40 JULY / AUGUST 2021 IBA INSURANCE SOLUTIONS This article, authored by my good friend, Craig M. Collins of Intact Financial Insurance Specialty Solutions, addresses the importance of vacation policies. Chuck Maggard President/CEO IBA Insurance Solutions cmaggard@inbankersins.com IBA Insurance Solutions is a Preferred Service Provider and subsidiary of the Indiana Bankers Association. If you’d like assistance from IBA Insurance Solutions, please give us a shout or send an email. We’ll be happy to be of service to you and your team. Did Everyone Take Their Summer Vacation? Va∙ca∙tion, noun – 1) a period spent away from home or business in travel or recreation; 2) a. a scheduled period during which activity (as of a business, court, or school) is suspended; b. a period of exemption from work granted to an employee. 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 32 years of underwriting fidelity insurance for banks, the largest losses I have seen were 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 who normally speak only 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 two to three 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 five consecutive work days and two weekends on each side (nine 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. The banking industry, however, 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. HB
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