Illustration of Basic Controls Over Wire Transfers

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The following is the next installment in WNDE’s series on fraud authored by Bill Morgan, principal at WNDE. 

In October’s WNDE newsletter, we set forth the basic controls that should be in place over wire transfers.  Noted below is a “conceptual model” as to how wire controls could be established to require personal involvement and approvals by multiple high-level company officials.

Note: The illustration below assumes that these company policies apply to large-dollar wire transfers that could materially affect the company’s financial position.  The company may have different controls for small, recurring wire transfers.  Also, these control procedures may vary depending on the controls available through the participating banks or financial institutions.

Illustration: Assume that Company X has a banking relationship with Bank A, and that the following controls are in place:

  1. Company X has executed a wire agreement with Bank A, setting forth various password and encryption procedures, and other required controls.  The wire agreement with the Bank is renewed annually, and sets forth which specific Company officials are authorized the initiate wires and/or execute (send) wires.  The agreement also specifies what persons at Bank A can execute the wires.  Company officials who are authorized to do wire transfers have personally communicated with the bank officials who will be processing the wires, and recognize the voice of the bank officials that they will be doing business with.
  2. On the day that a wire will be executed:
  • Jones, the Assistant Controller of Company X, prepares the wire transfer forms, approves the form using a computer-generated facsimile signature, and submits it to Mr. Smith, the Controller, for approval.
  • Smith manually signs the wire transfer form, and emails a pdf copy of the wire form to Ms. Johnson at Bank A.  Ms. Johnson has Mr. Smith’s signature on file and compares the signature for accuracy.
  • Smith also sends an email alert to Mr. Gregory, the President/CEO of Company X, setting forth the nature and dollar amount of the wire.
  • Johnson phones Mr. Smith, and confirms that she has received the wire and the amount of the wire.  (Mr. Smith and Ms. Johnson regularly do wire transfers, and they recognize each other’s voice.)
  • Before executing the wire, Ms. Johnson sends an email alert to Mr. Gregory, the President/CEO, requesting final approval of the wire.  Using special password and encryption controls, Mr. Gregory gives final approval to the wire transaction.  If the dollar amount or the nature of the wire transfer is a cause for concern to Mr. Gregory, he can take immediately action to stop the wire before it is sent, and avoid a possible large-dollar loss.

If you have any questions or concerns about fraud and wire transfers, or any other issue relating to your accounting needs, please contact your White Nelson Diehl Evans representative.

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