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The Malinda Dee bank fraud case: Watch the red flags!
Malinda Dee has emerged as a new celebrity in Indonesian mass media for her infamous acts of embezzling Rp 17 billion (US$1
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alinda Dee has emerged as a new celebrity in Indonesian mass media for her infamous acts of embezzling Rp 17 billion (US$1.95 million) of Citibank customers money. It is believed that the exploitation occurred over a period of around three years before three of her victims approached Citibank over suspicious unauthorized fund transfers from their accounts.
Before the crime was uncovered, Malinda, or Inong Malinda, was considered a model employee trusted to handle priority customers with account balances worth at least Rp 500 million.
In addition to being attractive, she was also perceived as a friendly and polite person and was able to maintain good relationships with her customers.
The fraud scheme itself was judged by the authorities to be “fairly simple”, where Malinda abused her wealthy customers’ trust and transferred huge amounts of their funds to her own accounts. In doing so she used several companies as intermediaries for channeling the illicit funds to her own accounts. At least 30 accounts have been identified by the authorities as being used by Malinda to facilitate her criminal activities.
In her fraud scheme, Malinda often forged customers’ signatures to withdraw funds before transferring money to her own accounts. Additionally, with her close relationship with her customers, it was easy for her to obtain blank signed forms or blank checks that were subsequently used to withdraw funds at higher amounts than were actually requested by clients.
This was because priority customers generally no longer had to queue before tellers to withdraw funds. They only had to see Malinda and ask her to make the withdrawal for them. This is how the opportunity was made available for Melinda to embezzle customer funds.
A recent global fraud survey conducted by the Association of Certified Fraud Examiners (ACFE) identified several common traits normally found with people orchestrating fraud. Based on the study, there are a number of “red flags”, or signs of potential fraud that should have been spotted in the Malinda case.
First, an offender is often seen clearly living beyond his or her means. Malinda was at the top level of her organization, but still, even with her position as a senior customer relations manager (and occasionally a fashion model), her income was far from enough to support her extravagant lifestyle.
Second, despite an extravagant lifestyle, people guilty of fraud are often perceived by business superiors and co-workers as model employees because of their demonstrated dedication to their work.
This way, no one suspects that he or she is actually planning or is actively running fraudulent schemes.
In the Malinda case, she was praised for her ability to maintain close relationships with customers, presumably due to her exceptional communication skills. Another trait identified by the ACFE’s survey was an “unusually close association with customers”.
This enabled her to remain in her position longer than she should have partly due to the preference of her customers. The longer a corrupt employee works for their organization, the more knowledge he or she gains about internal controls and how to bypass them.
Although their existence (or relevance) within the Malinda case has yet to be confirmed, other traits suggested by the ACFE’s study include: divorce or family problems; a “wheeler–dealer” attitude; excessive pressure from within an organization; instability in everyday life circumstances; and refusal to take vacations. All factors may indicate that fraud has already occurred within an organization.
Theoretically, from a criminology point of view, three factors may have existed that caused Melinda to become a criminal: pressure/motivation; opportunity; and rationalization (justification to avoid feeling guilty).
Ongoing investigations have indicated that inadequate supervision over Malinda’s authority to manage customers’ fund is evidence of an opportunity unwillingly provided by Citibank for the fraudulent activity to occur. Although further investigation is required to confirm this, her desire to live an extravagant life may have been a motivating factor that drove Malinda to commit fraud in the first place.
Furthermore, as written in several mass media publications (and is yet to be confirmed by the ongoing investigation), Malinda may have invested customer funds to generate financial returns, some portion of which may have been used to replace the funds initially embezzled. This means that she may have used the excuse of “borrowing customer’s money” to justify her acts instead of “stealing”.
Finally, the case is a hard lesson for the Indonesian banking industry, which clearly needs to enhance protection against not only external fraud but also internal fraud committed by its own employees.
One of the keys to eliminate, or at least minimize fraud within a financial institution is building strong monitoring mechanisms to at least create an impression that any fraudulent acts will be immediately uncovered and severely punished.
Failure to establish such mechanisms may result in customers losing their trust in the financial institution and may eventually force them out of business.
The writer is a lecturer at the Islamic University of Indonesia, Yogyakarta, specializing in forensic accounting. He obtained his Masters and PhD in forensic accounting from the University of Wollongong
in Australia.
