Checking Account Fraud

Fraud’s Finer Points 

In the previous column, we covered common insider checking account fraud involving stolen revenue checks. This column, the last in the series, underscores the importance of reviewing the volume of activity in small checking accounts, and it also offers lessons from the past – what fraud examiners can learn from actual case histories.

REVIEWING ACTIVITY IN SMALL CHECKING ACCOUNTS 

Employees frequently use small checking accounts, such as petty cash funds, advance travel funds, trust funds, and purchasing funds when attempting to pull off a disbursement fraud scheme. They choose these funds hoping they will be overlooked during audits and fraud examinations because the imprest fund amounts aren’t significant. Fraud examiners should use different criteria when deciding whether to review them. Instead of using the size of the account as the determining factor, we should consider the volume of activity that has occurred in the accounts during the period.  

As shown in the following cases, fraud perpetrators first deposit stolen revenue checks in these accounts and then create extra disbursements from these accounts to misappropriate funds. An unusual activity pattern in the account, such as a greater number of transactions or disbursements than normal, might be a prime fraud indicator.