Two Wrongs Don't Make a Right

In North Oakland, California, a woman who was an accountant at a medical center managed to embezzle $1.4 million over six years before she was caught.

In Huntsville, Alabama, a chief financial officer of a corporation was sentenced to five years for stealing $2,035,000 over a five year period.

In Douglassville, Georgia, a lawyer got 20 years for siphoning off mortgage payoffs from clients to the tune of over $1 million in real estate closings, averaging 30 to 40 closings a month over the last four years.

In Miami, two individuals were charged with taking checks payable to the U.S. Passport Agency. They stole more than $850,000 during two years.

We read these cases all the time. What is interesting is the fact that the preferred method of reimbursement is to go after the bank where the account was held, or where the stolen checks were negotiated.

The reasoning is that we should know when people are doing wrong and stop them from doing it. Then it wouldn't have gone on for so long, and the loss would be much less.

The defense we fortunately have for our use is the fact that because these frauds went on for so long, the Uniform Commercial Code says there is shared responsibility - and the loser is usually the entity that has been negligent to a greater extent and for a longer period of time. Take a look at those examples above - six, five, four, and two years. Where were all the safeguards and audits during that time?

On the other hand, the fact remains that all these negotiations did take place at financial institutions. And where were our people during all that time? Did no one question any of these transactions? Can you really believe that nobody noticed all those checks going into an individual account for those amounts?

Under the Suspicious Activity Reporting guidelines we are expected to observe and report any unusual or suspicious activity. But customer privacy has been so pounded into our heads, that in many cases employees are reluctant to report what in their hearts and heads they know is wrong. Where do you draw the line?

It's time to pay attention to the transactions and the people who make them. If you see something you feel in your gut is wrong, go to your supervisor and say so. Not reporting suspicious activity is also wrong - and as your mother told you long ago - two wrongs don't make a right!

Copyright © 2004 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 14, No. 4, 7/05