All Wired Up

Electronic Funds Transfers are Prime Fraud Targets

By By Joseph R. Dervaes, CFE, Association of Certified Fraud Examiners Fellow, CIA

Theodore Swaggen was above reproach. This eight-year employee of a major Midwest bank, had won the trust of his coworkers and supervisors. But as the supervisor of the bank’s wire transfer room, Swaggen handled ridiculous sums of money. He decided it was time to get his hands on some of it – $68.7 million to be exact.

Aided by a gang of outside accomplices and a few secret bank codes, Swaggen* planned the crime for a month and executed it in an hour. He transferred money from the accounts of major U.S. corporations to bank accounts that his co-conspirators had set up under assumed names at two banks in Vienna, Austria. But, fortunately, before the perpetrators could collect the loot, the bank discovered the fraud and put a stop payment on all electronic funds transfers (EFTs or more commonly called wire transfers). The embezzlers came tantalizingly close to succeeding and showed how vulnerable banks and their vast computerized cash movement networks can be to a dishonest insider.

EFTs are used by banks to move more than $1 trillion in funds around the globe each week and the amount is rising. Because of the large volume processed through

EFT systems, they are a prime target for fraud perpetrators wanting an immediate, enormous source of money.

Therefore, EFT systems are high risk and should receive the highest priority for security measures. As these FBI statistics show, more dollars change hands with EFTs than any other method but only make up a slight percentage of total transactions:


Category Number Dollars
Cash 80 percent 5 percent
Check 18 percent 12 percent
EFT 2 percent 83 percent


The volume of EFTs continues to grow as more companies use this medium to conduct business.

When a corporation transfers funds from its account, they contact its bank’s wire room by telephone. The bank initiates a predetermined call-back system (using various code numbers) to a designated executive at the company to verify authorization for the transaction. All calls are automatically taped. In the Swaggen case, he had access to the codes and knew the names of the appropriate executives at the various corporations used in his scheme.








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