Do your tellers have access to determine which accounts at your Bank have become dormant? Or is your dormant account function housed in your back-office Operations Department?
I had a conversation with a colleague of mine the other day that sparked me to write on this topic. They told me that they still had a passbook savings account and that they hadn’t updated their passbook in the branch for several years. This prompted me to ask them, “How do you know that your money is still in your account or if a teller wiped it out years ago and your balance is at zero?”
While working many years back in a financial institution, this exact situation occurred with one of our tellers. At that time, the dormant account process was handled in the branch. The Branch Manager would get a monthly listing of dormant accounts directly off the system. She would have the tellers pull the signature cards to separate the dormant accounts from the active accounts and place the signature cards under dual control in the vault. Banks do this as part of their internal controls process to eliminate access to the signature specimens, as a customer's signature is usually required to reactivate the account. But at that point, the tellers were aware of which accounts were dormant. Also, at that time, there were no system restrictions in place which would require a management override for transactions posted to a customer’s dormant account. We subsequently had a teller who was aware of certain passbook dormant accounts and had apparently stolen a blank passbook (which I might add, should you still have passbooks, ensure that they are kept under dual control and periodically inventoried). They had a friend come into the Bank, come up to the teller line, hand the teller a withdrawal slip (which on the surveillance camera was nothing suspicious), take the money out of the account and walk out. This continued over several months (so that smaller amounts could be taken out each time and not one large lump sum which might appear suspicious). This wasn’t uncovered until a year later when the actual customer came in with their passbook and there was no money left in their account.
Just because you have a passbook that says you have money in your account, it doesn’t always mean that the money is still there. When accounts become dormant, it means that the customer has not had contact with the Bank for quite some time. Some banks determine an account to be “dormant” when it has had no activity or customer contact for one year, some two years and others three years.
Let’s talk about the increased risk with passbook savings accounts (if your Bank even offers these anymore). Unless there is a state law that applies, there is no statement requirement unless the account is accessible via EFT. If these accounts can be EFT-accessed by anything other than a recurring preauthorized credit (like Social Security or direct deposit), you have to produce and deliver at least a quarterly statement, and a monthly one when most EFT activity posts. But if not, no statement is required. Like the case that I mentioned above, if account fraud has taken place on a passbook account, the customer is not going to know about it until they physically bring the passbook to the Bank for an update. When tellers are aware of dormant accounts, they know which ones they can target to try to get away with theft. Remember, a dormant account is one that doesn’t appear to be being watched very carefully by its owner.
It’s always been my personal opinion that the less tellers know about dormant accounts, the better. If you have the ability, house the dormant account function within your back-office Operations Department. This way, your branch personnel would not know whether accounts are dormant or not.
Always, always, always, require a customer signature to return an account to an active status.
To increase your controls and reduce your risk of employee theft, ensure that there is a daily report reviewed of “Transactions on Dormant Accounts” or “Transactions on Controlled Accounts” by personnel who do not have access to process transactions (i.e., your Operations Department). If transactions appear, request a copy of the customer signed document and the signature card for comparison.
And if you DO have to handle dormant accounts within the branch, ensure your system is set to require a supervisory override when attempting to process transactions to dormant accounts.
It’s all about the controls!!!!!!!
Quality Control Specialist
Sharon Geiger, Quality Control Specialist Sharon has 27 years banking experience, 21 of which have been involved in internal audit. She has extensive knowledge of all aspects of the banking industry, with a particular emphasis on regulatory compliance and identifying risks and controls. As QCR Specialist, she performs Quality Control Reviews to ensure all workpapers and reports are completed in compliance with the firm's standards.