Bank Jerusalem denies rumors: Is major embezzlement still possible today?
Bank Jerusalem has denied recent rumors, stating that no evidence of abnormal activity was found. Against this backdrop, we examined whether large-scale embezzlement remains possible today, given the tightened control mechanisms implemented after the 2002 Eti Alon and Trade Bank affair, in which 250 million shekels were stolen.
In recent hours, unverified rumors have been circulating on social networks regarding an affair concerning Bank Jerusalem. The bank itself clarified that "following the check that was carried out, no findings were found indicating any abnormal actions with the bank's funds or assets." Bank Jerusalem shares (2034, -1.93%) fell with the rumors, and later, after the bank's report, the negative trend moderated.
Against this background, we went to check whether large-scale embezzlement is even possible today in banks. It should be noted that the control and supervision mechanisms in banks have been tightened dramatically over the years. Their effectiveness has been proven, although they have not hermetically prevented embezzlement, which today mainly involves relatively small amounts.
When discussing embezzlement in banks, the most familiar story is the Eti Alon affair, a massive embezzlement exposed in 2002, in which she stole about 250 million shekels from the Trade Bank to cover the gambling debts of her brother, Ofer Maximov, causing the bank's complete collapse.
Following that affair and other events, in 2003 the Bank of Israel formulated a series of rules intended to prevent the recurrence of similar cases. The main clauses include:
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Access restriction: A banker has access only to their own clients.
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The "four-eyes principle": Sensitive actions or decisions must be approved by two separate office holders to prevent abuse of authority.
Job rotation
Rules require the implementation of rotation in various positions and proper separation of duties. According to the Bank of Israel's directive, a banking corporation is required to establish a policy of rotation for managers and employees, identifying sensitive positions and determining special internal controls where rotation is not possible.
Continuous vacation
Another lesson concerns the requirement to take continuous vacation. Alon's embezzlement was made possible because she did not miss work for years, shortened maternity leaves, and came to the bank even during vacations, making it difficult to detect her activity. Today, all employees must take at least 6 days of continuous vacation per year, and those in sensitive positions at least 10 days in a row. During this period, the employee's permissions are blocked, and their place is filled by someone who does not work in the same branch.
Anonymous reporting mechanisms
At the same time, automatic controls on the issuance of bank checks, breaking deposits, and granting loans were tightened. An obligation was imposed to operate anonymous reporting mechanisms (hotlines) that allow employees to report suspicious activity.
Today, in the era of artificial intelligence, innovative audit tools are being developed that allow for tighter supervision. Embezzlement in the banking system is usually not as dangerous as the collateral damage it causes, namely the fear for the stability of the banking system, or a "bank run." This is a situation where the public wants their money all at once, and the bank cannot meet the repayments.
A bank leverages public deposits, usually keeping balances of about 10% of the amounts required at any given moment. If everyone gets scared and demands their funds simultaneously, the bank may not be able to cope. In such a situation, the Bank of Israel usually intervenes by injecting liquidity or forcing a sale. In the past, before these regulations, small banks collapsed due to giant embezzlements, such as the North American Bank (1985) and the Israel-British Bank (1974).
