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why accounitng and bank computer audits show missing funds right away?
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why accounitng and bank computer audits show missing funds right away?

  #1 (permalink)
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why accounitng and bank computer audits don't show missing funds right away?

"But the largest sums were stolen by hacking into a bank’s accounting systems and briefly manipulating account balances. Using the access gained by impersonating the banking officers, the criminals first would inflate a balance — for example, an account with $1,000 would be altered to show $10,000. Then $9,000 would be transferred outside the bank. The actual account holder would not suspect a problem, and it would take the bank some time to figure out what had happened. "

There is an article in the NT times about the cyber thieves stealing $300 million - $900 milllion from various banks including many US banks

I understand most of the article - the malware etc but what I don't understand is the bank transfers. About is an example. So my question is even if it was a legit bank officer instead of the cyber crooks, how would the bank software let him increase the account
balance? Doesn't the software all based on double-entry so that to increase one account balance you must decrease another?

Also they mention ten hours - but the thefts have gone on for two years? Don't books have to balance at each accounting audit run?
http://www.nytimes.com/2015/02/15/world ... .html?_r=1


Last edited by aquarian1; February 17th, 2015 at 12:03 PM. Reason: missing the word don't in question - doh!
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  #3 (permalink)
Market Wizard
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Method


For greedy criminals without time your assumptions would be correct, but ...
Take a look at Kaspersky's scenario and you will understand why it isn't that simple.

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Plus: Cross-border combined with cross-bank transactions and the corresponding accounts don't match in the time frames that you suppose.


Last edited by choke35; February 17th, 2015 at 05:03 AM.
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Market Wizard
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aquarian1 View Post
Doesn't the software all based on double-entry so that to increase one account balance you must decrease another?

You forget bank money creation - here, you can see it at its worst ...
With the internal privileges, a bank manager can create credits towards the bank reserves/rating.

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  #5 (permalink)
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perhaps I haven't been clear in my question?

forget the cyber crooks for a moment.

Imagine a real bank manager who is crooked working at the bank.
The banks software wouldn't let him increase a bank account balance without reducing another account balance.
(my understanding not working in a bank. )

So I don't understand the example in the NY times article.

Keep your mind in the future, in the now.
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choke35 View Post
Plus: Cross-border combined with cross-bank transactions and the corresponding accounts don't match in the time frames that you suppose.

the time is 2 years

Well here's the question - don't banks transfers and balances (interbank) have to reconcile?

If they didn't any bank - including the ones in Greece - could just increase their "cash" holdings anytime the reserve requirements dipped.

I beleive there is interbank clearing and reconciliation - no?

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Market Wizard
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Not the way that you think ;-)

Suppose the following scenario which is close to Kaspersky:

You have a bank with about 40.000 customers (i.e. small in an international context)
with their normal daily business. Suppose now, that somewhere in your branch banks, some
of your employees allow 2 credits of 9.000$ and your systems show that both applications
have been approved. Both of the debtors cash out 9.000$ and use the money that your
employees have created for them towards your balance sheet. You are refinanced by your central bank
as long as your reserves/collateral are adequate, so no problem there.

So when would you recognize that one of these 2 customers was fraudulent? Or even worse:
When would you recognize, that your systems contain false data?


Last edited by choke35; February 17th, 2015 at 01:00 PM.
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double entry

distance makes no difference they could be beside each other or 1000 miles apart.

all deposits and withdrawals must balance.

if you fake a deposit with a bad cheque it bounces when presented at the opposing bank

if you pretend cash was deposited then when it is counted at the end of the day they is a shortfall

etc

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Market Wizard
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Answer
This post has been selected as an answer to the original posters question Answer

Noone "pretended" that cash was deposited.

Think, you still didn't get what banks do when they create money by allowing credits.
(Technically, they also create the initial double entry in their journal.
In basic accounting terms, this is a simple balance sheet extension.
So, everything is/seems correct in the DATA sphere, but it is not in the REAL sphere.)

All other entries follow up these initial (false or correct) double entries.
So if a bank creates money that you cash out, they will only find that you are fraudulent
when you don't pay your installments.

Perhaps the following link helps you understand the matter as it also shows the accounting records
in comparison with non-financials and non-bank financial institutions:

http://www.sciencedirect.com/science/article/pii/S1057521914001434


Last edited by choke35; February 19th, 2015 at 07:21 AM.
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