Risk Management Manual of Examination Policies - FDIC

Audit and Internal Controls - Internal Controls 99999
NOTE: A negative answer below indicates a condition which may be in need of correction. Such
answers may call for comment below and elsewhere in the regular examination report.
INTERNAL CONTROLS
YES NO
7. Are all contracts recorded on the date contracted? X
8. Is it a firm rule that all forward and spot contracts be confirmed at inception? X
9. Has the bank instituted an effective and current (within seven days) follow-up system regarding
unconfirmed and/or incorrectly confirmed forward and spot contracts? X
10. Are foreign exchange contracts and dealing slips prenumbered and used in such order? X
11. Does the bank have an effective system of controls over the trader and the trading environment?
A “Yes” answer to this question will necessarily require a “Yes” answer to each of the following
(as a minimum).
Is it a firm rule that:
X
(a) The trader not be allowed to receive confirmations on forward and spot contracts?
X
(b) The trader not be allowed to sign contracts?
(c) The trader be prohibited from initiating and receiving interbank funds transfers, opening
X
current accounts, or receiving credits to current accounts?
X
(d) The trader not be involved in the revaluation procedure?
(e) Trading activities be segregated from other bank activities, in particular the accounting,
X
confirmation, and report functions?
X
8-9 Although the bank has a firm rule regarding the confirmation of spot and future contracts, it was observed
that outgoing confirmations are frequently incomplete, with dates of trade and value dates frequently omitted.
Further, the confirmation exception log is haphazardly prepared and is not reviewed by an operations officer.
These deficiencies were noted by both the bank’s internal and external auditors; however, correction is yet to be
effected. It is recommended that these areas of potential exposure be remedied at an early date.
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