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#49879 - 12/19/02 05:14 PM
Kiting by bank employees
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Anonymous
Unregistered
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One of my audit duties is reviewing employee accounts. I have found three employees over the last eight months that were kiting. They are then handled by HR and their Supervisor on a case by case basis. My question is how do other banks handle this situation? Is the employee always fired, account closed or handled on a case by case basis? Is an SAR filed?
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#49880 - 12/19/02 05:19 PM
Re: Kiting by bank employees
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10K Club
Joined: Sep 2002
Posts: 13,965
TN
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I don't know how it should be handled but I do know that a SAR must be filed.
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#49881 - 12/19/02 05:19 PM
Re: Kiting by bank employees
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Platinum Poster
Joined: Oct 2002
Posts: 927
Milwaukee, WI
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The agencies' SAR regulations mandate that a SAR must be filed for: 1. Insider abuse involving any amount. That would be kiting by bank employees!
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My opinions are not to be construed as legal advice.
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#49882 - 12/19/02 05:25 PM
Re: Kiting by bank employees
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10K Club
Joined: Jul 2001
Posts: 85,219
Galveston, TX
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I have never worked at an intitution that kept an employee on after they were caught kiting. You also need to review your bonding agreement - you may be under an obligation to notify your bonding agent if you allow them to remain.
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The opinions expressed here should not be construed to be those of my employer: PPDocs.com
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#49883 - 12/19/02 07:23 PM
Re: Kiting by bank employees
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Platinum Poster
Joined: Nov 2002
Posts: 624
Texas
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Kiting checks between f/i's is an illegal activity. IMO, if an employee is participating in such activity instead of discussing financial difficulties with a trusted supervisor or loan officer to seek resolution, I have to question what else they may be concealing. Further, participation in illegal activites by bank employees, especially when the bank is involved, should be grounds for dismissal.
A more common occurence and grey area among employees, IMO, is cash kiting. Cashing a check at a merchant and depositing to cover checks written. This is an act that some employees may not understand is a form of kiting. I would be more likely to counsel first occurences in this situation.
Does anyone else struggle with this one?
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An error is not a mistake until you refuse to correct it
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#49884 - 12/19/02 08:08 PM
Re: Kiting by bank employees
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Power Poster
Joined: Aug 2002
Posts: 3,094
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At the last bank I worked for, this became a real problem. The employees caught "cash kiting" were fired. However, I agree that all employees should be told when hired that these practices are prohibited.
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#49886 - 12/20/02 01:48 PM
Re: Kiting by bank employees
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10K Club
Joined: Jul 2001
Posts: 85,219
Galveston, TX
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Grist - actually the more pertinent part of the regulation calls for:
"Insider abuse involving any amount. Whenever the financial institution detects any known or suspected Federal criminal violation, or pattern of criminal violations, committed or attempted against the financial institution or involving a transaction or transactions conducted through the financial institution, where the financial institution believes that it was either an actual or potential victim of a criminal violation, or series of criminal violations, or that the financial institution was used to facilitate a criminal transaction, and the financial institution has a substantial basis for identifying one of its directors, officers, employees, agents or other institution-affiliated parties as having committed or aided in the commission of a criminal act regardless of the amount involved in the violation."
So regardless of the amount, if it involves an insider (and notice this is defined as any employee or agent of the bank, not the Reg O definition), you are required by law to file a SAR. So regardless of how you choose to handle the HR or criminal aspect, if you uncover kiting by an employee, you are required to file.
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The opinions expressed here should not be construed to be those of my employer: PPDocs.com
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#49889 - 12/20/02 04:37 PM
Re: Kiting by bank employees
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Platinum Poster
Joined: Oct 2002
Posts: 927
Milwaukee, WI
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In reply to:
The bank must maintain a zero tolerence for that.
I agree, otherwise the bank is opening itself up to future problems. Have to be proactive and show the employees that this sort of thing will not go unnoticed.
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My opinions are not to be construed as legal advice.
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#49890 - 12/20/02 05:47 PM
Re: Kiting by bank employees
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Gold Star
Joined: Jul 2002
Posts: 338
Hell's Canyon
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How do you prove kiting? I'm not exactly sure what to look for. If you look at an account that has cash deposits (or an electronic transfer) on the same day checks cleared that would put them into OD it's suspicious but...then what?
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Wendy LaVoie
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#49891 - 12/20/02 05:52 PM
Re: Kiting by bank employees
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Platinum Poster
Joined: Jul 2002
Posts: 832
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In the kites that I have dealt with, the checks that clear the same day are usually pretty close to the same amount as the deposits. Over time the dollar amount progessively gets larger.
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Marilyn, CRCM
I'd rather be fishing.
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#49892 - 12/20/02 08:19 PM
Re: Kiting by bank employees
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Anonymous
Unregistered
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When it comes to kites, the main thing to look for is a trend. If the customer has two or three suspect transactions a month, for 3 months (or longer), I'd be concerned. Also, don't just look at one day's transactions. A smart kiter will spread his transactions over 2-3 days. And, give special attention to a suspected kiter that's also a borrower. Our research has shown that more than 80% of kiters are also borrowers, and they're kiting to disguise their weak cashflow. We have a system that helps identify and track kites. If'd you like to see a demo sometime via the Internet, please call or e-mail me. Regards, Wayne Barnett, President Wayne Barnett Software 877-945-4344 wbarnett@barnetttsoftware.com
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#49893 - 12/20/02 08:41 PM
Re: Kiting by bank employees
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Platinum Poster
Joined: Nov 2002
Posts: 624
Texas
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Your should have a Suspect Kite report and a Drawings against uncollected funds report that is monitored daily. Important things to look for is a "float overdraft", chk/dep ratio, and activity vs. bal fluctuation . Someone who is good at kiting will very rarely become OD. Even if your bank gives immediate credit for deposits, the ability to accurately monitor float is important.
If you suspect a check kiting scheme, you should require holds on all future deposits. The only deterrent to a cash kite that I have found is requiring approval on all cash deposits to an employees account. They tend to be a little hesitant to do this if involved in this type activity.
Also, tellers are often the first to identify or suspect a kite scheme. When this happens review your suspect kite report to see if the account had previously been flagged. If it was not, your report parameters may need adjusting.
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An error is not a mistake until you refuse to correct it
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#49894 - 12/20/02 09:37 PM
Re: Kiting by bank employees
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Anonymous
Unregistered
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Wayne's advice is dead-on right. We had a $70,000 kite loss this year, and a $161,000 loan charge-off for the same customer.
And to make matters worse, the Justice Department tells us that they won't prosecute the woman involved, because her loan officer knew she was kiting. The four banks involed in the kite agreed to share the loss if things went bad. But when all was said and done, the other three didn't remember that part of the conversation.
Working the Kite Suspect list may work for very small banks. But the list at our bank ($160 millon in assets) averages 18 pages a day (primarily from sweep accounts and overdraft protection).
I'd like to hear from anyone using Wayne's system.
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#49895 - 12/20/02 10:03 PM
Re: Kiting by bank employees
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10K Club
Joined: Jul 2001
Posts: 85,219
Galveston, TX
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In reply to:
But the list at our bank ($160 millon in assets) averages 18 pages a day
I hate to say it - but you are a small bank. You apparently either don't have or don't have the ability to set the parameters of your suspect report correctly.
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The opinions expressed here should not be construed to be those of my employer: PPDocs.com
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