Living the Good Life

Case Study of Another Authorized Maker Scheme, Part 1

 


 MarchApril-Fraud's-Finer-Points-DervaesFraud’s Finer Points 

An authorized maker scheme is a type of check-tampering fraud. In the ACFE’s Occupational Fraud and Abuse Classification System (the “Fraud Tree”), the crime is a subset of fraudulent disbursements, which is a subset of cash schemes. (We dissected another authorized maker scheme in the November/December 2010 and January/February issues.) In these cases, the perpetrator physically prepares a fraudulent check and/or causes the organization to issue an unauthorized check, which is then converted to personal use. This raid on an organization’s treasury often drives private small businesses into bankruptcy. A trusted employee must have access to the checkbook and bank statements and the ability to forge signa-tures and alter accounting records to perpetrate this crime.

  

 In my experience from investigating disbursement frauds in the public sector and from my understanding of similar frauds in the private sector, one of the most common check-tampering schemes involves trusted employees who simply issue checks to themselves for personal benefit. 

 

 

 

 

 

 

 

 

 

 

A business owner who wants to deter and detect these schemes should require that monthly bank statements be delivered unopened directly to him or her or an independent party. This person then should review the redeemed checks for any unauthorized or unusual transactions, such as checks issued to the bookkeeper or custodian of an account.

If your organization doesn’t receive its redeemed checks with the monthly bank statement, it should at least obtain a report showing the fronts and backs of the redeemed checks to perform this reconciliation. This process is critical to an organization’s survival, especially in the shaky economy.


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