Evening journal., 1891-12-02
TO PREVENT peFALcArIoNs.
An old Bank Examiner elves Rules ia
Detect and Prevent Frauds.

In q long letter to the Louisville
Courier Journal b. " Sanders, formerly
bank examiner, and previous to that
banker, referring to the information
bank directors should have, says:
81 think the way to get this information
is not to rely on the manager alone for
it. but TO bring the principal clerks into
the presence Of the directors at every
meeting, and have them present with
their own hands statements Of their de-
partment, signed by themselves. This
should bo regular custom, and being
established as such, would be no more Of
reflection on the officers than the
regular ssmi-annual expert examination,
to which every bank should be subjected
In q small country bank where the cashier
manages aud does most OF the book
keeping himself, the most commonly
adopted hiding place for fraud is Ia &C
counts with city banks, by making
fraudulent entries. But it Is different in
city banks. and it is about city banks that
Ra writing. During the time was
national bank examiner, | had to deal
with several defAleations, and always
found the clerks had more or less strong
suspicion that things we're not right and
would have been glad Of Q chance to clear
their skirts by telling all they know, II
they had good excuse. IN the case Of q
clerk who has been used all his life TO do
as lie was told, who has often done things
which he did not understand, and for
which no reason WAS given him, but
which he afterWard found Was all straight
and right. 1t takes moral courage for him
TO 20 To the directors aud say be suspects
the manager of crookedness But by the
method | propose, most Of these things
would .come out in natural way, and
unless there was collaslon between tho
manager aud the clerks, such things as
improper oVerdrafts, improper cash items,
unauthorized loans. excessive loans, etc
would be shown while they were yet
within bounds and would be checked.
In fact, the knowledge that such things
would be reported would tend to prevent
them. OF course, I know the plan | sug-
Fest would not prevent defalcations by
tellers and clerks, but | am only writing
now about lncompeteney and corruption
by the higher officers.
Let me give my idea of what should be
a part of the proceedings at every regular
weekly meeting of the directors Of the
bank.
First-Have type written copy of the
condensed weekly statement laid before
every director. They will grasp 1t In
gross and Ia detail better than by having
the cashier read 1t oYer rapidly.
"Second-After reading the minutes,
have the teller appear before the board
with detailed statement Of his cash,
signed by himself, showing the amount
Of coin. bank notes. exchanges for clear
ing house, and last but rot eist, his cash
items. This last has been the ruin of
many bank aud many bank man. Let
the essh items be listed in full, with
memorandum OF how long each one has
been carried and by what officer it was
authorized Let ths teller remain
3 moment OF two to answer any question
that may be ssked, and then retire
Third-Let theiRdividHal ledger keeper
be called In and let him present to the
beard a statement signed BY himself 10
the effect that the following Il all the
oysrdrafts appearing on his ledger. Lot
the list show how long they have bssn
running, and by whom authorized, and
whether secured or not and Il secured,
by what. After remaining few moments
ready 70 answere any quesvton, let MIN
retire.
"Fourth-Let the discount clerk aP
pear with list signed by himself, stat
ing that the following is complete list
Of all loans and discounts made since last
meeting naming the collateral and by
what officer authorized, If the direct
ors prefer, the small loans less than q
certain specified amount might DO omit
ted. A list OF liabilities to the bank
as payer aud endorser ever certain
amount specified by the board should be
| furnished weekly; also a statement of
amount Of past due paper and q list OF
the same. If desired. The discount
clerk could then retire It would also
be we'll to have the liability ledger. with
its index, lying on the table during the
sessiOn of the board, that any director
might consult it at his pleasure
fIt would then be in order for the
manager to make any explanations he
night think proper, and to answer any
questions asked. The directors who dis
charge their duty by attending the meet
Jugs would then know what they ought
to know, and could take appropriate
action If necessary. It would soon b
known whether or not the managema aut
was good. If good, the directors would
recognize the fact, and would understand
that It was best not to hamper the mana
ger by passing resolutions Of instruction
about every little tbiug, but to let hin
alone to be governed by circumstances II
. doing for the best. The chronic obiector
should there be such would be vote
down and quietly dropped at the mex
! election. If the management should b
bad, the fact would also be msde mani
fest before IL could break the bank, an
II could be controlled and checked unit
a suitable change could be made,