Pub. 11 2014 Issue 2

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 N E W M E X I C O R E A L I Z E D R E A M S Summer • 2014 15 beer. The bank owner paid the store owner for the damage and beer. No crim- inal charges were filed. Five years later, the bank owner wanted his son to work for him at the bank. What do all of these incidents have in common? They are all dishonest acts in which the bank did not end up losing any money. However, in each case the bank lost an employee. Banks have a special place of trust in the community. Bank employees deal with the public’s money and finances. This special trust comes with responsi- bilities and with substantial penalties for committing any dishonest or fraudulent act. Under the Financial Institution Crime Bond, Section 14, paragraph 2, it states: “This bond terminates as to any Em- ployee … (a) as soon as any Insured, or any director or officer of an Insured who is not in collusion with such person, learns of any dishonest or fraudulent act committed by such person at any time, whether in the employment of the In- sured or otherwise, whether or not of the type covered under Insuring Agreement (A), against the Insured or any other per- son or entity …” As soon as a director or officer of the bank learns of any dishonest or fraudu- lent act by an employee, the bonding of the employee is immediately terminated as to all future acts. How long ago the act happened does not matter. The amount of money involved does not matter. Whether or not it involved something at the bank does not matter. The termination of the bond as to the future acts of the employee is automat- ic and immediate. The termination ap- plies even if the bank does not inform the bonding company of the dishonest or fraudulent act. The penalty for retaining an employee after learning of any dishonest or fraud- ulent act is that if the employee commits future dishonest acts against the bank, the bank would have no protection for the loss under its Financial Institution Crime Bond. Further, FDIC requires banks to have employees bonded as allowed by Sec- tion 18(e) of the Federal Deposit Insur- ance Act. Most states also have state laws which require bank employees to be bonded. Generally, a bank has no option but to terminate the employment of any per- son upon learning that the person has committed any dishonest or fraudulent act. n For more information, please give us a call at (785) 228-0000. redflag s nm.com | 1.800.704.5533 know the red flags. Our elderly are the targets of investment fraud , and you, as a financial professional who works with seniors, can prevent devastating financial loss by helping them recognize the red flags of cons and schemes designed to take their money. Visit redflag s nm.com or call the State of New Mexico Securities Division at 1.800.704.5533 to learn more. Financial PROFESSIONALS, you CAN HELP PREVENT INVESTMENT FRAUD ON THE ELDERLY.