Apparently we have an unwritten policy that loan officers cannot cut a loan proceeds check but I've found few controls to prevent a loan officer from cutting their own checks. We also have a variety of check-writing machines from computer based to manual. I'm looking for two things - whether your bank allows loan officers to cut their own checks and, if not, what controls do you employ to prevent a loan officer from doing so. Thanks!

Loan officers should not cut their own checks. Checks should come from an attorney or a loan officer assistant (titles may vary). It's a separation of duties issue. One control - don't give them access to the checks or machines.

what if it is a consumer installment loan where there is no attorney participation? and there is no assistant?

Basic segregation of duties principles would dictate that a loan officer never has the ability to cut checks without it passing through some sort of internal control point. Consumer retail, mortgage or commercial - it really doesn't matter. I have witnessed a lot of fraud when it doesn't.

What I'm seeing is the loan officer writing down the check details and handing the paper to the head teller or loan processor if they have one. The head teller, who is ususally busy never knows if the loan officer has a customer in their office or not. It is a form of separation of duties but its not a very strong control. Since it is such a weak control, I'm wondering if we should scrap it and depend on detective controls such as welcome letters, returned mail follow-ups, & checks for multiple loans tied to one address among other controls. We are a small community bank.