• From the Vault

Did Everyone Take Their Vacation This Summer?

August 28, 2019

Why Worry About Vacations?

Vacations provide several benefits to both employees and employers. Employees come back from vacation refocused on the tasks at hand, while the employer benefits by having motivated and refreshed employees. Vacations are necessary for all parties involved.

What’s common in the banking industry is temptation. Bank employees are surrounded by opportunities for dishonest acts, teller shortages, CD documentation fraud, fictitious loans, and unauthorized account transfers are all exposures that are unique to the banking industry.

Internal controls such as segregation of duties, job rotations, and internal audits are great methods of both discovering and preventing these acts, but the best control to prevent and discover employee dishonesty is a vacation.

Why is it Important?

Most dishonest schemes start out relatively small. In fact, the dollar amount remains relatively stable for the first couple of years. As time passes, however, a dishonest employee becomes emboldened since he/she has not been caught and starts to increase the amount taken from the bank - sometimes dramatically. The amount can grow to millions of dollars over a relatively short period of time.

During my thirty-two years of underwriting fidelity insurance for banks, I have seen many employee dishonesty losses. The largest ones have been discovered while the employee was on a mandated vacation (dishonest employees do not like to take long vacations), or on an unplanned leave from the bank (perhaps due to a serious illness). The scheme will start to unravel when the employee is cut off from access to the bank’s systems and is not able to continue covering his/her tracks. Customers that normally only speak with the dishonest employee ask account questions of another employee, who starts to investigate and the scheme unwinds.

Employee Warning Signs

  1. Employee is resistant to taking vacations lasting more than 2-3 days.
  2. Employee is highly protective of their work product.
  3. Employee resists change to their work process or job duties.
  4. Employee comes into their working environment during their vacation.
  5. Employee directs customers to channel their questions only to them.

Vacation Policy Suggestions

  1. Require that all employees take a vacation that spans 5 consecutive work days and two weekends on each side (9 days total out of the bank).
  2. Do not allow employees to enter their work area during their vacation. Any banking transaction can be done via the drive thru or ATM.
  3. Disable VPN or any “work at home” technology that the employee may be using during the vacation period.
  4. Disable the access card or key that the employee uses for the duration of the vacation period.

 

It is understood that in today’s workplace there is a need for flexibility in work schedules for employees. However, the banking industry has unique risk factors that must be addressed. Vacation has tremendous benefit to the well-being of employees, but serves as the best deterrent and early detection of employee dishonesty.

Enjoy your time off.

 

This article is provided for general informational purposes only and does not constitute and is not intended to take the place of legal or risk management advice. Readers should consult their own counsel or other representatives for any such advice. Any and all third party websites or sources referred to herein are for informational purposes only and are not affiliated with or endorsed by OneBeacon Insurance Group. OneBeacon Insurance Group hereby disclaims any and all liability arising out of the information contained herein.