Employee bank statement audit

We have a new employee who is outraged that someone opens personal bank statements. This employee has asked us to cite a regulation that permits us to do this. I don't believe there is an actual reg, just a bank safety and soundness practice. Please help?

In Oklahoma this is cover under state law in the Requirements, Standards and Procedures for an Internal Control Program.At a minimum, all officer and employee accounts must be reviewed qtrly and any unexplianed items reported to the board. Check in your state's banking laws.

I looked at this some time back and couldn't find anything that specifically said a bank couldn't do it. When I talked with internal auditors and some attorneys, I was told this is the way we always did it and planned to do it.

The bank isn't sharing any of that info and isn't using it for anything other than internal controls.

While I am not pleased at the prospects either, and I believe a degree of privacy is warranted, if I am not happy with the controls, confidentiality and reasons, I am free to pay for an account elsewhere.

I also believe a employee who steals and uses their own account to aide in this would be really stupid. But I was told it has happened before and would happen again. Hence paragraph 1, above.

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Andy Zavoina
Opinions stated are not necessarily that of my employer.

A few years ago, I looked into this issue because some managers were concerned that our department (Internal Audit) did not have the legal authority to review employee accounts. After researching the federal and state(PA)rules, I concluded there were no restrictions. Our advisors (experienced in both bank regulations and state law) agreed and stated that if we were looking at bank statements for business purposes, there were no legal impediments.

The advisor noted that under the rules for a bank's charter, a bank is allowed to conduct daily activity, in the best business interest of the bank, while maintaining safety and soundness. He noted that unless there is a statute or regulation that prohibits an activity, banks are allowed to assume an activity is permissible if it is within the realm of conducting normal authorized bank operations. Therefore, legal permission for a specific acitivity such as reviewing statements is not needed to conduct the activity.

However, noting that individual state laws may be full of "landmines", I suggest that you contact your counsel.

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The opinion stated herein is personal and not that of my employer.

It's interesting that none of you has mentioned whether your fine institutions include a statement in your employee handbooks (or other venue) that puts your employees on notice that any employee account at your bank is subject to possible review by the Audit Department.

Before you ask, we don't have such a statement. And after reading this string, I'm wondering why.

[This message has been edited by John Burnett (edited 03-27-2001).]

John, you made a great point. Having a statement in the personnel policy or perhaps in the employment application may go a long way in preventing potential legal problems. Also, a statement may help to prevent morale problems if employees found out that accounts are being reviewed.

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The opinion stated herein is personal - not of my employer

[This message has been edited by Doug (edited 03-27-2001).]

It's great to see a topic generate such immediate interest!

Your employee handbook is your MOST valuable loss prevention tool and you should use it to describe the terms and conditions for both initial and continuing employment. This is definitely one of those issues that should be addressed there. And remember to use the phrase "initial and continuing" when you refer to your business practices.

Embezzlers are infamous for stealing from their institutions -- and then wiring or physically depositing the stolen funds into their own accounts at the same institution. This may sound stupid -- but it's an established fact.

If you gather information during the normal course of business, you may inspect those same records as a normal business practice. You don't need to notify the account holder of this inspection, regardless of the type of account relationship.

Work with your legal counsel to draft appropriate wording for the institution's policy and the employee handbook -- and perhaps issue an explanatory notice to your employees, as a reminder of your business practice.

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Dana Turner
Security Education Systems
danaturner@bankersonline.com
830-535-6500