Conspiracy Theories In Wells Fargo

Events Paper #1
In September 2016, federal regulators accused Wells Fargo employees of creating nearly 2 million fraudulent bank or credit card accounts for pre-existing customers since 2011. Bank employees temporarily funded newly-opened accounts by transferring funds from existing accounts in order to obtain monetary compensation for achieving sales goals. In addition, these accounts generated approximately $2.5 million in bank fee revenues. The fraud committed by the employees was apparently the result of the stringent sales goals set by senior management. For example, John Stumpf, former Wells Fargo CEO, mantra was “eight is great”. This ideology encouraged employees to attain eight Wells Fargo products per household. Former employees

The fraud triangle theory is a framework for an organization to assess their vulnerability to fraud and unethical behavior. The framework is based upon three factors – pressure, opportunity and rationalization. Pressure is what causes a person to commit fraud. In the Wells Fargo incident, the employees felt pressure from upper management to meet sales goals and feared losing their jobs. Opportunity is the ability to commit fraud and is created by poor oversight or weak internal controls. Wells Fargo internal control at the time did not flag unusual customer activity or the ability for employees to transfer customer funds without customer authorization. Lastly, rationalization involves a person justifying their actions. Wells Fargo employees may have thought their actions were harmless since the fraud was committed via the bank’s information system and technology has a distancing effect. Wells Fargo should have completed a fraud risk assessment on its retail-banking operations in order to protect the firm’s integrity, customers and stakeholders. An effective fraud risk assessment would have identified the incentives, pressures and opportunities for fraud. For example, Wells Fargo management would have considered the pressures of the employees from senior management to meet customer sales goals. In addition, the financial compensation associated with opening new accounts would have been recognized as an incentive to commit fraud as well as the opportunity would exist to open an account without the customer’s