Internal Control Questionnaires and Verification Procedures

Supervision by Directors and Senior Management

  1. Are the directors and senior management kept informed about the nature and magnitude of the risks in the funds transfer activity?

  2. Has the board of directors and/or senior management reviewed and approved any limits relating to the risks in the funds transfer activities? If so, when were the limits last reviewed?

  3. Is senior management and/or the board of directors advised of customers with:

    1. Large intraday and overnight overdrafts? If so, are other extensions of credit to the same customers combined to show the total credit exposures?

    2. Large drawings against uncollected funds?

  4. Is senior management and/or the board of directors, under established policies and procedures, required to review at predetermined frequencies:

    1. The volume of transactions, the creditworthiness of customers, and the risks involved in the funds transfer activity?

    2. Credit and other exposures related to safe and sound banking practices?

    3. The capabilities of the staff and the adequacy of the equipment relative to current and expected volume?

  5. Are there periodic credit reviews of funds transfer customers?

  6. Are the reviews adequately documented?

  7. Do competent credit personnel independent of account and operations officers conduct the reviews?

  8. Does the institution make payments in anticipation of the receipt of covering funds? If so, are such payments approved by officers with appropriate credit authority?

  9. Are intraday exposures limited to amounts expected to be received the same day?

  10. Have customer limits been established for FedWire and CHIPS exposure which include consideration of intraday and overnight overdrafts?

  11. Are groups of affiliated customers included in such limits?

  12. Do the limits appear to be reasonable in view of the institution’s capital position and the creditworthiness of the respective customers?

  13. How often are the limits reviewed and updated?

  14. Does senior management review the customer limits? How frequently?

  15. Are intraday overdraft limits established in consideration of other types of credit facilities for the same customer?

  16. Are payments in excess of established limits approved on the basis of information indicating that covering funds are in transit to the financial institution? If so, who is authorized to make such approvals?

  17. Are payments against uncollected funds and intraday overdrafts in excess of established limits referred to a person with appropriate credit authority for approval before releasing payments?

  18. If payments exceed the established limits, are steps taken promptly to obtain covering funds?

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