Hi everybody. It has been a long journey which I have taken you through, on various aspects of red flags in a bank’s branch. Now back to my concluding series on red flags. To summarize, we have seen that there are three main risks faced in a bank (Credit, Market and Operational Risks).
Apart from credit risk which has been the main cause of bank scandals and collapses, the next largest risk (operational risk) spans all departments of a financial institution. With respect to Operational risks, I examined the four main risks, that is, people risks, system risks, process risks, and lastly external risks. Although external risks may be caused by factors outside the control of the bank, I hope by creating an awareness of these happenings, the effects from them can be minimized.
FINAL QUESTIONS ON EXTERNAL RISKS TO PONDER
For the rest of external factors that indicate red flags in branch banking, I will leave you with a few searching questions to ponder over. As well as some quidelines.
ATMs
- How can your bank reduce ATM thefts and frauds? The card-less ATMs are more secure, but until you get there, is the ATM process under joint control? Are the cards and pin-mailers held by the same person?
- Do you give ATM service to anybody who asks for it? Do your illiterate customers benefit from the ATM service? How well do they understand the process if they are illiterate. Remember the ATM is not like a mobile phone. Its operations have a direct effect on customers’ balances and are not kid games that can be run on trial and error basis.
- Does the same person deliver both cards and pin-mailers to the customer? If yes, what controls have been factored in?
- Do you just give out the service and its accompanying guidelines and leave customers to their fate or for Security Guards to take over?
Cheque books
- Are your cheque books and savings withdrawal booklets always under lock and key?
- How often are snap checks conducted to identify overstayed ones? What policy is in place with regards to shredding of such overstayed, damaged or unusable ones?
- Are the cheque books delivered to the customers or their known and identified agents under their signatures and confirmation?
- Do you follow up to ensure the cheque books are intact and receipt confirmed by the customer?
Emails
- Do you receive email requests from customers? What steps are taken to ensure their authenticity?
- Do you have email indemnity for electronic transfers from your customers?
- How do you avoid cyber fraud and how often do you educate/share security tips with customers?
Outsourcing
- Do permanent staff and outsourced staff have the same functions?
- What is the proportion of outsourced staff to permanent staff? How do you manage the two groups to prevent disunity and lack of control?
- How do you manage mobile bankers out in the field, to ensure accountability of funds collected?
- Are your cash in transit teams made up of the right numbers, or is it just the cashier and driver of the mobile van? Do you have a hand in their recruitment?
Deceased Accounts
- Do you have a thorough evaluation of Letters of Administration or Executors presented by unknown persons?
- Do you pass the beneficiaries through a proper KYC test to ensure genuineness?
Identity Theft
- Have your staff gone through training on document fraud and other financial crimes?
Undue Influence
- How can you prevent or minimize undue influence from friends, family, customers, regulators and politically exposed persons (PEPs) in delivering of credit facilities.
Money Laundering
Do you watch out for red flags in money laundering? Since we should think globally and act locally, I will leave you with an extract from The USA’s Federal Financial Institutions Examinations Council (FFIEC) Infobases. It is an online training source which provides guidance to field examiners of financial institutions as well as the financial institutions themselves.
This extract on money laundering is therefore applicable globally. This document lists various transactions and activities that may indicate potential money laundering. While not all-inclusive, the list does reflect ways that launderers have been
known to operate. Transactions or activities listed here may not necessarily be indicative of money laundering if they are consistent with a customer’s legitimate business. Also, many of the “red flags” involve more than one type of transaction.
“1. Refusal or reluctance to proceed with a transaction, or abruptly withdrawing a transaction.
A customer may be reluctant to proceed, or may even withdraw a transaction after being informed that a Currency Transaction Report will be filed, or
that the purchase of a monetary instrument will be recorded. The customer may withdraw all or a portion of a transaction to avoid Bank Secrecy Act reporting and recordkeeping requirements.
- Customer refusal or reluctance to provide information or identification.
A customer may be reluctant, or even refuse to provide identifying information when opening an account, cashing a check, recording the purchase of a monetary instrument, or providing information necessary to file a CTR.
- Structured or recurring, non-reportable transactions.
An individual or group may attempt to avoid Bank Secrecy Act reporting/recordkeeping requirements by breaking up, or structuring a currency transaction or purchase of monetary instruments in amounts less than the reporting/recordkeeping thresholds. Transactions may also be conducted with multiple banks, branches, customer service representatives, accounts and/or on different days in attempt to avoid reporting requirements.
- Multiple third parties conducting separate, but related, non-reportable
transactions.
Two or more individuals may go to different tellers or branches and each conduct transactions just under the reporting/record-keeping threshold.
- Even dollar amount transactions.
Numerous transactions are conducted in even dollar amounts. NOTE: Money laundering and check kiting schemes have similar characteristics.
- Transactions structured to lose the paper trail.
The bank may be asked to process internal debits or credits containing minimal or no description in attempt to “separate” a transaction from its account.
- Significant increases in the number or amount of transactions.
A large increase in the number of or amount of transactions involving currency, the purchase of monetary instruments, wire transfers, etc, may indicate potential money laundering.
- Transactions which are not consistent with the customer’s business or income
level.
Transactions should be consistent with the customers known business or income level.
- Transactions by non-account holders.
A non-account holder conducts or attempts to conduct transactions such as currency exchanges, the purchase or redemption of monetary instruments, etc., with no apparent legitimate reason.”
Dear Readers, this is the end of my series on fighting red flags in branch banking. As I always say, banking in Ghana is made up of a combination of eighteenth and twenty first century processes, mostly due to the combination of high illiteracy levels and few very educated and financially savvy persons. Whether the branch is situated in the upper class banking district of Airport or within the slums of Agbogbloshie, the red flags are still around albeit at various levels.
Conclusion
Before I sign off, I want to to leave you with an extract from last month’s article on “Using morning huddles as a risk management tool.
“ The daily huddle is a short meeting meant to occur every day so that the entire team can get informed and aligned on the work that needs to be done. It’s a regular discussion in which attendees address key performance indicators and areas of improvement. These meetings can take place daily or weekly. The purpose of team Huddles are to drive employee engagement and to serve as a self-correcting measure to keep the company on the path toward achieving its goals. Building a morning huddle ritual will help make your team more effective by getting your team to vocalize what they are working on to their colleagues. It also gives everyone a chance to know what is keeping everyone busy and should add depth beyond what your team task management tool is giving you”.
You can use these articles in yoyr subsequent morning huddles and see if any if these red flags are “flagging” in your Branch ir department.
I hope many of you have taken a few tips from them and have managed to identify something new which can be used as a shield to protect your bank.
ABOUT THE AUTHOR
Alberta Quarcoopome is a Fellow of the Institute of Bankers, and CEO of ALKAN Business Consult Ltd. She is the Author of Three books: “The 21st Century Bank Teller: A Strategic Partner” and “My Front Desk Experience: A Young Banker’s Story” and “The Modern Branch manager’s Companion”. She uses her experience and practical case studies, training young bankers in operational risk management, sales, customer service, banking operations and fraud.
CONTACT
Website www.alkanbiz.com
