Unfortunately, I have had multiple reasons in the past couple of years to find out what is covered under my homeowner’s and auto insurance policy. My basement flooded in December 2016, and I got hit by a deer in December 2018. I know, Happy Holidays, right? I spent years feeling good about being insured and knowing that if something happened, I would be covered. Unfortunately, in one of these instances I realized I was not covered under my insurance policy because of the type of flooding that happened in my basement. This was a very distressing situation, especially as a new homeowner. I learned not to take anything for granted and to make sure I know what my insurance coverages are.
How does this apply to your financial institution? During our testing of wire transfer procedures at most financial institutions, we test your wire transfer policy to ensure it complies with your financial institution bond insurance policy. A lot of financial institutions believe they are covered in case of a loss on a fraudulent wire but would not be, based on their current procedures. Bond insurance policies have varying requirements regarding wire transfer coverage, including passwords, PINs, callbacks, and wire transfer agreements. These requirements can be cumbersome and require a lot of extra work on behalf of your wire transfer staff and, if requirements are not followed, could result in a significant loss to your financial institution. In addition, there are usually specific requirements for how the wires are received (fax, phone, email, etc.). Therefore, it is important to review your bond insurance policy now and every time it is up for renewal. When working on a renewal (or at any point during the coverage period), ask your insurance agent to determine what the specific requirements for coverage are. Insurance language tends to be relatively vague and getting specifics from your insurance agent will help you ensure you are covered in case of a loss. Wire transfers are not the only area of the financial institution covered by the bond insurance policy, and it is critical to know all the requirements for coverage for all areas of your financial institution. Periodic review of your bond insurance policy will help ensure you are not in the same situation I was and are covered in case of a loss. If you have any questions, reach out to us.