AML CHALLENGES
Know Your Employees — A matter
of trust
Prospective employees are screened in
a variety of ways during the application
process. Once employed, methods are used
to monitor productivity and trace misappropriated funds or allegations of fraud. But
there is a lack of real-time review of either
new or established employees to determine
if they are engaging in inappropriate behavior
before that behavior shows up as a loss for
the bank. This provides criminal fraud rings
with the ability to infiltrate an institution
by placing a new employee of their own or
compromising an existing one.
For example, a fraud ring pays young individuals to apply for teller positions in order
to steal customer information. After limited
training, these new employees often have the
ability to access almost all accounts across
the portfolio, including signature cards, with
no numerical, geographical or other restrictions. No alerts are generated even if a new
employee accesses hundreds of accounts
with no transactions following any of them.
These new employees will often work for
only a few weeks and will leave the bank’s
employ before the criminal ring begins to
make unauthorized withdrawals from the
accessed customer accounts.
On the opposite end of the spectrum are
long-term employees — often ones who have
been internally promoted. They are in positions of trust and their performance reviews
tend to highlight their productivity and not
focus on whether the accounts they opened,
or loans they closed, have resulted in fraud.
The expectation that they will continue to
produce, or some external financial pressure,
can make them susceptible to criminal fraud
rings’ efforts to compromise them.
For example, a long-term bank employee
who was a branch manager developed a
drug habit. To make extra money, he began
training a group of criminals in the bank’s
procedures regarding opening business
accounts and obtaining loans. He advised
the fraud ring regarding the documents they
needed and interceded on their behalf with
the loan department to make sure their business loans closed, even though he knew that
they did not have any legitimate business. For
his effort, he received a percentage of each
loan that closed. As a branch manager, his
name did not appear on any paperwork. He
gave the account opening and loan closing
credit to other branch personnel. None of the
loans, which totaled more than $2 million,
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Institutions that understand the
true scope and profile of internal
fraud risk will be better positioned
to protect all their assets
were ever repaid, and the accounts were
used to launder the ring’s money.
Real-time review of both new and existing
employees would have aided the bank
in identifying the fraud and determining
who was responsible. A comparison of
employee access records and productivity
changes across the branch, within a narrow
geographic zone, or portfolio-wide, would
help to identify anomalous behavior that
could then result in further investigation.
The call center — Help at any cost
Criminal rings need their accounts to stay
open in order to further their goals. Yet their
behavior often triggers AML alerts that automatically freeze their activity. This leads to
contact between members of the criminal
organization and the call center. But call
center employees are neither trained in, nor
rewarded for, identifying potential fraud.
Even in the most extreme cases, where
callers cannot answer any security questions
correctly, there is no procedure for alerting
AML, compliance, or investigations to the
suspect accounts.
Criminal fraud rings take advantage of human
nature and the desire for the call-center
employee to help them in order continue
their fraud. Some examples include:
1. A caller who stated that he did not have
his account number or date of birth with
him, yet still managed to have the hold
removed from his credit card;
2. Members of the fraud ring who advised
each other to stay on the line with the call
center and keep apologizing “until you get
a nice lady who will feel sorry for you;”
3. A caller who could not state his address or
phone number, even after receiving hints
from the call center representative, yet
still had his credit cards unfrozen;
4. Callers who stayed on the phone for more
than an hour and were transferred to
several different representatives be