did not consider it necessary to stay and watch the process, as they had treasury to check.
My suspicion immediately fell on the cleaner who had moved the trollies, as he had had access to the area unsupervised for several minutes. The branch had called in the police before my arrival and they seized the cleaner and took him off to the police station, after I had foolishly discussed my suspicions with the detective. I was dismayed when some hours later a mighty grim cleaner returned with a bandage around his head, tightlipped and very angry.
While he was away, I went back down to have a close look at the cabinet the canister was stored in. It was just a box of steel with a single lock on it. How did the thief open it as the absent teller at the time held the only key? In frustration, I kicked at the door and to my amazement, the locked door simply sprang open. Turned out the lock had been faulty for months and not one of successive tellers had thought to report the fact! Suddenly I had several agency tellers as suspects.
I finally decided that a former teller (And I had one in mind!) who knew all the routines and times and knew about the faulty lock, had slipped into the basement while no-one was down there, banged open the steel box and moved the canister to a space behind the lift shaft. As numerous people had back door keys to the branch, he would have gone back after hours, retrieved the canister and disposed of it somewhere. Despite my suspicions, I simply could not confront anyone due to lack of concrete evidence and the case remains unsolved to this day.
So where initially it seemed as if magic had been employed to spirit the agency cash away, in the end it was just simple but fiendishly clever exploitation of weaknesses and failures in controls. Luckily there was not a big loss of cash but custodians had a fine lesson in how not to do your job.
One thing is certain, the bank of yesteryear had woven a magnificent web of controls around its activities and in a perfect world not a single fraud should ever have taken place. Yet the world was never perfect, simply because human beings, who were tasked with implementing controls, were often fallible, lazy and weak. We auditors were often damned for being petty by criticizing what ostensibly seemed like trivial rules not being applied but more often than not, simple things like the flaunting of the hoary old maker/checker control were at the root of enabling criminal acts. Probably the biggest flaw lay in the very predictability of even the most diligently applied controls. Initialling things and ticking things off often fell down simply because the people applying these rules had no idea why they had to do these things! Familiarity and boredom watered down such measures and were eventually easy to sidestep.
I have no idea how criminals go to work now in this age of computers but I should imagine the charming, pretty girl who could use her assets to get other people to trust her implicitly and relax their controls, might be battling to commit fraud in the bank of today. Good looks and a charming manner mean zilch to computers but somewhere along the line there has to be a human interface with controls which can be overcome and while there is a human in the circle, crime will be possible. The “computer fundi” would be the person to invite closer scrutiny in the bank today I would guess but it would require that the auditor command an equal level of expertise. Someone from my generation would have to go back to school to keep up with the nimble-fingered brigade involved with computers today.
In conclusion, thanks to all those diligent bank clerks who did their jobs properly and applied the bank’s controls unfailingly. You made my life easier!
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