Dormant Accounts – Potential for Fraud
D’Anna Case
University of Phoenix
Dormant Accounts – Potential for Fraud
Perhaps one of the most vulnerable accounting departments to fraud and internal abuse in banks is the dormant accounts (CFE-In-Practice, 2004). A dormant account by definition is any account, which has gone for longer than one year without any transactions with the exception of the posting of interest. Most banks and credit unions send out letters to notify account holders when the account status has changed from active to dormant. If that account goes without a transaction for over five years, the balance will be escheated to the state (CFE-In-Practice, 2004).
Summary of Article
In the article, Bank manager jailed after raiding dormant accounts, from Money Marketing publication, a bank manager reportedly stole over 40 thousand English pounds from his bank and has been sentenced to 14 months in jail. The manager admitted a series of accounting frauds upon his appearance in court. Lee Nerwick was the manager of a branch of Barclays Bank in Southwold, England. For a period of about six months, Nerwick used his position to override security and deposit the monies into his own account. He had used the additional funds to take several trips and extravagant spending.
Concepts to Banking Career
Although several cases concerning dormant account fraud from different countries appear in articles, in my banking career these cases of fraud in the dormant account departments have not been reported. Most of the employees involved in these cases were not prosecuted because of the disturbing publicity. Bank executives have kept these cases private. Monies were recovered as possible and the employees were terminated. Dormant accounts departments have very little auditing requirements and are not held separately on a bank’s balance report.
Recommendations for Improvement
The separation of all the depository accounts held at an institution...