Pub. 10 2015-2016 Issue 4

A loan officer deleted her custom- er’s loans from the past due list even though the loans were still past due. She submitted the false past due listing to the Board. Upon question- ing she explained that she didn’t want the Board to know how many of her customers were past due. She stated she would start working with the customers to bring the loans current immediately. A bank owner learned his son had broken into a liquor store and stolen some beer. The bank owner paid the store owner for the damage and beer. No criminal charges were filed. Five years later, the bank owner wanted his son to work for him at the bank. A standard Financial Institution Bond contains a condition that terminates the Bond as to all future acts of an employee immediately and automat- ically as soon as a director or officer of the bank learns of any dishonest or fraudulent act of that employee. This happens regardless of the details of the act – how long ago it happened, how much money was involved, or whether the bank was involved. This termination of cover- age happens regardless of whether the bank informed the Bond insurer of the act. This means that the bank usually has no choice but to terminate the employment of, or avoid hiring, any person known to have committed a dishonest or fraudulent act. The FDIC has the authority to require all employees to be covered un- der a Financial Institution Bond. In addition, the bank itself would take on a significant risk by remaining uninsured with regard to all future acts of that employee. In each of the examples above, the bank was fortunate enough not to suffer any financial loss, but in each case it lost an employee. The bank need not consider whether the act is serious enough to warrant termination. If an employee is no longer covered by a Financial Institution Bond, the bank should understand the risk assumed if the employment continues. Brought to you by: Chuck M. Towle and the KBS Editorial Team To help protect your bottom line, call KBS to discuss this article and other loss prevention topics or products (785) 228-0000 Access more KBS Security Officer’s By-Words at: kbsforbanks.com /resources SUBSCRIBE FOR ENHANCED KBS CONTENT: http://tinyurl.com/kbssubscribe Connect with us on social media: twitter.com/kbsforbanks linkedin.com/company/kbsforbanks Visit our new website KBSforBanks.com