We have a customer who wishes to appoint one of our CSRs as their personal power of attorney to take effect in the event they become incompetent. We're unsure if this is appropriate.

Are there audit steps that should be implemented?

Has anyone else dealt with this?

It is against bank policy for an employee to be a POA on a customer's account (unless it is a family member). I feel there is a conflict of interest and a potential for liability upon the bank. The employee should not accept to be a POA for a customer. Just a couple of months ago, one of our customers asked our assistant cashier to be his POA, but she declined because she did not feel comfortable doing so plus our bank policy stated that she couldn't. I would proceed with caution.

We prohibit such an arrangement.

I agree. In a perfect world POA's only for family members. The interesting question that sometimes arises is what if the customer is a close personal friend and the personal relationship pre-existed the banking relationship?

Depending upon your risk tolerance, this might be acceptable with executive management approval. That approval should only happen after a conversation with the customer that satisfies the executive that there was a pre-existing relationship and that the customer is not being coerced. The customer should also be asked to sign a statement to that effect. However, even with these precautions a disgruntled heir can question the arrangement.

The more risk adverse approach would be to refuse. If the employee and customer are truly long-term friends and there are no qualified family members around, they can open their accounts at another bank.