I review employee statments as a part of my audit program. I have been watching one account inparticular for several months, as I see activity that indicates a possible gambling habit. I have been paying close attention to the checks being written, cash w/drawn and cash deposited. This person has at least 13 different loan or credit card payments that are being made. I have not found any unusual cash shortages. The CEO wants to have the branch manager talk to this person. I am wondering if any of you have been in a similar situation and what the proper way to handle it is. Do we just wait and watch? I do not want this employee to feel as if we are accusing her of anything-- afterall what she does with her money really isn't any of our business as long as she isn't taking any that doesn't belong to her. That said, it is also behavior that may indicate a person that could get themselves into a desperate situation and we do not want to just sit around and wait to get burned. I also know that just because fraud isn't as obvious as a lot of teller drawer shortages doesn't mean it isn't occurring some other way. Any input would be appreciated.

Yes, we have had these situations and we just watch their behavior at work as well as in their accounts. The only reason you know this person's debt and spending habits is because they bank with you. You could have people in similar or worse straits who don't bank with you and you wouldn't know it.
Aside from free financial counseling, what would the branch manager offer? That they move their account? If so, the red flags remain, you just don't know it.
It's a tough spot to be in and I don't envy you.

I think there are 2 reasons you should cover this with the employee.
1. Concern for their financial / mental / etc health
2. Possible risk to the bank as they become more and more stressed to meet their obligations and look for a quick fix

Approaching it from the POV that there aer indicators that they are in a bind and the bank / the supervisor is concerned and wants to help would be my recommendation.

That is my thought. I have a real concerns with these types of audits. If a customer was doing the same activities on their account, would you be just as concerned? no, we would be hoping for some NSF activity!

I am guessing that this is a teller or admin position. Generally the pay is not great. Also, are they married, live with someone? How does that person earn money? How do they pay for and split bills? Does the rommie/spouse/live-in pay in cash? Does the employee have a second job for cash tips?

My suggestion is continued monitoring until you have more concrete information, or irregularities begin to appear. At this point, you run the risk of simply being offensive.

Also, this is not a conversation for the branch manager to have. This must come from HR.

"That is my thought. I have a real concerns with these types of audits. If a customer was doing the same activities on their account, would you be just as concerned? no, we would be hoping for some NSF activity!"

I guess I have to disagree with this statement. A customer does not have his hands in a teller drawer of a bank insured by the FDIC. If I thought an employee was engaging in high risk activity that typically leads to defalcations or embezzlement, I think the bank is at risk. Many bank have ethics policy that address this fact, such as this:

Individuals are expected to be prudent in their personal borrowing, investments, business, and other activities to ensure that they do not put themselves in a position in which their personal interest, financial or other, might influence, or give the appearance of influencing any action they take, judgment they make, or advice they give on behalf of the Company.

As such, you would have an opportunity to talk to this employee and tell them to knock off this questionable financial activity or look for another job.

Things like this are the exact reason I do not do my personal banking at the bank I am employed with. It is becoming like "1984" with employee accounts. Bank employees have the right to bank with whoever they wish, and if they are smart, it should not be where they work. I recently posted in another thread where I got confronted about a single large deposit into my account. It was an insurance settlement check from a car accident I had been involved in. And I was grilled about the details of the car accident and everything. I was very mad that my employer had nosed into my personal business, and as a result, I closed my account, and since then I have left that bank and I am now employed with another bank. And I now know to do my personal banking at another institution.

It's certainly possible that you were confronted in an impolite manner. But, I disagree that "smart" employees should bank somewhere other than with their employer - it looks bad (in my opinion), you're hurting the bank's funding position, and, frankly, if you're not doing anything wrong you have nothing to be concerned about. When I did this kind of thing, and saw something odd, I just told the supervisor that so-and-so deposited a large amount of cash, or an items drawn on such-and-such...and asked if they had any concern (and I think it's reasonable to ask about an insurance check - lots of banks have lost money on those).

Keep in mind that no matter where you bank, you can be "grilled" about your account activity. With CIP and customer due diligence, if your activity looks suspicious or raises any flags you're going to get asked about it. If your employer handled it improperly, I understand the frustration. But to move your accouts to another bank just so no one will ask you questions about it is unrealistic.