Help! Which regulation says that signature cards attached to dormant accounts must be maintained under dual control and separate from other signature cards? We are currently in the process of scanning all of our signature cards and the question regarding whether or not we should scan dormant signature cards has come up.

If there is any such requirement, it would be at the state level.

How are you going to "un-image" the cards on accounts that "go dormant" tomorrow?

I do not believe that this is covered under any reg. FDIC examiners used to recommend it as an added measure to discourage employee embezzlement from dormant accounts. Unless you are sure that your dual control measures are well implemented, segregating these signature cards makes them an easy target for an enterprising employee though. Also keep in mind that deposits to dormant accounts may be a sign of unauthorized transactions - after the initial deposit, the account is no longer considered dormant and withdrawals can be made freely without appearing on the dormant reports.

There is no regulation that states that dormant account signature cards should be segregated. It is simply an industry best practice to protect the dormant cards.

A few thoughts for consideration...

Technology, particularily imaging technology, has introduced a number of new risks that many banks have not addressed.

Scanning dormant signature cards presents a couple of issues. First, you need to address how you will limit access to the dormant cards (images) to those few that need it. Even if the physical sig card is protected, those with access to the image may be able to copy the signature and transfer it to a check. Second, make sure you have adequate controls in place to prevent someone from modifying the physical sig card and scanning the altered card into the imaging system. Third, make sure access to the actual images is restricted to prevent someone from altering the image.

You will also have to address those accounts that move from active to dormant status after everything is imaged. A process should be in place to segregate the physical sig card and move the imaged card to a restrictive status.

Another issue that we're trying to deal with is imaged or electronic reports. In the "old days," the dormant account list was protected. In many image systems, everyone (or many more people) in the bank now has access to the electronic reports. Access should be limited to electronic reports just like physical reports.

One last comment...I've seen at times banks limit access to the dormant account reports but not the inactive accounts. At these same banks, transactions on dormant accounts reject for a second review, but not transactions on inactive. If I was interested in defrauding the bank, I would start with inactive accounts just prior to them going dormant. That way a second review would not be triggered. It might make sense to eliminate the inactive account designation altogether or at least protect the inactive reports as well. That said, with the proliferation of technology into every aspect of banking, it is getting harder and harder to hide information. It is easy to lock up a piece of paper, but it is not quite so simple to protect data stored on many different systems in many different formats. Job security I guess...

How are we going to "unimage" a signature card belonging to a dormant account? Good question! Unfortunately, I am not involved in the group making these decisions. Someone who is involved called me and asked for more information on handling dormant cards. (Believe it or not, I knew we were thinking of imaging signature cards but was not aware that we were in the process of "making it so". How's that for internal communications?) I'm sure my boss is aware but is, alas, on vacation.

I wouldn't think you need to unimage or delete sig cards when an account goes dormant...just restrict access to them. Your imaging system should have document level security.

Our examiners(FDIC) reviewed this area last time they were in which was probable the first time in the 8 years I have been here. I think as long as you have adequate controls to review any dormant transactions you would be O.K. You would not need to unimage a signature card in my opinion. I think with technlogy this control is outdated since other controls are now available through reporting.

We have a daily report reviewed by the Internal Auditor on all activity to a dormant account. Our teller system (JHA Vertex) also requires an officer approval to continue the transaction. We mail a notice to the customer when an account goes dormant and also when a transaction occurs on a dormant account which are mailed independently of the branch offices.

The examiners were satisfied with these controls. Hope this helps.

The following are the controls we have with regard to dormant accounts:
1) The dormant account list checked by an officer or a regular basis.
2) Dormant accounts files are stamped dormant and segregated from other active ones.
3) When accounts get activated, a report is printed to be checked by an officer.
4) The teller can't pass a transaction on a dormant account without officer approval i.e. system control.
5) Customers are contacted when there are transacitons to their accounts.
6) Dormant accounts remained dormant for more than three years, their balances will be transfered to unclaimed balance account in Head Office. If the amount is too small, will be transfered to income and the accounts will be closed.

The above controls will minimize the frauds but will not illminate it.

What imaging software is your bank using? Where can I find some resource info. on the controls/risks w/imaging systems. You listed some risks that I hadn't thought of regarding dormant accounts....but I also wondered about access/security/printing levels w/these systems as it relates to imaging various bank documents (e.g., lending docs, accounting doc, etc.).