The written case analysis must be 5-7 pages in length, APA format and include 6-7 scholarly citations/references.CASE 3.4: First Keystone
A Japanese bank introduced the concept of around-the-clock
access to cash in the 1960s when it installed the world’s first cash-dispensing
machine. In 1968, the first networked ATM appeared in Dallas, Texas..vitalsource.com/books/9781337003100/content/id/N441″>1 Two
generations later, there are more than two million â€œcashpoints,â€ â€œbancomats,â€
and â€œholes-in-the-wallâ€ worldwide, including one in Antarctica.
Not surprisingly, ATMs have been a magnet for
thieves since their inception. In 2009, an international gang of racketeers
used a large stash of counterfeit ATM cards to steal $9 million from hundreds
of ATMs scattered around the globe in a well-planned and coordinated 30-minute
crime spree. Several high-tech thieves have hacked into the computer networks
of banks and modified their ATM software. One such miscreant reprogrammed a
network of ATMs to change the denomination of bills recognized by the brainless
machinesâ€”the ATMs treated $20 bills as if they were $5 bills. High-powered
video cameras and miniature electronic devices attached to ATMs have been used
to steal personal identification numbers (PINs) from a countless number of
unsuspecting bank customers.
A variety of low-tech schemes have also been
used to rip off banks and their customers via ATMs, including forced
withdrawals and post-withdrawal armed robberies. â€œRam-raidingâ€ involves using
heavy-duty equipment to rip an ATM from its shorings. The ram-raiders then haul
the ATM to a remote location and blast it open with explosives. The most common
and lowest-tech type of ATM pilfering involves the aptly named tactic of
Many banks have suffered losses from their ATM
operations due to embezzlement schemes perpetrated by employees. One such bank
was the Swarthmore, Pennsylvania, branch of First Keystone Bank. Swarthmore, a
quiet suburb of Philadelphia, is best known for being home to one of the
nation’s most prestigious liberal arts colleges. In 2013, Forbes
Magazine ranked Swarthmore College as the sixth best institution of
higher learning in the United Statesâ€”two slots below Yale, but two slots higher
In January 2010, three tellers of First
Keystone’s Swarthmore branch were arrested and charged with stealing more than
$100,000 from its ATM over the previous two years. The alleged ringleader was
Jean Moronese, who had worked at the branch since 2002 and served as its head
teller since 2006. According to media reports, Moronese told law enforcement
authorities that she initially began taking money from the branch’s ATM in 2008
to pay her credit card bills, rent, and day care expenses.
No doubt emboldened by the ease with which she
could steal the money, Moronese reportedly began taking cash from the ATM â€œjust
to spendâ€ because she â€œgot greedyâ€.vitalsource.com/books/9781337003100/content/id/N442″>2 Prior
to taking a vacation in the fall of 2008, a tearful Moronese approached one of
her subordinates and fellow tellers, Kelly Barksdale, and confessed that she
had been stealing from the ATM. Moronese â€œbeggedâ€ Barksdale to help her conceal
her thefts â€œbecause she didn’t want her children to see her go to jail.â€.vitalsource.com/books/9781337003100/content/id/N443″>3Barksdale
was apparently persuaded by Moronese’s tearful plea and agreed to help her
cover up the embezzlement scheme.
In fact, the cover-up was easily accomplished.
According to the local police, Moronese and Barksdale simply changed the ledger
control sheets that were supposed to report the amount of cash stored in the
ATM and in the locked vault within the ATM. First Keystone’s internal control
procedures mandated that two employees be involved in resupplying the ATM and
its locked vault and in maintaining the ATM ledger control sheets. However,
either Moronese or Barksdale completed those tasks by themselves.
In early 2009, a third teller, Tyneesha
Richardson, overheard Moronese and Barksdale discussing the embezzlement scheme.
Richardson then reportedly asked Moronese for money to pay off her car loan.
Moronese agreed to give Richardson the money and told her that she shouldn’t
worry because â€œthe bank had a lot of money and they would never miss it.â€.vitalsource.com/books/9781337003100/content/id/N444″>4,.vitalsource.com/books/9781337003100/content/id/N445″>5 After telling Barksdale that she had
given money to Richardson, Moronese told Barksdale that if she ever needed any
money â€œto let her know.â€.vitalsource.com/books/9781337003100/content/id/N446″>6 Not
long thereafter, Barksdale allegedly asked Moronese for $600 to pay her rent.
An internal audit eventually uncovered the
embezzlement scheme at First Keystone’s Swarthmore branch. That internal audit
revealed that $40,590 was missing from the branch’s ATM, while another $60,000
was missing from the locked vault within the ATM’s interior.
While being interrogated by law enforcement
authorities, Barksdale reportedly confessed that she and her colleagues had
also stolen money from the local municipality. City employees periodically
dropped off at the First Keystone branch large bags of coins collected from
Swarthmore’s parking meters. Tellers at the branch were supposed to feed the
coins into a coin-counting machine and then deposit the receipts printed by the
machine into the city’s parking account. According to Barksdale, she and her
two fellow conspirators diverted money from Swarthmore’s parking funds and
split it among themselves. The police estimated that the three tellers stole
approximately $24,000 of the parking funds.
In January 2010, when the three tellers were
arrested, they did not have far to go since the Swarthmore police station was
across the street from the First Keystone branch where they worked. In
commenting on the case, the local district attorney observed that Barksdale and
Richardson had a choice to make when they learned of Moronese’s embezzlement
scheme and that each had made the wrong choice. â€œSo, the lesson is you can
either be a witness or you can be a defendant. These two chose to be
The district attorney also commented on the
branch’s failure to require employees to comply with internal control
procedures. â€œThe case is yet another example of the importance of not only
implementing internal accounting safeguards, but ensuring that those safeguards
are being followed by all employees at all levels of the business.â€.vitalsource.com/books/9781337003100/content/id/N448″>8,.vitalsource.com/books/9781337003100/content/id/N449″>9
1. Prepare a list of internal control procedures that banks
and other financial institutions have implemented, or should implement, for
their ATM operations.
2. What general conditions or factors influence the audit
approach or strategy applied to a bank client’s ATM operations by its
3. Identify specific audit procedures that may be applied
to ATM operations. Which, if any, of these procedures might have resulted in
the discovery of the embezzlement scheme at First Keystone’s Swarthmore branch?
In the United States, â€œATMâ€ generally refers to an â€œautomated
teller machineâ€ or â€œautomated transaction machine.â€ In some English-speaking
countries, however, â€œATMâ€ refers to â€œall-time-money.â€
C. Scharr, â€œBank Employees Charged in Embezzlement
Scheme,â€ Delaware County Daily Times(online), 12 January 2010.
M. Schaefer, â€œEx-tellers at Swarthmore Bank Charged in
Theft,â€.philly.com/”>www.philly.com, 12 January 2010.
Scharr, â€œBank Employees Charged.â€
While at work, the three coworkers reportedly used the code word
â€œToddâ€ to refer to â€œtheir friendâ€ when they needed or wanted to take money from
Scharr, â€œBank Employees Charged.â€
Schaefer, â€œEx-tellers at Swarthmore Bank.â€
Press release issued 11 January 2010, by G. Michael Green,
District Attorney, Delaware County, Media, Pennsylvania (.delcoda.com/documents/FirstKeystoneStatementbyMikeGreen.pdf”>http://www.delcoda.com/documents/FirstKeystoneStatementbyMikeGreen.pdf).
In March 2010, an employee of First Keystone’s branch in
Berwick, Pennsylvania, pleaded guilty to embezzling $750,000 over the 17 years
that she had worked for that branch. According to published reports, the
employee routinely â€œskimmedâ€ money received by the bank and deposited the
stolen funds into bank accounts that she controlled.