Internal fraud

The act committed by an employee, like moving the funds between the accounts or giving falsified information in monthly reports, leads to internal fraud. The most common type of theft through such activities is siphoning funds from dormant customer accounts.  

It happens due to a lack of segregated duties and oversight. In such cases, the employees abuse their authority, gain access to critical information related to the organisation, and indulge in suspicious activities. 

For example, they apply their powers to authorise credits to clients they know and sometimes breach policies to get the information they can tell others. 

They may indulge in money laundering or procurement fraud (where the employee facilitates an illegal transaction between a vendor and a supplier).

Such crimes lead to theft of customers' IDs (data theft) or account takeover. The stolen data is used to withdraw funds or conduct various forms of transactions without customers' knowledge. 

How To Protect?

• The firm should monitor the activities of the employee and check all the related accounting irregularities.

• Employees are allowed to access customer's accounts; however, the firm should investigate if they try to gain access to accounts like frequently checking the high net worth or VIP accounts or after-hours customer details, which is beyond the scope of the job.

• Firms should have internal fraud technology solutions to pick up immediate threats. In addition, they should employ systems to interpret the behaviour of the workers to prevent such activities. 

• The employment rules should be updated according to the changes in current working circumstances to handle irregularities or misuse of powers.