We are a small institution (less than $250m). We have one individual who does the majority of our bookkeeping/accounting function which includes entries to the general ledger and various balancing responsibilites. The same individual is also responsible for creating new customer's on our core banking system.

Potential problem, or not? How risky is this?

Personally, I don't believe this person should have access to maintenance customer accounts, but can't seem to link together a persuasive argument, other than simply stating fraud potential.

This sounds like a disaster waiting to happen. This person has a hand in everything from start to finish - setting up accounts, performing maintenance, making general ledger entries, and even balancing. Segregation of duties does not eliminate the possibility of fraud, but it does reduce the opportunity for a person to commit and/or conceal fraudulent activities or errors.

It doesn't matter that this person is honest and trustworthy. I can't count the number of times I've heard people say "I never would have dreamed this person was capable of something like this!" One of the reasons people commit fraud is opportunity, and I'd say this person has plenty of that.

I would think your examiners and external auditors would have something to say about this as well.

If it is not possible to segregate duties (as is sometimes the case in smaller institutions), do you have compensating controls in place?

Is there someone reviewing the reconciliations?

IMO we have people whose time is not fully utilized that could set up new customers.

Compensating controls

Some reconciliations are reviewed, some not. Report review is minimal and seems to be of the minimal scan and sign method. The supervisor of this individual is stretched thin acting as CFO, head cashier, lender, manager, as well as deposit account maintenance so based on that my gut reaction is, in general, the activity bankwide is not properly scrutinized by management.

It would be best for the duties to be segregated. If that is not possible, there needs to be a detailed meaningful review of all of her work.