By Ann Sookhoo, P&G Associates Senior Auditor
Establishing and maintaining effective controls is one of Banking’s major responsibilities. One primary control includes appropriate separation of duties with the daily processing of Wire Transfers. With the increasing number of internal and external Wire Transfer fraud, this process is being scrutinized by Banking Regulators. Segregating duties is one of the most important functions of a substantial internal control system.
Most Banks’ Wire Transfer processing is handled by their Back-Office Operations Department. The Wire Transfer reconciliations are prepared and approved by the Accounting/Finance Department, where appropriate segregation of duties is evident and a strong control of the process is in place. However, many Banks still do not have that function segregated. The Accounting/Finance Departments within the Bank are responsible for both the daily processing of Wire Transfers and preparing the daily Wire Transfer reconciliations, usually by the same two individuals.
A Bank’s risk of internal fraud is elevated when the same Bank personnel have system capabilities to enter/verify wires and reconciliation functions. With these functions being handled by the same employees, how would Banks be able to detect possible collusion among employees and ensure such is not occurring?
In order to reduce potential risk for internal fraud, Banks should ensure that personnel who complete the daily Wire Transfer reconciliations are excluded from having any system functionality relative to the daily Wire Transfer process. In addition, they should ensure appropriate segregation of duties is in place.
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