Thursday, January 24, 2013

Bank Burglary in BRI- Forensic Audit Assignment

Let me share to you my take home exam on midterm :) It's been while, actually, for me to wrote this paper, but then yeaah, I decided to share it to you, hope that it [maybe] could give you some benefits :) Enjoy it then. 

Source: Google

Bank Burglary in BRI (Bank Republik Indonesia)

On the latest 2003 we were surprised by the news related with the fraud cases which are happened in some banks in Indonesia, such as BNI, Mandiri, and BRI. Related with the fraud which is happened in BRI, we can call it as burglary. At that time Bank Indonesia (BI) received a report of a burglary at Bank Rakyat Indonesia (BRI) in amount of Rp 294 billion since the beginning of September 2003. Rudjito as the Director of BRI, Jakarta, Wednesday (3/12/2003) admitted that BRI management already knows that case on 23 September 2003, then a day later the problem was revealed by the regional office and reported to the BRI Center. Judging the case from the legal side, BRI immediately reported the case to the law enforcement. The chief of 3 BRI branches which is located in Senen, Tanah Abang, and Surkencana Bogor dismissed by the management just a week after the case came out. Rudjito further explained that the case was uncovered by internal Supervision Unit (ISU) of BRI. Still in the same month, BRI has conducted special investigation, then the report have been obtained in the beginning of October. The perpetrator is a man who has name Yudi Kartolo, he was the perpetrator who also broke into P.T Bank Negara Indonesia(BNI) a few years ago with similar model and detrimental to that Bank Rp 320 billion, and he was arrested not long time after this case came out to the public. The result of this investigation is stated that the total potential loss that may occurred by this case is Rp 294 billion. Related with the statement, the management stated that has reserved the potential losses that may occur and seek recovery. Reserves were established 100% over potential losses that occurred and have been charged to expense on the potential risks that may occur in the balance ofSeptember 2003.

The next question regarding the news above is how could that fraud happened to BRI which is known as one of the big banks in Indonesia which has good system? That unusual transaction has been
carried out in early September and immediately conducted a special audit process to clear it. Then soon, the chief of bank center decided to suspend lending of deposit guarantee at all branches. According to Director of Supervision II of Bank Indonesia (BI), burglary case that occurred at the Bank of BRI is due to the involvement of those three chief of the BRI’s branches. Further he was explained that burglary can happen because there are procedures which are violated by those three branches office chief. As happened in the BRI branch office in Atrium Senen. The chief of branch office did not comply with Bank Indonesia’s procedure which is called as real time gross settlement (RTGS / settlement instantaneous) by changing the delivery orders and put the deposit funds of Rp 100 billion into the accounts of certain people who became the perpetrator’s friend (Yudi Kartolo). Through the fake orders, it looked like there was an order placements delivery from the Bank of Regional Department (BPD) of East Borneo, but in fact the command was not there and that was not allowed at all. In RTGS procedure, it requires that if there are any changes it should be done by sending one by one message command to one account only. Thus, if we looked at the case, RTGS rules have been violated, then without the involvement of the branch office chief that sounds impossible to do. To cover the losses, the Kartolo Yudi’s account and his friends in BRI have been frozen. However, relating to return of losses, the central bank (BI) has not received the report and still monitor the progress.

A few pictures according to the case above are show the moral of bank officials today. Even a branch office chief cannot be trusted 100% by the management. According to me, the internal control and system operating which is applied by BRI has been made really good. BRI follow the international standard where the chief of branch office perform multiple controls toward transactions which are happened in the bank, besides that BI as the bank center of Indonesia also monitoring BRI’s activities. So, that was hard enough to do fraud when there is no involvement from the inside party. When this case came out, the directors of BRI constantly report the newest report related with this case to BI, even the prosecutor. It shows that the director boards are really cooperative and against toward this fraud. To prevent this case happened in any other bank, it will be better for every Indonesia bank to more concern with identity of their customer. I mean they are really known the customer’s lunge or history. As we seen above, the main perpetrator in this case is Yudi Kartolo who has known has been the perpetrator in BNI’s case. Further, in my opinion, the people like Yudi Kartolo is should be banned or put in the black list from the banking activities.

Here, we can see that the personal integrity of an employee is one of the important reasons to commit the fraud. As we know that fraud is a dishonest act which is committed by individuals or group. Pressure (especially related with financial problem) could be one of the reasons why this fraud happened, but seen the case above which involve the branch office chief, I did not think that it would be the main reason for those 3 chief to did the fraud. Regardless of the situational pressures and opportunities to commit fraud, this dishonest act is still committed by the individual and society which holds the individuals accountable for their behavior. The perpetrator of frauds usually just care about their own needs, they never think about the losses that will get by the company. To make the employees of a company feel that they are part of something important, motivate them to work in a more ethical way because that would be big loss for a company when the employees do not have the correct personal integrity. Choose people who have good personality to work in the company and do physiological test periodically. That could help you to more understand about the employees, whether their intention or behavior is changes or not. The opportunities that arise to commit the fraud are the other reason that could be influence the good employee with good integrity to commit the fraud. Maybe that would be one reason that influences the branch office chief to help Yudi Kartolo to commit the fraud. As the branch office chief, he must be have great power to do something even changes or violated the policy. When the bad personality met with a good opportunity, then that would be one of great fraud if there is no outstanding internal control, and that was happened in BRI. As I was mentioned before that BRI case was uncovered by the Internal Supervision Unit of BRI. Further, if a company (or in this case is Bank) facing these kind of problem (related with the fraud), the first thing that the company should do is to learn how to detect them. It could be done by observing the symptoms such as first the unusual behavior or changes in behavior, it is because the fraudster may not ever take a vacation or call in sick in fear of being caught. Then the second one is complaint, if the company is resaving a large amount of complaint and tips, then there would be possible fraud that has to be investigated. Third one is check all transactions that are made, do audit periodically to make sure there is fraud in the company, then when there is missing documents, this should be suspicious. Through detect the fraud symptoms earlier, it could be prevent the company from the bigger loss. 

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