THE IMPORTANCE OF FRAUD AUDITING IN MANAGING SUSPICIOUS BANKING TRANSACTION (A CASE STUDY AT BANK X)

Abstract

The prevalence of fraud in banking sectors keeps rising globally that results in losses suffered by banks. The study aims to find out the importance of fraud auditing in managing suspicious transactions. Methods used for this study to obtain data are personal interviews, questionnaires, and document review. Writer distributed Internal Control Questionnaire (ICQ) and takes sample of 40 (forty) staffs at headquarters of Bank X. Writer used questionnaires to get information about internal control at PT Bank X. Personal interviews and document review were also used to obtain data in regards to fraud case happened in company. Result obtained from the study is fraud incidence due to lack of internal control. The fraud case involves a Relationship Manager (RM) and a customer. Fraud was detected when customer claimed his account to be unequal with Bank’s record. After completed fraud auditing procedure by Financial Crime Unit, the findings aim at RM. The RM used signed blank transfer forms and then withdraws customer’s money into accounts of RM’s children and RM’s acquaintance. Although the frequency of the outgoing transaction were high, bank failed to detect earlier because the transfer amount is below Bank’s verification limit and there was no system to monitor transaction which may indicate fraud. From suspicious transaction analysis, the pattern of such transaction deviates from customer’s characteristic. Through interview with RM, the money withdrawn used to make investment in other banks. RM’s illegal act causes loss to customer. The loss is estimated as of Rp 3,7 billions. Gap analysis shows the area of weaknesses in Bank X that gives possibility for perpetrator to commit fraud. However, fraud auditing procedure that applies in solving the case gives advantages such as reducing risk, maximizing profit, and creating a more accurate financial reporting. All in all, writer suggests Bank to oversee their customer’s transactions by establishing a special transaction monitoring system.