control, and governance
THE UNSUPERVISED LOAN SUPERVISOR
A recent article published by LoanSafe reports that a U.S. district judge has sentenced a former loan supervisor at a Maryland credit union to prison for bank fraud and aggravated identity theft.
In her plea agreement, the woman stated that she created fraudulent checking and share accounts, loans, lines of credit, and credit card accounts in the names of at least five customers, one of whom was deceased. She also manipulated these customers’ existing lines of credit and credit cards to increase limits without their knowledge.
For four years, the woman concealed the fraud — which totaled more than US $219,000 — by using a portion of the funds to repay some of the accounts, backdating transactions and changing terms, and altering the accounts’ mailing instructions to prevent statements and notifications from being sent to the customers.
This bank fraud illustrates the importance for internal auditors to recognize red flags that can indicate segregation of duties issues as well as bypassing key preventive controls. In this case, the red flags included the ability of the loan supervisor — without additional signatures or approvals — to:
COMMENT ON THIS ARTICLE
Internal Auditor is pleased to provide you an opportunity to share your thoughts about the articles posted on this site. Some comments may be reprinted elsewhere, online, or offline. We encourage lively, open discussion and only ask that you refrain from personal comments and remarks that are off topic. Internal Auditor reserves the right to edit/remove comments.