Pub. 2 2013 Issue 1

6 l e a d i n g a d v o c a t e f o r t h e b a n k i n g i n d u s t r y i n k a n s a s K ANSAS BANKERS Consulting Service (KBCS) now offers compliance auditing services to banks that are members of KBCS. Since the implementation of the audit ser- vice, KBCS has performed a Bank Secrecy Act audit, an Electronic Fund Transfer Act audit, and a Privacy of Consumer Financial Information audit. KBCS also has a NACHA compliance audit and an additional Bank SecrecyAct audit scheduled for 2013. In addition to operational and deposit compliance audits, KBCS also offers audits for lending compliance. An advantage to using KBCS audit services is that, once the audit is completed, KBCS staff can assist the bank in making corrections through the legal and compliance service with no additional fee. If your bank has not yet joined KBCS, but is interested in the audit- ing service, the bank may request an audit proposal letter. The audit proposal letter will include the one-year KBCS membership fee and a list of compliance audits available, along with the estimated costs. A sample of the KBCS contract may also be sent upon request. Please contact Allison Kernin, J.D. in the KBA Legal Department to request an audit proposal letter. Kansas Bankers Consulting Service Update Terri Thomas, KBA SVP-Legal Department W ITHWIRE fraud con- tinuing to be a big problem in the banking industry, the insurers that insure banks are looking at ways to limit their exposure. Many of the losses occur when bank employees don’t follow policy. Callback verification is the most common tool used, yet often our employees don’t take the time to make the call. Many bonding companies are now requiring that, in order for coverage to apply, a callback verification must be done. The bond language usually defines what qualifies as callback verification. Callback verification typically means an outgoing telephone call placed by the bank to verify the identity and authority of the customer, or customer’s authorized representative, which 1) was performed prior to executing the instruction, 2) was placed to a verified telephone number and resulted in verbal confirmation of the amount and recipient of the transfer, and 3) verbal confirmation that the instruction had been sent by the purported customer or authorized representative of the customer. Many bonding companies are also requiring a written agreement with the customer. These companies are including language that details what must be included in the written agreement. Typically, a written agreement must include authorization by the customer to rely on voice, telefacsimile, electronic mail or electronic text instructions to make transfers; the names of the persons authorized to initiate such transfers; and an instruction verification procedure other than voice recognition. Every banker who handles the insurance for the bank should read the section of the bond that applies to wire and ACH transfers to make sure they understand the requirements for coverage and they should make sure that the employees who do the wires understand the procedures that must be followed. Limiting Your Exposure To Wire Fraud Herb Iams, President, KBA Insurance, Inc.