The Man in the Mirror: Employee Due Diligence

Michael Jackson man in mirrorFill in this blank:  __________________ Due Diligence. If you are like most AML professionals, “Customer” was the first and only answer that came to mind. The importance of Customer Due Diligence has been drummed into the mind of AML practitioners and is a common training topic. However, the recent indictment of a former TD Bank employee on wire fraud relating to the Rothstein ponzi scheme demonstrates that financial services firms need to know their employees and be able to detect red flags in employee activity.

DSA president, Alison Jimenez, presented on Employee Due Diligence at this years ACAMS AML and Financial Crimes conference in Las Vegas.  The focus of the presentation was taking a look inward at employee actions that may indicate suspicious activity. Key takeaways included:


  • Depository Institutions are required to file SARs when“directors, officers, employees, agents or other institution-affiliated parties having committed or aided in the commission of a criminal act, regardless of the amount involved in the violation.”a
  • SARs were filed on almost 20,000 institution affiliated individuals from July 2012 – December 2013 b
  • The most common type of Insider Suspicious Activity was embezzlement/defalcation c
  • #1 red flag for Employee fraud is “living beyond means”c
  • Proactive data monitoring of Employees results in the greatest decrease in amount lost to fraud d

The South Florida Business Journal reports TD Bank has accrued more than $500 million in legal costs due to the Rothstein ponzi case.  Employee Due Diligence is an expensive lesson to learn.

a 12 CFR 208.62 (Board of Governors of Federal Reserve)
b FinCEN SAR Stats Issue 1
c SAR Activity Review, Issue  23, May 2013
Report to the Nations on Occupation Fraud and Abuse, 2014 Global Study, ACFE