Citi bank was in deep trouble after the fraud took place. Federal authorities were investigating the fraud. In response to FBI investigations, they arrested Gary Foster, who has worked in Citi treasury finance department. It was found that Foster was allegedly embezzling more than $19 million from Citi and its customers. It was second public blow for Citi within two months. Initially customers account was compromised by hackers. Many people expressed their views upon Citi to take necessitate action and ensure it doesn’t happen in future.
Can you believe the reason behind it??
“How Trusted Employees Steal Millions and Why It’s So hard for Banks to Stop Them”
It was found that the reason behind it was poor internal controls. Most banks have done poor job in keeping up with internal threats. One cause might be banks have reduced spending on internal controls and fraud detection because of very tight budgets. It was a reprise of internal fraud happened in Bank of America and BofA. In the latter case employee had been accused not of embezzlement, but of leaking customer names, addresses, Social Security numbers, phone numbers, bank account numbers, driver’s license numbers, birth dates, e-mail addresses, family names, PINs and account balances to a ring of criminals. In the former case with Bank of America customer accountholder information was compromised.
Employee who committed, was clever!!
It was a classic case of insider fraud. Many banks monitor their employees to detect various types of fraud and Citi did not have that kind of monitoring in place. According to the complaint filed by the U.S. Attorney, Foster(the former Citi bank employee) transferred money from various Citigroup accounts to Citigroup cash accounts and then used ACH rails to fraudulently wire funds to his personal account at a different bank. He was either very clever or was leading a double life that only caught up with him after leaving his post at Citi. Between July 2010 and December 2010, Foster had allegedly moved $900,000 from Citigroup’s interest expense account and $14.4 million from the bank’s debt adjustment account to the cash account. From there, in eight separate wire transfers, he had funds routed to an outside, personal account.
In this case, the activity was outside his normal activities. Usually for ACH and Wire transactions a higher officer need to authorize the transaction .Foster was working in finance department and was not an officer. Transaction monitoring such as anomaly detection called for in the new FFIEC guidance, would have picked up the fraud very early. Historically, the ACH and wire channels have not had sophisticated fraud-detection capabilities. That knowledge offers opportunity for inside jobs. They take advantage of the trust of their co-workers, management and the company. Even though transaction monitoring is not in place some behavioral triggers should have clued executives at Citi.