In hindsight, it seems obvious: Nathan’s pilfering of ING Corp. should have never been allowed to start, much less last as long as it did.

Nathan played a lead role in transitioning his old employer onto a new enterprise resource planning (ERP) system. A mistake by his new employer created an opportunity for Nathan to steal company funds.

As a part of the changeover team, I became an expert on all aspects of the ERP system including financial reporting, journal entries, and, most importantly, checks and wire payment processing. He was also, by mistake, along with a co-worker, given the authority to approve checks up to N5,000,000.

The accounting department consisted of a controller, assistant controller, accounting manager (Nathan), and three people under him. Of the three of them, it was only him who could request checks. Together with a co-worker, he could also approve checks. In their small accounting department, they knew each other’s system passwords and could often log on as someone else to get the job done. One morning, while sitting at my desk, he realized that he could log in as someone else, request a check, and then log in as himself and approve his own request.

In June 2010, his wife was pregnant and his annual N800,000 salary was just not getting all of his bills and loans paid. He thought that if he just paid off his debts, then they could do quite well with his income matching their living expenses.

He registered a business “Arce Business Consulting” got a BN number and opened a bank account at a major bank. He chose Arce because the company did a lot of business with another company that had Ace in its name. On a Thursday afternoon, right before he left for the day, he logged on as subordinate and requested a check made out for N20,000. He then logged on as himself and approved it. He picked up the check on Friday and deposited it in Ace’s bank account on Friday afternoon. For every credit (to the bank) there has to be a debit, and his debits needed to be hidden somewhere. Payments were usually for insurance claims, commission expenses, various refunds, or an administrative expense. He hid all the debits in ledger accounts that had a lot of reconciliation activity, making sure that his debit helped the account reconcile to zero.

Using this method, he stole about N500,000 in 2010, N750,000 in 2011, N1.2 million in 2012, N1.5 million in 2013 and N3 million in 2014 before he was apprehended.

Include Background checks in your hiring procedures and avoid hiring the likes of Nathan. Do vendor background check and avoid losing funds to fake companies like Arce Business Consulting.

Contact GF Forensics today.

www.globalfraudforensics.com

Article written by Evelyn Edmond-Mbang  – Fraud Risk Consultant

“The man of science has learned to believe in justification, not by faith, but by verification.” -Thomas Huxley

DISCLAIMER: Comments expressed here do not reflect the opinions of FraudXpose or any employee thereof.

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Thank you for this article but my question is how does a small to medium organisation guide against the likes of Nathan knowing they may not be able to carry out background checks like big organisations do?