Risk WATCH with Alberta Quarcoopome: Fighting the red flags in banking (3)

Red Flags in Process Risk

Last week, we discussed important reminders about banking processes.

Procedural manuals must be well-designed and reviewed. They should be customized and shared effectively. Users need to understand and adopt these manuals for them to work.

Without proper manuals, staff may lack knowledge. This can lead to inconsistent service delivery. Staff might rely on personal judgment instead of banking principles.

At each step in the process, banks face various risks. This is especially true at branches. Adhering to established processes helps guide and control operations.

Compromised Account Opening Processes

Many fraud cases start during account opening. Sales Executives under pressure may bypass procedures to meet targets.

Supervisors should watch for certain signals during account openings. Were all directors or partners present? If not, consider deferring the opening until you can confirm their details.

Some officers approve accounts using information from non-existent customers.

Mis-matched Services

Bank products should not be given to everyone indiscriminately. Are you selling ATMs or e-banking products to unqualified individuals?

If an e-banking application was submitted by someone illiterate, check again. It’s likely that a third party will operate this payment channel, leading to future claims against the bank.

Confirm email correspondence from wealthy but illiterate customers. If they are not computer literate, someone else may be acting on their behalf.

Cheque Handling and Processing

Cheques are convenient but also risky instruments in banking. Many banks have faced significant losses due to cheque fraud recently.

All branch staff should receive refresher training on cheque payment laws. Be cautious of customers who frequently stop cheques or avoid phone confirmations.

Educate customers about the cheque process so they understand its importance as a payment method.

What is System Risk?

System risk involves losses from business disruptions or system failures. Causes include data corruption, viruses, telecom failures, and utility outages.

These issues often affect the entire bank rather than just one branch. However, there are red flags at the branch level that shouldn’t be ignored.

Users’ Misunderstanding of Banking Software

Many users fail to realize that software only facilitates transactions; it doesn’t replace human interaction. Lack of training for data entry personnel can lead to serious mistakes.

Data entry without understanding its implications is a major red flag. Banking requires speed and accuracy along with comprehension of software functions.

Pay attention to accounting principles like double-entry bookkeeping and suspense accounts management to prevent frauds and losses.

Dual Access Issues

In small branches, teamwork can lead staff members to assist each other too much. While this is positive, it must be managed carefully for security reasons.

Tellers should not have access rights for general ledger entries unless absolutely necessary. Managers performing data entry functions also pose a risk that needs addressing immediately.

Access Rights Management

Regular checks on user access rights are essential for security purposes. Ensure no former employees retain access after leaving or going on leave.

If you notice active data entry by someone who is absent from work, investigate immediately before any issues arise.

Leaving systems open when staff step away poses risks too.

Do your employees leave systems running while they take breaks?

Are interns allowed unsupervised access? These practices can lead to serious vulnerabilities in your system's security protocols.

Constant System Freezes

Outdated computers can cause frequent system freezes that corrupt customer data.

Don’t accept vague explanations from IT about system issues without thorough investigation.

Monitor your branch’s performance closely; proactive measures can minimize problems significantly.

Frequent Error Corrections

Watch out for specific personnel who regularly make errors needing correction.

Repeated corrections could indicate attempts at covering up fraudulent activities.

Check audit trails for patterns among users making these corrections; further scrutiny may reveal deeper issues within your operations.

Password Security Risks

Staff must never share passwords; this basic rule is often ignored despite warnings during training sessions.

Trusting others with passwords compromises security significantly—like giving away a life jacket while swimming!

Stay vigilant about password sharing among employees; it leads directly to potential breaches in security protocols.


### ABOUT THE AUTHOR

Alberta Quarcoopome is a Fellow of the Institute of Bankers and CEO of ALKAN Business Consult Ltd. She has authored three books: “The 21st Century Bank Teller,” “My Front Desk Experience,” and “The Modern Branch Manager’s Companion.” Alberta trains young bankers in operational risk management, sales, customer service, banking operations, and fraud prevention.


### CONTACT

Website: www.alkanbiz.com
Email: [email protected]
Phone: +233-0244333051 / +233-0244611343