By Jason Olson
August 30, 2017
As a bank director, you know that you have the difficult task of being responsible for providing oversight of your bank’s risks. Included in this responsibility is being charged with governance of management and ensuring internal controls are adequate to mitigate risks including fraud. This can be a daunting task as fraud is alive and well across all industries, especially the financial institution sector. It’s imperative you stay informed on fraud trends as well as consider a fraud prevention check-up checklist for your financial institution.
Recent Fraud Trends in Financial Institutions|
According to the Association of Certified Fraud Examiners’ (ACFE) 2016 Report to the Nations, which is a biennial summary report of surveyed Certified Fraud Examiners, the banking and financial services industry had the most occurrences of occupational fraud at 16.8 percent of the 2,410 reported fraud cases. The ACFE defines occupational fraud as “the use of one’s occupation for personal enrichment through the deliberate misuse or misapplication of the employing organization’s resources or assets.” The median loss of these occupational fraud cases was $192,000.
The most commonly reported fraud schemes (and their definitions) affecting the financial institution industry consist of:
In addition to these fraud schemes, the following are other highlights from the 2016 Report to the Nations:
FinCen Suspicious Activity Report (SAR) Statistics
To further examine occupational fraud trends in the financial institution industry, we extracted SAR filings related to fraud committed by employees, directors and owners from 2014 through July 11, 2017, from FinCen’s database. Below is a summary of fraud-related SAR findings by state in which Eide Bailly LLP has an office.
Summary of SARs by State
As reflected in this table, the number of fraud-related SAR filings has remained fairly consistent on an annual basis. The table below reflects the identified perpetrators’ positions from these SAR fraud-related filings.
Summary of SARs by Position Type
What You Can Do to Inspire an Anti-Fraud Environment
To mitigate fraud risks, you should consider having your organization conduct a fraud prevention check-up. The ACFE provides a complimentary, simplistic fraud prevention checklist for you to download on its website. If fraud prevention weaknesses are identified during this check-up, you can work with your organization’s personnel and/or our forensic accountants to ensure your organization develops the proper safeguards to protect its assets from common occupational fraud schemes. Conducting fraud prevention check-ups on a periodic basis is an excellent way for you to set the proper anti-fraud tone within your organization.