The Ave Bank uses the financial module in its ERP system to process cash deposits made by customers. The banks ERP module for customer deposit accounting is a batch-processing system. Customers fill out a deposit slip when they deposit cash. The cashier validates the deposit slip, collect the cash, and then issue a dated receipt to the customer to evidence the deposit. The batches of deposit slip are processed overnight in a batch-processing run to update the customer account records.

Two different types of deposit slips might be used by a customer. One type is a blank-form deposit slip that customer obtain at the bank. Typically, large quantities of blank-form deposit slip are left on counters in the banks lobby for the customers convenience. A blank-form deposit slip does not contain any pre-entered data. In particular, the customer or the cashier must manually enter the customers account number on this form. The other type of deposit slip is contained in a customers cheque book. In the case of a cheque book deposit slip, the customers account number has already been entered on the form in computer-readable form. Each cheque book deposit slip contains the customers account number in magnetic-ink character recognition (MICR) format to facilitate computer processing.

The two types of deposit slips look similar but are distinguishable. When batches of deposit slip are processed in the computer department, one of the first are processed in the computer department, one of the first steps is to enter, using a special machine, both the customers account number and the amount of the deposit in MICR format at the bottom of each deposit slip. MICR input is used because of the large volume of the transactions. Because each cheque book type slip already has the customers account number in MICR, it is only necessary to MICR-encode the amount of the deposit. Both the customers account number and the amount of the deposit must be MICR-encoded on the blank-form deposit slips.

Several month ago, Ave Bank was the victim of a clever fraud. It seems that some person entered the busy bank and left a stack of fraudulent blank deposit slips on one of the banks counter. These deposit slips were exact duplicate of those normally placed on the counters, with one important difference. Each fraudulent blank deposit slip had been MICR-encoded with the account number of a checking account that apparently had been opened under false name. Recall that the MICR-encoded account numbers are normally entered on the blank-form deposit slip after the deposit at the bank. Most or all of these deposits were incorrectly credited to the fraudulent checking account in overnight computer batch-processing run of the days deposit slip. Within a few minutes of opening the next morning, this person returned to the bank, inquired as to this checking account balance, and withdrew 90% of the balance in cash. To date the identity of the person is unknown, and cash, more than RM300,000 has not recovered.

Required:

ii. Discuss in detail the FIVE (5) role of Ave Bank computer system play in the perpetration of this fraud.