Converting Company Checks to Cash
The Theft: Converting Company Checks to Cash
In a recent post, we saw that John opens the mail and receipts checks made out to the City of Whoville. He was stealing cash by using the check-for-cash fraud scheme. Thatโs one way to steal.
But consider that converting company checks to cashโeven without using a check-for-cash schemeโis possible.ย
In this post, I show you how fraudsters turn company checks into cash.
John alone opens the mail. Now he steals checks made out to the city andย deposits themย into the Whoville Projects bank account (the new account is never set up in the city’s general ledger). Then John writes checks from his fraudulent bank account to anyone he chooses–including himself. (Rita Crundwell used an off-the-books checking account to steal $53 million dollars.)
Many companies incorrectly believe that fraudulent bank accounts can’t be opened in their name, especially if they are incorporated. Why? Because most banks ask for copies of company corporate documents. But consider that fraudsters canย open a “doing business as” bank account in the name of ABC Company. Since the bank account is a personal (and not a corporate) bank account, the bank will not ask for corporate documentation.
Also, fake corporate documents can be created, if Susie wants to go the route of opening the bank account in the name of ABC Company, Inc.
The Internal Control Weakness
The fundamental weakness is John opens the mail and receipts the checks by himself. Also, thisย type of theft often occurs when no one is comparing revenues to budget or prior period amounts. Aย lack of security cameras allows John’s thefts to go undetected.
Fix the Control Weakness
Two people should be present when the mail is opened and receipted. Another alternative is to use a lockbox; that way, all checks go directly to the city’s bank rather than to the city.
The city should install security camerasย and record all activity.
Periodically request a list of allย accounts from the bank. Then see if each account is set up in the city’s general ledger.
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