The three critical elements of the fraud triangle: 1) motive, 2) opportunity, and 3) Rationalization, clearly exist within the case of the $150,000 embezzlement involving McKinley, his tractor company, and CFO position with the bank.
McKinley’s motive, the driving force behind this act of embezzlement was his own self pride: his inability to deal with the fact that he had made a bad choice of investment, a poor investment strategy and an inability to manage and operate a small business. He was a well-educated, well respected, high ranking financial professional with a major financial institution, and he had failed.
The opportunity to create this fraud and embezzlement was the result of his own knowledge and understanding of bank operations. Since he was the person that designed the systems, implemented the systems and over saw the systems, he as in the perfect position to take full advantage of the systems. He did exactly that, he used his knowledge and understanding of the banking systems to take full, illegal advantage of the bank.
McKinley rationalized his plan as being the perfect scheme to take money from the bank due to the fact that the risk of being caught or detected was impossible – he could request money, authorize the transfer, approve and write the amounts off – with no other approval or authority. High volume accounts, high dollar amounts through the clearing accounts, insignificant dollars to the bank, no one would know better, he would never get caught, hardly even a wrong doing – this was his rationalization.
The banks systems of internal controls were weak and insufficient to detect this low level of fraud and embezzlement. Given an extremely liquid asset of this nature, cash – every journal entry through a clearing account should require a minimum of two signatures. In addition, a senior level manager should never have sole authority to complete all sides of any...