Is nothing sacred?

I guess not. Eleanor Zapanta allegedly stole $712,000 from the Center for Spiritual Living by, wait for it…writing 250 unauthorized checks.

If your organization uses checks in any way, shape, or form, be very, very careful. Zapanta’s fraud allegedly took place over six years. The church only has an annual budget of $1.2 million. Assuming that the money was stolen at the same rate each year, that’s just under $120,000 per year, or 10% of the annual budget, lost to fraud. Normally, a check fraud starts small and grows until it is discovered, but you get the point – the church lost a huge percentage of its budget from just one fraud scheme.

Given the information shared in the original news story, let’s see what we can learn or infer:

1. Church business managers should never be left to their own devices. Someone in the organization needs to review their work on a regular basis. Fraud thrives on secrecy, lack of oversight, and misplaced trust.

2. Check stock must be locked in a file cabinet or safe when not in use, and it should only be accessible when two individuals are present. I know – it feels like overkill, but consider the losses associated with just the check frauds that I have discussed on this blog. I have many, many more check frauds stored and analyzed in our global case studies database. Check fraud can easily cost well over $500,000, and it is almost 100% avoidable.

3. Don’t rely on your bank to stop embezzlement. Most banks do quite well at detecting and preventing check fraud perpetrated by third parties. Embezzlement, or fraud committed by an insider with access to checks, however, is a different matter. How exactly should a bank uncover an embezzlement if the checks are signed by an authorized signatory?

4. Reconcile your organization’s bank statements on a daily basis. As part of that reconciliation process, ensure that checks issued have the appropriate supporting documentation such as invoices, purchase orders, etc. Checks should also have two signatures when appropriate and pertain to business-related expenses. Checks made out to individuals or payees that appear unfamiliar should receive additional scrutiny.

There are additional lessons learned, but that’s enough to start the ball rolling. What additional measures would you recommend?

Need a writer that understands fraud? When you hire me to write an article, blog post, newsletter, or white paper, you get an accomplished writer that is also an expert in fraud.

paul@mccormackwrites.com

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About Paul McCormack
I have over 20 years of experience in corporate fraud and intellectual theft prevention, detection and investigation. Unlike many fraud experts, I have both industry and professional services experience. To date, I have conducted over 800 interrogations of fraud suspects including numerous senior corporate executives. As a freelance writer, I have written over 1,000 articles on a broad range of topics. My areas of expertise include: • Asset Misappropriation • Big Data • Bribery, Corruption, and Collusion • Check, Wire, ACH, and Credit Card Fraud • Consumer Fraud • Corporate Security • Cybersecurity • Data privacy (Europe, Brazil, Russia, India, and China) • Drug Trafficking • Embezzlement • Employee Fraud • Executive Protection • Fintech • Financial Statement Fraud • FCPA • Healthcare fraud • Identity Theft • Intellectual Property Theft • Internal Audit • Interrogation Tactics • Loss Prevention • Mobile Fraud • Money Laundering • Operational Excellence • Organized Crime • Payments Fraud • PCI Compliance • Retail Fraud • Risk Management • Terrorism and Counterterrorism • UK Bribery Act • Workplace Violence

One Response to Is nothing sacred?

  1. Pingback: Organized crime has an “Easy Button” – White Collar Crime « Fraud Happens

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