Tuesday, February 20, 2018

Blunder after blunder in $60m fraud

First Citizens CEO: Appropriate action taken, but...

BANKING BUSINESS: First Citizens director David Inglefield, right, speaks to chairman Anthony Smart and Group chief executive officer Karen Darbasie before the start of the bank’s 20th annual meeting of shareholders on Monday at Hilton Trinidad, St Ann’s. Photo: ISHMAEL SALANDY

What has been the fate of five First Citizens employees who handled the $60 million fraudulent wire transfer that was sent from the bank’s Point Lisas branch in September 2011 involving the National Energy Corporation (NEC), now called National Energy?
The Express has found out that two were promoted, one has since resigned, one remains a manager and one was fired.
The case of the fired employee is being handled by the Banking, Insurance and General Workers Union (BIGWU).
The money was sent to three countries.
1. A wire transfer of $8 million (US$1.2m) to Central International Co (CIC) in Boston.
2. A second wire transfer for $35 million (US$4.7m) to an attorney in Antigua
3. And a third transfer of $17 million (US$3.75m) to a bank in Dubai.
The Express has seen a confidential final Group Internal Audit report dated April 30, 2012, that was prepared seven months after the fraud had been perpetrated.
In the report, the bank admitted its detection controls failed in the wire transfer process at the Point Lisas branch.
The Group Internal Audit Committee looked mainly at the actions of the employees involved in processing the transaction —a manager, assistant manager, supervisor (SUP), customer account representative (CAR) and customer service representative (CSR).
The report indicated that, in September 2011, the CAR received an e-mail purportedly from NEC requesting the three wire transfers for a total of close to US$10 million (TT$60 million).
She later received the supporting paperwork from NEC by courier.
The CAR then passed the wire transfer request to the CSR, a junior employee, to complete.
The bank’s internal audit found that the CAR:
*Failed to detect the irregularities in the letterhead and signatures on the paperwork from NEC
*Failed to properly scrutinise the e-mail purportedly sent by NEC.
The audit found that the e-mail “failed to capture the nature of the transactions, while the detail or contents of the e-mail were ambiguous”.
*Overall, Ms (CAR) failed to demonstrate the required level of duty and care in the execution of her duties...and failed to display care and attention.”
No system or process 

The bank’s audit report concluded that, given the large sum of money, the CAR should have informed her supervisors.
They were also critical of the NEC, stating “notwithstanding the ambiguity or shortcomings of the e-mail” dispatched to one of their employees, he (the employee) “contributed to the breakdown in the process as his response could have and was interpreted as a confirmation of the existence of wire transfers to be processed. He thus failed to apply the level of duty and care in the execution of his functions, when he responded in the manner he did to the e-mail received from Ms (CAR).”
And although the CSR who was given the wire transfer to process had clearance from his superior to proceed, the report noted that he “failed to detect any of the irregularities, specifically the authenticity of the letterhead and signature on the letters in question”.
In fairness to the CSR, the report stated that the bank’s due diligence rules did not explicitly make junior staff responsible for double-checking requests that a senior had already approved.
The report revealed that the three letters sent by courier purportedly from NEC were addressed to the assistant manager.
The report stated that the CAR “proceeded to act upon the instruction in the letter without referring (it) to the assistant manager”.
The manager responsible for the bank’s “Management Control” also came in for harsh criticism.
The audit committee concluded, “Given the value of the transactions involved...US$10 million...from one (1) customer’s account, the manager should have had a system or process that would have required such transactions to be referred” to either the assistant manager or the manager.
Without due care 

The report stated that the manager:
“Failed to set up required guidelines and operating systems that would have allowed him management oversight and control over transactions of this nature and value.”
The manager was further chided in the report as the audit committee felt that such transactions were to be referred or discussed with senior members of his management team for approval.
The audit committee found that the assistant manager maintained some level of accountability and “failed to apply the required level of duty care when delegating such responsibility to her junior staff”.
The supervisor also came in for harsh criticism by the Group Internal Audit team, which found that “she failed to effectively authenticate the legitimacy of the request, especially given the value of the funds under consideration”.
The report concluded that the audit team was unable to ascertain whether the CAR or supervisor or any other member of staff “was a willing party to the fraudulent act”.
Now managers at other branches 

The report was also critical when it came to the fact that the CAR was allowed to proceed with the transaction without referring to the assistant manager.
The assistant manager came under fire for this, with the report stating that she had abdicated her responsibility to the CAR.
“However, although responsibility can be delegated, accountability cannot be delegated,” the report stated, adding that “she be held accountable for the transactions in question”.
In their final recommendations the audit committee felt that disciplinary proceedings should be initiated with the consultation of the HR Department on the CAR, stating: “Given her level of involvement in the execution of these transactions it should also be determined whether a charge or position of loss in confidence should be considered.”
And also the supervisor, “for her failure to display level of due care and attention in the execution of her duties.”
So were these employees disciplined for their oversight by the bank?
The Express sought answers from First Citizens Group CEO Karen Darbasie.
“All of the employees who would have been involved in the transactions, whether part of the internal audit report or in any other review that we have done, we are comfortable that the appropriate action was taken based on the recommendations of all the reports we had before us,” she said in a telephone interview on April 11.
Darbasie was non-committal on exactly what disciplinary action their Human Resource or Legal department had taken against any of the employees.
“I can tell you that we did review all of the situations that were highlighted in the reports and actions were taken. I don’t want to say more than that we are satisfied that the actions taken were sufficient,” she added.
The CEO shied away from saying exactly how many employees were disciplined or whether questions on whether any of them had been terminated.
The Express, in trying to ascertain if any of the employees still worked at the bank, perused the First Citizens website and saw that the manager and assistant manager are now both managers at other branches.
Bank used conveniently

The Express spoke to BIGWU president Vincent Cabrera via phone, who revealed that the supervisor had resigned sometime ago from the bank, but he could not say whether it had been triggered by this investigation.
He said the CSR continues to work as a supervisor while the CAR “has been fired because of this matter which is now in the Industrial Court and we have taken up her case”.
Cabrera, though, was quick to point out, “When we look at the issue, we cannot fault any of the workers because they did everything by the books and this was an international operation and the bank was just used conveniently.”
So why did the bank stop the investigation several months after hiring international corporate firm Kroll?
Darbasie, who assumed leadership of the bank in April 2015, could only give an answer based on what had been done by her predecessors.
“I would not want to speculate about the decisions made at that point in time, to be quite honest it was under the oversight of the board. So Kroll was retained and at the point in time, reports were obtained from Kroll, the bank determined that they had sufficient information to move forward on the actions of the bank they were responsible for taking,” she said.
Darbasie said she could not give clarity on the Kroll report, or any details surrounding the possibility that the $8 million (US$1.2 million) that was wire-transferred to Boston in the US was later taken to Guyana and converted to gold before it was shipped to Dubai.
She expressed confidence that they were now in a better position to handle outbound wire transfers, as the audit committee had suggested strengthening this process.
“Yes we are in a position of constant upgrade for best practices and would have looked at the situation that occurred then to ensure policy and procedures if they needed upgrading would have been upgraded at that point in time,”she stated.
And she is still hopeful that those responsible for this crime would some day be caught.
“We have made the reports that we were supposed to do to the relevant authorities and we trust that the process will be handled to ensure that the maximum efforts are made to ensure that the perpetrators are dealt with accordingly,” she said.
The Express spoke to then-investigating officer in the matter Superintendent Edwards at the Fraud Squad, who said that whatever information he had obtained he had passed it on, since he was later transferred from that department.
Senior sources say, to date, nearly six years later, the investigation is at a standstill and they are no closer to catching anyone for this crime.
The matter is solvable, but the question is are the relevant authorities willing to pursue it to the end?