Answer:
Answer by Randy Carey: There is no requirement to notify the regulators in a situation such as this. However, a Reg O violation, especially one that appears willful, could have serious consequences for both the executive officer and bank. The Board should be notified and the possible impact of these violations thoroughly explained. Additionally, for the banks protection the Board should ensure that appropriate disciplinary action is taken against the executive officer and proper controls are put in place to ensure that this practice does not continue.
Answer:
Answer by John Burnett: You should have appropriate controls in your overdraft processing to prevent abuse like this. If the officer in question is reversing his/her own OD fees, that's a violation of a basic policy against self-dealing and abuse of position. If the officer is involving others in reversing those fees, the complicit individual should be directed to refuse any further such refunds. Many banks move the handling of insiders' accounts to a centralized area to provide better controls and lessen the potential for an insider to abuse the system. A centralized overdraft decision for the insider in question would be a cinch: bounce the check, charge the fee.
First published on BankersOnline.com 2/12/07
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