Pub. 10 2020-2021 Issue 4

O V E R A C E N T U R Y : B U I L D I N G B E T T E R B A N K S — H E L P I N G C O L O R A D A N S R E A L I Z E D R E A M S November • December 2020 19 avoid negligent hiring and verify infor - mation on a candidate. Placement services can also be used by smaller organizations to find, vet and verify potential candidates, which helps lessen the business burden. Items to consider when vetting poten- tial candidates to avoid becoming the next victim of fraud or embezzlement include: • Verifying education and professional credentials • Performing background checks that include criminal and credit checks • Investigating for any wage garnish - ments, liens or judgments that may be indicative of prior embezzlement history • Researching for news articles online that may uncover any prior employ - ment activities You may also want to consider im - plementing a whistleblower hotline, which provides a confidential way for employees to report wrongful behavior. Not only do hotlines prevent illegal and fraudulent behavior, but they can also detect issues before they become severe and can help reduce losses. In some ar- eas, a whistleblower hotline allows for tips to be submitted anonymously for all manners of wrongdoing, including: • Financial: Mistakes and criminal ac - tivity can occur in many areas — ac - counting procedures, lending discrep- ancies, billing errors and more. • Ethical: Issues considered to be ethical breaches include code of conduct viola- tion, physical theft, intellectual prop - erty theft and more. • Privacy and Security: can include identity theft, confidentiality breach - es, customer database hacks and tampering with electronic door locks, to name a few. “When it comes to where we are go- ing in the future, it’s about adapting to change. We don’t do banking as we did 50 or 150 years ago. We don’t even do banking as we did 15 years ago. Ev- erything is going to change around us, and we have to continue to change along with it.” -Susan Whitson, EVP, First National The Importance of Internal Audit No Matter Your Bank’s Size No financial institution is too big or small to be a fraud victim. Systems of internal controls allowing management to measure performance and an inter- nal audit program to ensure controls are implemented to protect your institution. The Federal Reserve System, OCC, FDIC and NCUA guide internal audits; all financial institutions must adhere to regulatory requirements regarding internal controls. Organizations’ inter - nal control system consists of manage - ment’s environment and procedures, ensuring key business objectives risks are identified, evaluated and reduced. These include the reliability of financial reporting, operational effectiveness, regulatory compliance and safeguard - ing of the institution’s assets. Components of Internal Control 1. The control environment sets the tone of the organization, influenc - ing the control consciousness of its people. Foundation for all oth - er components of internal control, providing discipline and structure. 2.Risk Assessment — business’s anal - ysis and identification of relevant risks relating to the achievement of its objectives. This forms a basis for determining how the risks should be managed. 3.Control activities — procedures and policies which help ensure that management directives are carried out. 4.Information and communication are the identification, capture and exchange of information in a form and time frame that enable people to carry out their responsibilities. 5.Monitoring is a process that assess- es the quality of the performance of internal control over time. It is important to remember that in- dependence is critical to the internal audit function. To accomplish the audit function’s objectives, personnel must maintain total independence from your management or other employees. Recovering Lost Data Dealing with attacks on your finan - cial institution is tough, and there are many aspects to consider in the recovery period. Recovery money is important, but another issue is data loss and your potential obligation to report it. Forensic accountants help you recov - er data in many ways: • Coordinating with legal services that are well versed in cybersecurity and reporting requirements. • Investigating information from email accounts and preserving and analyz - ing workplace devices used by those with compromised credentials or used by those who may have internally com - mitted fraud. • Collaborate with your IT department (which could be third-party or inter - nal) and obtain logs to investigate and put preventative steps to mitigate fu- ture risk. The safety of your financial insti - tution’s data and employees is criti - cal to your success. As your organi - zation navigates through the changes of operating during COVID-19 and beyond, it’s more important than ever to make sure your financial in - stitution is protected. n T he safety of your financial institution’s data and employees is critical to your success. As your organization navigates through the changes of operating during COVID-19 and beyond, it’smore important thanever tomake sure your financial institution is protected.