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222M Euros error - the importance of exception management

http://money.cnn.com/2013/06/11/news/world/bank-error-napping/index.html

Speaking of transaction banking and exception management, a bank clerk nodded off for a second while processing a transfer request and held down the number 2 on his keyboard, changing the amount from 62.40 Euros to 222, 222, 222.22 Euros, according to testimony before a German court. The payment request had been approved by a colleague, who has spent less than 1.4 seconds examining 603 payments... and this approving colleague has been fired (they forgot to say what's happened to the originating clerk).

Anyways, I wish I had a dollar for every time when a banking executive tells me that nothing like this would ever happen at their bank.  Needless to say, it does.

In this case, they spotted the exception before it was too late.  Not in well-known cases of some other banks.

The morale is that most backroom operations and technology has been designed for routine commodity transactions.  Exception management is often an afterthought.  But profits and sustainability are mostly in managing exceptions.

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Comments: (2)

Keith Appleyard
Keith Appleyard - available for hire - Bromley 14 June, 2013, 19:46Be the first to give this comment the thumbs up 0 likes

I recall many years ago (probably the late 1980's), when a woman went to a fashion store in Brussels and purchased a dress for BEF18,500 (then approx GBP240). The store assistant was new to the POS terminal, and erroneously entered an extra 6 '9's, ie 18500999999, and convinced the Customer to sign the [American Express] Charge Card sales slip.

That transaction sailed all the way through, rang no alarm bells within Store or with Merchant Acquirer, and was applied to the Charge Card account.

Warning bells then came the next day from Treasury, who recognised an extreme exposure to BEF.

As the Customer was also enrolled in Direct Debit, I had the fun and games of working out how best to reverse out the erroeneous transaction and apply the correct amount before the deadline for issuing the Direct Debit request.

Thereafter we did have a 'reasonability' check, but it did still have to be denominated in "millions" to allow for exceptional purchases such as Jet Aircraft Engines (that's another story, involving Guinness Peat Aviation at East Midlands Airport)

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 16 June, 2013, 13:18Be the first to give this comment the thumbs up 0 likes

It's so ironic that a EUR 10 online purchase would have to go through CVV and VbV (and Mobile OTP, if it's in India) whereas such a high value EFT transaction almost bypasses exception management procedures! In a way, I attribute such incidents to standard software implementation methodologies where only the basic processes are implemented and all exceptions are swept beneath the rug as "nice to have" features that are deferred to the proverbial "next phase", which never happens in practice.

Nahum Goldmann

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