Banks hit by $200 million in employee fraud

Australian bank workers have taken a massive $217,266,481 over the past thirteen years, with many of them motivated by gambling addiction, according to a new report.

Employee Fraud in Australian Financial Institutions, released by forensic accounting firm Warfield & Associates, examined 120 cases from 2000 to 2013.

Sixty-nine of the incidents occurred at one of the Big Four banks. The most common form of theft involved skimming cash from customers' bank accounts or term deposits, or creating false loans.

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Several cases involved huge amounts, with five racking up at least $10 million and one bank employee stealing $45.3 million. Thirty-three of the thefts exceeded $1 million.

The most alarming statistic may be that one in six of the frauds took more than five years to discover, even though on at least 20 occasions customers notified the banks of fraud on their accounts. One theft of nearly $3 million stayed under the radar for an extraordinary 16 years.

"No organisation can completely stop fraud from happening. However, a number of these organisations had large frauds occurring that were not discovered by their internal controls and reviews over what can only be regarded as an incomprehensible period of time," the report notes.

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At least 30 of the perpetrators had been employed by the bank for 10 years or more before turning to crime. In some cases, red flags were ignored: a lack of supervision or a failure to comply with company policy came up in several cases. Signs of gambling addiction also escaped scrutiny.

The second-biggest motivation was lifestyle improvement, with several of the perpetrators using the stolen money to fund lavish expenses such as designer jewellery, fancy cars, holidays, and in one case, hundreds of thousands of dollars in Michael Jackson memorabilia (including a signed guitar bought from eBay for US$250,000).

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