Preventing and Detecting Financial Institution Fraud


Jacob Parks, J.D., CFE
ACFE Research Specialist

One of the most flagrant money laundering violations in recent memory occurred at an HSBC branch in Mexico, where drug traffickers were depositing huge sums of cash in violation of anti-money laundering regulations and best practices. The task was so routine for the criminals that they started transporting the cash in boxes that were specifically designed to fit through the dimensions of the teller’s window. Then, someone started thinking outside the box and came up with the idea of making the opening in the teller’s window bigger to more easily facilitate the cash deposit process. That kind of breakdown in ethical culture only occurs when there is either corruption in management or (at best) poor oversight.

Frauds against financial institutions from outside parties are often crimes of opportunity, especially when it comes to cybercrime. Customer information, proprietary data and other confidential information stored by financial institutions are top targets for cybercriminals, and breaches can result in both financial losses and a damaged reputation.

Fraudsters find it easy to rationalize their crimes against what they perceive to be large, monolithic profit machines. When the bank is the victim, the criminal might think: “The banks deserve this.” “The money is insured, anyway.” “It’s a victimless crime.” Never mind the fact that the costs of fraud inevitably get passed on to consumers, because most fraudsters are not interested in taking rationalizations all the way to their moral conclusions. Likewise, frauds committed by financial institutions and their employees often involve large groups of victims, such as a class of customers, the government, investors or other financial institutions.

While the rationalizations for fraud involving financial institutions might be inevitable, these organizations can take measures to reduce their exposure and to prevent people within their organization from committing fraud. The ACFE’s new Preventing and Detecting Financial Institution Fraud course reviews these and similar schemes, and the ways to detect and prevent them.

These schemes and countless other threats make being a fraud examiner in the financial institution sector a challenging task. However, there are effective controls and techniques available to reduce fraud losses, comply with regulatory demands, and satisfy customers.