Pub. 7 2017-2018 Issue 5

14 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 don’t immediately go into de- fault,” Ewing explains. “They take proceeds to pay back the loan and keep pyramiding it up until the house of cards falls down.” To prevent this type of crime, Ewing recommends the loans be audited fairly frequently to en- sure that established loan pro- cessing procedures are followed. Read your policy Although proper controls can go a long way to either eliminate or mitigate loss, it’s important that banks have the necessary insurance to limit losses. According to O’Connor, all financial institutions bonds are relatively the same, but they do have their nuances. Coverage for embezzlements is called Coverage A, O’Connor notes. “It’s important that the banker read this section of the policy as it outlines what constitutes an embezzlement,” he says. In addition, there is always a separate paragraph addressing embezzlements that deal with loans. “This section should be looked at closely as words such as ‘active and conscience pur - pose’ or ‘manifest intents’ or just ‘intent’ are often included,” he explains. “These words have been adjudicated in the courts many times over the years.” “However, the bank must show that the loan officer knew the loan he/she was presenting wasn’t a good loan (they may lie about the qualifications), someone else was involved and that they received some sort of financial benefit (or would have received). The policies are writ- ten this way because insurance companies don’t pay for bad loans.” n Facts & Stats • In 2016, the financial services industry had the highest single loss at $54 million, as well as the highest total loss at over $120 million. In the $54 million loss, a private equity fund manager submitted false invoices, substantially overstated the prices of international business deals and set up fraudulent bank accounts in the employer’s name and the companies in which his employer invested. • Almost 18 percent of employee theft cases surveyed occurred in the financial services industry, with a median loss of $273,843. • 68 percent of employee embezzlement cases occurred at companies with fewer than 500 employees. • 37 percent of schemes in financial services last longer than five years. • The most common methods used in long-run- ning schemes were check fraud and funds theft. Source: HISCOX, “2017 Hiscox Embezzlement Study: A report on white collar crime in America.”   continued from page 13 Today’s banks are searching everywhere for a technology partner that does business the same way they do—a commitment to innovation and a focus on service . Well, look no further than CSI. Our innovative solutions and customer-centric approach are the secret combination you’ve been waiting for. csiweb.com/Secret SECRET FORMULA REVEALED!