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#1540265 - 04/25/11 05:49 PM
Employee Accounts
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Power Poster
Joined: Jul 2003
Posts: 2,675
Austin Texas
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Not a frequent peruser of this thread - I did do a search under 'employee accounts' but did not find anything helpful.
Any suggestions on how to audit employee accounts - we're a small shop, less than 20 officers and staff. Frequency?
Thanks
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#1540287 - 04/25/11 06:13 PM
Re: Employee Accounts
RBanker
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100 Club
Joined: Feb 2011
Posts: 112
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When our primary regulator would perform a safety & soundness exam they would go back 3 months for directors and executiv officers. Our auditors would look at the prior 3 month period from their exam date. They looked for transactions that appeared suspicious; like kiting, looked at overdrafts for officers and directors, they would also check to see if the employees had performed any maintenance or transactions to their own accounts, etc.
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#1540346 - 04/25/11 07:20 PM
Re: Employee Accounts
CARM9
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Power Poster
Joined: Jul 2003
Posts: 2,675
Austin Texas
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Thanks CARM9
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#1540433 - 04/25/11 08:42 PM
Re: Employee Accounts
RBanker
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New Poster
Joined: Mar 2007
Posts: 4
Missouri
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We have an Executive Officer look at all employee accounts on a monthly basis, for suspicious activity. All employee accounts cut on the same day, so that makes it easier.
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#1540435 - 04/25/11 08:43 PM
Re: Employee Accounts
RBanker
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Member
Joined: Jun 2006
Posts: 85
CT
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Are you referring to all employees or just Reg O Officers?
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#1540455 - 04/25/11 09:24 PM
Re: Employee Accounts
TheQueen
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Power Poster
Joined: Jul 2003
Posts: 2,675
Austin Texas
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Being a small bank (less than 20 employees), we are expected to review all employee accoutns as a risk management review.
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#1541219 - 04/26/11 08:44 PM
Re: Employee Accounts
RBanker
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Platinum Poster
Joined: Feb 2007
Posts: 597
Central Texas
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We are a smaller bank, but do have branches so that puts us at like 70 something employees. I send out a form each year for them to give me updated account information (or any account they are an authorized signer on). I have a spread sheet I use and I go through it and basically I pull statements for at least 6 to 7 months and review it for any thing suspicious, kiting, frequent cash deposits and the amount size, does this person a teller and are they frequently short and now they are putting money into their account several months later!!! This may not be the greatest way to do this and I hope to eventually find something else that is more doable!!!
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#1541296 - 04/26/11 11:12 PM
Re: Employee Accounts
Happy Drugs
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Diamond Poster
Joined: Apr 2003
Posts: 1,636
snorkeling in warm, clear wate...
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We put together a query that picks up each insider account (defined as "you work here in some capacity"), included any related accounts, and we get the number of credits and debits plus the amount of debits and credits that ran through each account in the last month. We look at the entire list, but focus on the accounts that stick out and pull our focus. If someone has 2 deposits per accountholder that roughly equal their payroll, we don't get excited. If we see 15 deposits, it's a different story and we start pulling source documents and statements. It's worked well for several years. We explain it to the Fed as a tiered review system that looks at every employee and officer each month. The first tier eliminates the majority as "expected activity", the second tier identifies accounts that have excess activity that we take a closer look at. The most common thing we find is employees that are using payday loans to make it - we give the info to an EVP that has a motherly chat with them to find out how they're planning on digging out of the hole they're sinking into and helps them brainstorm a plan. It lets them know we're watching. If we see an odd transaction, we handle it case by case. That said, we've got very strong Reg O controls that are monitored daily by the Operations Dept. The nice thing about the query is that we only pull docs on the accounts that jump out and make us say "Hmmm..." There's nothing sacred about the 15 deposit trigger. We might pull docs much quicker based on the total dollar amount going through the account or just a surprising increase in activity.
Last edited by HMS Hawkii; 04/26/11 11:13 PM.
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#1541408 - 04/27/11 01:22 PM
Re: Employee Accounts
HMS Pippii
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Platinum Poster
Joined: Feb 2007
Posts: 597
Central Texas
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I like what you have in place HMS...I probably spend more time on this than is necessary and I just carried on with the previous auditors auditing ways.
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#1541541 - 04/27/11 02:36 PM
Re: Employee Accounts
Happy Drugs
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Gold Star
Joined: Nov 2008
Posts: 498
Texas
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We are a very small shop with 9 employees. I have a spreadsheet with each employee and any account they are related to or any account they are a signer on. I check a different employee each month. I pull images of the statement and look over them. If I see anything that looks suspicious, I investigate further. I did have one employee I kept a closer eye on, but she left about a year ago.
Employees are aware their accounts are reviewed, but they do not know who or when.
Examiners & Auditors have been okay with it so far. EVP looks over my accounts.
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#1541689 - 04/27/11 03:55 PM
Re: Employee Accounts
PStateBank
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Platinum Poster
Joined: Feb 2010
Posts: 835
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To anyone: Do you report your employee and Reg O officer account reviews to a committee?
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#1541791 - 04/27/11 05:01 PM
Re: Employee Accounts
*W*W*
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Platinum Poster
Joined: Jan 2006
Posts: 642
Missouri
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We issue a written report to our Audit/Trust Audit Committee of the Board (OCC Bank) that summarizes how many accounts we looked at and if there were any causes for concern. Other than that, no.
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#1542237 - 04/27/11 09:54 PM
Re: Employee Accounts
Tennismom
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Power Poster
Joined: Jul 2003
Posts: 2,675
Austin Texas
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Thanks tennismom, but that's not really an option, and doesn't answer my original question.
I understand some institutions operate that way - we do not, and I'd rather the thread not get bogged down on that specific topic.
Thanks
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#1542238 - 04/27/11 09:55 PM
Re: Employee Accounts
RBanker
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Power Poster
Joined: Jul 2003
Posts: 2,675
Austin Texas
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*W*W* - our director and officer accounts are reviewed by an independent third party auditor....as part of their controls audit. That information is reported to the Audit Committee
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#1542261 - 04/27/11 10:54 PM
Re: Employee Accounts
RBanker
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Platinum Poster
Joined: Feb 2010
Posts: 835
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Thanks R Banker. That's what I wanted to know.
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#1542598 - 04/28/11 03:53 PM
Re: Employee Accounts
*W*W*
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Gold Star
Joined: Nov 2008
Posts: 498
Texas
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*W*W* - If I find anything, I report it to the president, and he addresses the situation as he sees fit. I keep a log of what I review and if anything is found along with when I notified the president.
Our external auditors review the log and employee accounts also. They haven't had any issues so far.
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#1581374 - 07/21/11 08:55 PM
Re: Employee Accounts
PStateBank
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Platinum Poster
Joined: Feb 2010
Posts: 835
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I'm looking at roughly 40 employees, some with multiple accounts for the following activity:
Deposits outside of normal payroll dates Excessive nubmer of deposits Even-dollar deposits Frequent NSF activity Changes to OD Protection limits Unusual postings to account Use of p.o.box address
I'm doing monthly reviews of all employee accounts. It's very time consuming. I'm wondering if i need to narrow my review. I pull reports and compile my information onto a spreadsheet. Is this overkill? Any suggestions?
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#1581468 - 07/21/11 11:06 PM
Re: Employee Accounts
*W*W*
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New Poster
Joined: Jan 2004
Posts: 8
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I look at approximately 45 employee accts on a daily basis. I pull a query each morning that identifies all deposits other than payroll (tran code driven). Each deposit is tracked on a spreadsheet with the source of the funds documented. It sounds like a lot of work, but really isn't because internet transfers, ACH deposits (spouse pay), etc are easily identifiable so no other research is necessary. If deposits become suspicious, then other transactions are reviewed. Findings, that include a management response if there's a problem, are reported on a monthly basis to the Audit Committee of the Board.
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#1581490 - 07/22/11 04:57 AM
Re: Employee Accounts
Utahn
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10K Club
Joined: Jul 2001
Posts: 83,362
Galveston, TX
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Jeez - what a waste of time. Can you imagine a bank with thousands of employees employing these types of methods???? If they don't have too, why would a small bank implement such draconian monitoring efforts.
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#1581543 - 07/22/11 12:59 PM
Re: Employee Accounts
rlcarey
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Diamond Poster
Joined: May 2011
Posts: 1,406
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We use some specific BSA program tools to review employee accounts. I do not spend a lot of time in this area.
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#1581593 - 07/22/11 01:39 PM
Re: Employee Accounts
osucpa
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100 Club
Joined: Sep 2007
Posts: 126
On a sled
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We use some specific BSA program tools to review employee accounts. I do not spend a lot of time in this area. Same here.
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#1581608 - 07/22/11 01:48 PM
Re: Employee Accounts
osucpa
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Platinum Poster
Joined: Feb 2010
Posts: 835
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what tool(s) are you using?
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Opinions expressed are my own and do not reflect the views of my employer.
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#1581625 - 07/22/11 02:06 PM
Re: Employee Accounts
*W*W*
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Platinum Poster
Joined: Feb 2007
Posts: 597
Central Texas
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I have 75 employees, but after you pull in all the accounts they own or are authorized signers on I am looking at several hundred accounts. I have a spread sheet, but honestly I don't have time to look at this all the time. I guess I really do more of spot checks.
I would have to say this is one of my lowest priorites! I might would check more if new accounts would code these accounts better than what they do (I find they don't always get employee,officer on them all like they should!
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#1581858 - 07/22/11 04:36 PM
Re: Employee Accounts
*W*W*
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100 Club
Joined: Sep 2007
Posts: 126
On a sled
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what tool(s) are you using? We use Patriot Officer as our BSA software.
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#1582000 - 07/22/11 06:32 PM
Re: Employee Accounts
Hobbes
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Diamond Poster
Joined: May 2011
Posts: 1,406
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We use a Jack Henry product for BSA purposes. The product allows us to create specific worklists for our customers. I have 3 specific worklists (wire transfers, ach activity and cash activity). These worklists include employees, directors and owners. The worklisted are reviewed on a monthly basis by a deviation rate, the program establishes.
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#1582059 - 07/22/11 07:07 PM
Re: Employee Accounts
osucpa
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Platinum Poster
Joined: Feb 2010
Posts: 835
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I think I'm going to suggest revisions to our Employee Account Review Policy and start shopping for software in my "spare" time.
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Live Like No One Else! CRCM
Opinions expressed are my own and do not reflect the views of my employer.
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#1582070 - 07/22/11 07:22 PM
Re: Employee Accounts
ACBbank
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Diamond Poster
Joined: May 2011
Posts: 1,406
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We are on the same page. Any issues I have with an account I first go to HR to discuss.
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#1582073 - 07/22/11 07:27 PM
Re: Employee Accounts
osucpa
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10K Club
Joined: Jul 2004
Posts: 18,989
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To all those who currently perform an employee account review, are you in IA?
I was always under the mindset that this should be a management function (as it is a interal control) and IA audits the process.
(Although I can see the argument for IA doing this, as well)
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#1582131 - 07/22/11 08:07 PM
Re: Employee Accounts
A_G
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Platinum Poster
Joined: Feb 2007
Posts: 597
Central Texas
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To all those who currently perform an employee account review, are you in IA?
I was always under the mindset that this should be a management function (as it is a interal control) and IA audits the process.
(Although I can see the argument for IA doing this, as well) Unfortunately it fall right smack in my lap as IA...As I stated earlier if NA would code them as they set them up or added as an authorized user...I could print out a report, but I need some software that would simplify this process for me!!!
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#1582250 - 07/22/11 10:04 PM
Re: Employee Accounts
Happy Drugs
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Platinum Poster
Joined: Feb 2010
Posts: 835
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We're a small bank. We don't have an IA dept. I do BSA and Compliance so, I was nominated for this particular task.
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Live Like No One Else! CRCM
Opinions expressed are my own and do not reflect the views of my employer.
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#1582291 - 07/23/11 02:13 PM
Re: Employee Accounts
*W*W*
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Power Poster
Joined: Jun 2003
Posts: 7,656
Florida
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I believe that one other person mentioned it almost in passing - besides the payroll and other accounts that are listed as employee, do a search to ensure that you're covering accounts where the person may be an authorized signer. Also do a scan of addresses in the event that a fictitious account was opened up.
We once ran a loan report by address and found 11 consumer loans at one address (residential) - all different names. It was also the address of the branch manager/loan officer. He was making fraudulent loans to pay off the earlier ones when he realized he did not have an exit strategy for the fraud.
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#1583789 - 07/27/11 04:20 PM
Re: Employee Accounts
Hobbes
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New Poster
Joined: Jan 2004
Posts: 8
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rlcarey....What do you suggest for a small institution? Examiners ask for evidence of employee account review to identify potential fraudulent activity.
Last edited by Utahn; 07/27/11 04:21 PM.
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#1583935 - 07/27/11 06:35 PM
Re: Employee Accounts
Utahn
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10K Club
Joined: Jul 2001
Posts: 83,362
Galveston, TX
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How do you monitor all your other accounts for fraudulent activity? Your biggest risk is and always has been from the outside.
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The opinions expressed here should not be construed to be those of my employer: PPDocs.com
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#1587316 - 08/03/11 11:20 PM
Re: Employee Accounts
Hobbes
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10K Club
Joined: Jul 2001
Posts: 83,362
Galveston, TX
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I would challenge anyone to find the review of employee accounts in any of the Federal regulatory agency's examination manuals. Unless this is required by State law or your bonding company, there are many ways to develop internal controls to prevent employee fraud. Reviewing all accounts of every employee, IMHO is probably the most inefficient use of time and resources.
How many years have you been doing it and how many embezzlements or frauds have you uncovered?? And if found, were these directly found by this account review or though some other source? Dual controls and proper account reconciliation processes are probably much more important.
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The opinions expressed here should not be construed to be those of my employer: PPDocs.com
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#1587388 - 08/04/11 12:49 PM
Re: Employee Accounts
rlcarey
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Diamond Poster
Joined: May 2011
Posts: 1,406
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In the state of Oklahoma it is state banking requirement.
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#1587395 - 08/04/11 01:00 PM
Re: Employee Accounts
osucpa
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10K Club
Joined: Jul 2004
Posts: 18,989
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While the Federal Reserve does not suggest reviewing the accounts of every employee, it has this to say in the commercial bank exam manual:
Employee Deposit Accounts Historically, examiners have discovered various irregularities and potential malfeasance through review of employee deposit accounts. As a result, bank policy should establish standards that segregate or specially encode employee accounts and should encourage periodic internal supervisory review. In light of these concerns, examiners should review related bank procedures and practices, taking appropriate measures when warranted.
If not included in the internal or external audit program, are employees’ and officers’ accounts, accounts of employees’ and officers’ business interests, and accounts controlled by employees and officers periodically reviewed for unusual or prohibited activity?
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#1588045 - 08/04/11 11:59 PM
Re: Employee Accounts
IAaudit
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10K Club
Joined: Jul 2001
Posts: 83,362
Galveston, TX
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Mr. A - nice catch in the FRB exam manual - I looked in them all and missed that. But I still believe there are better ways to monitor employee accounts than reviewing each one.
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