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Fraudulent disbursement schemes reviewed in country club theft
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Recently it was reported that two former employees of a Silver Spring country club were sentenced to prison regarding crimes committed to defraud the country club. According to the FBI press release about the sentencing, Akinyeme Bamisaiye, a/k/a Yemi Olufemi Bamisaiye, age 41, of Clarksville, Maryland (the former controller) and Sajjad Nazar Mahar, age 49, of Kearneysville, West Virginia (the former general manager) were each sentenced to 52 months and then 3 years of supervised release. Bamisaive pleaded guilty to mail fraud and money laundering and Mahar pleaded guilty to mail fraud, money laundering, and wire fraud. U.S. District Judge Roger W. Titus ordered forfeiture of over $1.3 million, which was the money stolen by the fraudsters.
The fraud schemes perpetrated were the development of "ghost employees" and "authorized maker schemes." According to Joseph Wells, the founder and Chairman of the Board of the Association of Certified Fraud Examiners, ghost employees are people on the payroll who do not work for the victim company. For this scheme to be successful the ghost must be added to the payroll, timekeeping and wage rates must be saved, paychecks must be cut, and the paychecks must be sent to the perpetrators. Authorized maker schemes occur when employees with signing authority of the victim account breaches internal controls and writes checks for their own benefit.
For businesses wondering how these frauds could be prevented all that has to be reviewed are internal controls. To prevent ghost employees, all newly hired employees need to have references and backgrounds checked. Personnel records should be checked occasionally to ensure terminated employees have been removed, social security numbers are attached, deductions are taken, and have an address and phone number. Payroll checks must be passed out by an independent individual with no access to payroll or personnel (such as an administrative assistant) and have employees sign for the check and show ID. Finally, for those receiving payroll via direct deposit, a report must be run to search for employees sharing the same bank account.
To prevent an authorized maker scheme segregation of duties is paramount in the check processing operations. Those who prepare the checks should not be signing the checks. Canceled checks should be checked for valid backup so the purpose of the transaction can be validated.
Fraud is never fully preventable but precautions can reduce the damages.
