Bank President Helps Himself
In a typical case of company-officer embezzlement, the former president of a Logan County, Illinois bank, Bryson John Russell, admitted in court that he had embezzled funds from the Hartsburg State Bank. But he got away lucky. Taking into consideration Russell’s guilty plea, the U.S. Magistrate waived a more extensive indictment and accepted just a single count of embezzlement.
According to court documents and statements made during the hearing, total loss to the bank was estimated between $376,000 and $562,000 – quite the tidy sum for the man who started working at the bank in 1966 and rose to become its president by 1989.
The Long and Winding Road
In a typical modus operandi, Russell acted deliberately and carefully as he slowly and surreptitiously accumulated his “winnings”. It took him many years to plan his offense, carefully identifying loopholes and searching for safe opportunities to grab a little bit here and a little more there. Numerous studies in the field of insider embezzlement demonstrate conclusively that vast sums are not pilfered in one fell swoop, but usually take a long period of time to accumulate.
One might think that over the course of time, signs would eventually become obvious, and the culprit would be caught. But, like the lesson from the race between the tortoise and the hare, slowly and surely often wins the race. By flying under the radar over a long period of time, the perpetrator’s deeds can remain invisible while the embezzlement accumulates.
eLoomina is able to take advantage of the drawn-out period of embezzlement to gather information, constantly cross-checking it with other officials in similar positions in similar industries, creating heat maps and identifying trends that indicate minor and slow variability in behavior. eLoomina raises the flag very early on anomalies in a specific department or with a specific employee, no matter what the level. No need to wait for hundreds of thousands of dollars to disappear over years before discovering the perpetrator and his methods.
Did you know that even behaviors that is usually considered positive – for example, early arrival at work and putting in long work hours can actually be indications of fraud in the making? eLoomina spots the trends as soon as they start. Always vigilant, our analyses can sort through patterns that might, on the surface, seem like the conduct of a dedicated employee, but, instead, produce an alternate image of risk on the rise.
Russell admitted that he began pilfering small amounts of money from the bank to pay for personal items and bills. Since the amounts were so minor, nobody saw any red flags, neither in the president’s behavior nor in the accounts.
Living beyond one’s means is the prelude in many major fraud cases. But by stealthily starting with small sums of money, the changes in lifestyle are subtle. eLoomina looks carefully at a great many numerous indicators in typical organizational data-capture that, analyzed together with AI and our exclusive algorithms, indicate changes in employee consumption habits compared to peers and/or to earlier behavior. On their own, organizations are unable to make vital connections between diverse information systems and are thus unable to develop a clear picture that alerts in time. eLoomina gives them that capability.
The early motives for living beyond one’s means vary from case to case and organizations are not tuned into them. At eLoomina, we trace these motives. Lack of progress in employee salary and benefits, unjustified wage gaps in the salaries of staff performing different activities, or lack of compensation for hard work or overtime can become motivators for fraud. eLoomina tracks the employee data, determines important patterns, and translates them into actionable variables that can stop fraud before it gets started.
It’s Great to be President
Being at the highest echelon of management at the bank, the president enjoys virtually unchallenged power and autonomy – variables that have been found to have a very strong correlation with risky behavior, according to Professor Vardi's Organizational Misbehavior (OMB) studies.
As president of the bank, Russell used his position to his advantage. He began creating bank loans in the names of various bank customers, even including personal relatives, circumventing loan officers. When loans came due, Russell created new, larger loans in other bank customers’ and relatives’
names to pay these off while enabling him to embezzle additional sums. In his court case, Russell admitted to cashing a customer’s $15,000 certificate of deposit and applying the proceeds to a loan he had created in the customer’s name.
eLoomina is able to utilize the very information accumulated in the bank's data systems to spot unusual usage habits while comparing them to similar position-holders in the bank to similar-level individuals at other banks (even presidents). The variance over time – even years – is assigned dynamic risk scores. Thus, eLoomina does not need to monitor in real-time to catch a fraudster in flagrante delecto like real-time systems.
eLoomina’s superior effectiveness comes from the inclusion of vast, diverse information and our ability to understand it early and over time. eLoomina automatically and regularly analyzes deviations from accepted norms and processes that do not follow bank procedures or behaviors thus addressing situations cases that were not anticipated during regular audits by the bank's internal auditors and risk-assessors.
Catch It Before It Happens
In so many cases of embezzlement, the damage goes way beyond the money. When fraud is uncovered, the hours upon hours of managerial occupation and the public embarrassment, produce severe damage to the bank’s reputation.
An ounce of prevention is worth a pound of cure. eLoomina automatically spots and assesses the factors that lead to embezzlement before it occurs.