The branch settlement system is basically an accounting or a bookkeeping system that the bank uses to transfer money between one branch office of the

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6 The branch settlement system is basically an accounting or a bookkeeping system that the bank uses to transfer money between one branch office of the bank and another branch office of the bank. Now, the bank uses a bookkeeping system for this purpose because there are so many of these interbranch transfers going on every day that it would be physically impossible to send little messengers with little bags of money back and forth between all of the branches. The bank used a computer located up in San Francisco to keep track of all of these transfers going on every day. And to make one of these transfers, the bank used a standard form for entries telling the computer what to do. This standard form was called a branch settlement. You may also hear it referred to as a branch settlement form or a branch settlement ticket.... Now there were two rules governing the use of these branch settlement s. The first rule is that one branch is never supposed to send both the debit and the credit halves of a branch settlement ticket into the computer. The second rule is that one branch is never supposed to use the special code number of another branch. As the first step in the scheme that I m here to tell you about, Lewis (the inside man at the bank), Lewis would pay out money to Smith or to Marshall or to one of their companies. As a second step, Lewis would send the debit half of a branch settlement into the computer, telling the computer, in effect, Charge the branch settlement system for this money I paid out to Smith or to Marshall or to one of their companies. Within 10 days after sending in the first half, though, instead of sending the credit half of the ticket over to the Miracle Mile like he was supposed to, Lewis would put the credit half into the computer himself, violating the first rule that I told you about, that one branch is never supposed to enter both the debit and credit halves of a branch settlement into the computer. And to fool the computer into thinking that the credit half of the form had come from the Miracle Mile, which it hadn t, Lewis misencodes the credit half. He puts the special code number of the Miracle Mile in magnetic numbers on the bottom of the credit half, violating the second rule that I told you about, one branch is never supposed to use the special code number of another branch. At this point Lewis had done enough to prevent a tracer from going out because the computer had gotten both halves of the form within 10 days. And he succeeded in fooling the computer into thinking that the two different halves of the form have come from two different branches because the debit half has Beverly Drive s special code number on it and the credit half has the special code number of the Miracle Mile. But Lewis has one additional problem to solve. The books had to balance. If you look at the transaction so far, you will see that there are two credits and only one debit. The reason you are a debit short is that there is no real money being put into the system. No customer account is being charged to make up for the money being paid out to Smith or to Marshall or to one of their companies. So what does Lewis do to solve this additional problem? To supply the missing debit, Lewis takes another branch settlement ticket and he takes the debit half of this branch settlement ticket, and at the time he sends in the credit half of the first ticket, he sends a new debit with it. So that what the computer sees up to this point is: credit, debit, credit, debit, and everything is balanced. The computer has gotten both halves of the ticket within 10 days with two different code numbers, and the computer gives Lewis another 10 days to get the credit half of the second ticket in. And Lewis is happy; and Smith, Marshall, and their companies are happy... until Lewis gets sick and is unable to send in the credit half of the ticket into the computer. Then Lewis goes to jail; and Smith, Marshall, and representatives from all of their companies all go to jail.

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10 Personnel Controls Management Control Plans Personnel planning Job descriptions Supervision Personnel security Termination Job Rotation Bonding 4