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Case Study of Another Authorized Maker Scheme, Part 2


By Joseph R. Dervaes, CFE, CIA

Fraud's Finer Points
Case History Applications
 

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A staffer at the local bank informed the town mayor about inappropriate charges for women's clothing that the clerk-treasurer made on the city's credit card account. In addition, an external auditor who was reviewing city financials discovered the clerk-treasurer had issued unauthorized checks to herself for almost $80,000 in a three-year period. This column brings you the conclusion of this case study.

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An authorized maker scheme is a type of check-tampering fraud. In the ACFE's Fraud Tree, the crime is a subset of fraudulent disbursements, which is a subset of cash schemes. (We dissected another authorized maker scheme in the November/December 2010 and January/February issues.) In this scheme, the perpetrator physically prepares a fraudulent check and/or causes the organization to issue an unauthorized check, which is then converted to personal use. This scam has the potential to drive small businesses into bankruptcy. A trusted employee who perpetrates this fraud must have access to the checkbook and bank statements and the opportunity to forge signatures and alter accounting records to perpetrate this crime. 

 

Part 1 of this column discussed the perpetrator, the organization, the initial discovery of this disbursement fraud and some lessons learned. We now continue the story in this column by discussing the actual investigation, including elements of the fraud, the red flags, some additional detection techniques and information about the interview. 

 


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By The AACI
Excellent lessons from this story. Management could have done simple monitoring steps to avoid such a fraud event. Management review is one the most effective defenses against fraud and corruption.
 
By Carla