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How Financial Institutions Can Protect Against Employee Dishonesty

Financial institutions must protect against burglary and counterfeiting, but one of the most significant losses financial institutions face is employee dishonesty. This may include theft, fraud, embezzlement or other illegal acts. Here is what financial institutions can do to protect against these losses.

Examples of Employee Dishonesty

People who work in the financial industry often have access to customer bank accounts or financial institutions’ funds, and may find ways to personally gain from their access. Here are some examples of employee dishonesty that financial institutions may face:

  • Creating fake customer accounts
  • Skimming from accounts
  • Loaning money to unqualified applicants for kickbacks
  • Fraudulent trading practices

Protecting Against Employee Dishonesty

Financial institution bonds are a type of insurance that protects financial institutions against employee dishonesty, forgery, robbery and similar crimes. A financial institution bond can reimburse cases where an employee makes financial gains from his or her dishonest act. Some states require financial institutions to carry bonds, and others don’t. Even if a financial institution bond is not required, obtaining one is advisable.

To help prevent employee dishonesty and fraud, procedures such as separation of duties, two-person controls and regular audits can be deterrents. However, a financial institution bond can provide protection when a dishonest employee finds a way around controls.