+/- $400 million

Banks commonly lend money against invoices. So a business can get money from the bank before the customer actually pays. Lubricates commerce and makes the bank money.

But isn’t there a problem if the invoice is fraudulent? To protect against that, banks normally make sure that the customer has “accepted” the invoice.

When the bank learns that the customer has stopped accepting new business from the business, it looks more closely at the invoices. Apparently, the “acceptances” were themselves fraudulent, and a bank employee may be “involved.” Bank may be out $400 million.

“Citibank Says Fraud Hits Mexico Unit,” Wall Street Journal, March 1, 2014 B1 http://on.wsj.com/1d7iSEH

What is your plan if one of your controls to prevent fraudulent documents doesn’t work, due to employee infidelity? Is there a check or a balance? What impact on your overall strategy of expanding your bank’s activities internationally? How do you mitigate the damage? Does insurance cover you?

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Filed under Business Case, Controls, Data quality, Duty of Care, Governance, Internal controls, Risk, Third parties

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