We often associate financial fraud with shady characters doing deliberately dishonest deals. But as a forensic accountant with long experience conducting financial fraud investigations, it’s clear to me that anyone—no matter how trustworthy they may appear to be—can be tempted into wrongdoing under the right circumstances.
Consider the recent case of Shan Hanes, CEO of Heartland Tri-State Bank in Elkhart, Kans., population 1,888. Hanes, a 52-year-old family man and leader in the local community, serves as a prime example of how quickly things can unravel when desperation sets in.
From Victim to Perpetrator
At first glance, it’s easy to see Hanes as just another fraudster. But what’s interesting about the case is that Hanes didn’t start as the villain, and his story serves as a stark reminder of how thin the line between victim and perpetrator can be.
According to a February 2024 report by the Federal Reserve, Heartland Tri-State Bank collapsed in the summer of 2023 after Hanes embezzled $47.1 million to cover the losses he sustained in a cryptocurrency scam.
Hanes had been the target of an apparent cryptocurrency scheme known as “pig butchering.” In such a scheme, according to the Department of Justice, scammers establish a level of trust with victims in online communications and then entice them into investing in a fraudulent cryptocurrency scheme. The “butchering” of victims occurs once their assets, or funds, have been stolen.
Drawn into the crypto scam, Hanes lost his savings, his children’s college funds, and, eventually, all sense of control. In his desperation to recover, he made multiple wire transfers from his bank, scammed money from his church, which closed in the wake of the scandal, and swindled his local investment club, which also shut down.
Hanes is now facing a federal count of embezzlement from his bank, which could result in a 30-year prison sentence, as well as 29 felony counts in state court for misappropriation of funds, scamming money from the community, making false statements, and committing unlawful acts over a computer.
When Character Meets Circumstance
Character plays a huge role in how we respond to difficult situations. Many people believe they would never resort to committing financial fraud. And while this may be true, not everyone involved in financial fraud has a bad character. Sometimes they act because they feel they are being pushed into circumstances where their options are limited. Desperation can cloud judgment and lead to decisions they never thought possible.
The fall of Heartland Tri-State Bank shows that fraud doesn’t only happen to “bad people” or inside big, faceless corporations. It can happen anywhere—especially when someone feels cornered, desperate, and unable to see a way out.
In Hanes’ case, as his financial troubles deepened, he began to rationalize his actions. First, he dipped into his own funds. When those dried up, he turned to embezzling from his bank and the community. The once-trusted CEO became the architect of a scheme, trying to outrun his mounting debt.
Opportunity and Trust: A Dangerous Mix
Fraud thrives where trust and opportunity intersect. Hanes used his influence to exploit both, pushing the boundaries of the control systems in place and creating his own opportunities to commit fraud. This case serves as a reminder that even the most trusted individuals can make catastrophic decisions when given too much unchecked authority.
Hanes’ position as CEO gave him unique access and opportunity. His role allowed him to bypass internal controls, manipulate wire transfers that exceeded the bank’s limits, and ultimately abuse the trust of his colleagues and the community. This wasn’t just a failure of character—it was a failure of oversight, amplified by the unchecked power that Hanes wielded.
“Significant internal control breakdowns and the influence of the CEO [Hanes] as a dominant management official created an opportunity for the series of apparently fraudulent wire transfers to be initiated and processed,” the Federal Reserve said. “These wire transfers significantly impaired Heartland’s capital and liquidity, causing the bank to become insolvent.”
Five Tips to Prevent Financial Fraud
The lesson here is not just about personal integrity but about understanding how we might act under pressure—and putting safeguards in place before desperation takes hold. In that spirit, here are five tips to prevent financial fraud in your organization:
- Strengthen Internal Controls: Think of a transaction like a circle. No single individual should have so much control over financial transactions that they can complete the circle alone. The same can be said for decision-making. Segregation of duties and regular audits can help detect irregularities before they spiral out of control.
- Foster a Culture of Transparency: Encourage open communication and transparency across all levels of the organization. Employees should feel safe raising concerns or questioning actions that seem out of the ordinary without fear of retaliation.
- Provide Financial Education: Many people fall into scams, like cryptocurrency fraud, because they don’t fully understand the risks. Providing employees and leaders with financial education and fraud awareness can help prevent them from becoming victims.
- Establish a Whistleblower Program: Create a secure, anonymous channel for employees to report suspicious activity. This can be crucial in detecting fraudulent behavior early and protecting both individuals and the organization.
- Be Aware of Personal Stressors: People who are under personal or financial pressure are more vulnerable to making unethical decisions. Offering employee assistance programs and fostering a supportive workplace can help mitigate these risks.
Fraud prevention isn’t just about catching bad actors—it’s about recognizing vulnerabilities, building trust, and ensuring that safeguards are in place to prevent people from making desperate decisions they might regret.
To learn more about preventing and detecting fraud, visit our practice page on financial fraud investigations or contact us for a consultation.