Why Concurrent Audits Are Key for Bank Transaction Safety

Introduction:

Ensuring continuous transaction monitoring is crucial for financial institutions. Banks require a consistent, uninterrupted system to scrutinize transactions, and concurrent audits come in handy for this purpose. Concurrent audits offer simultaneous evaluations of financial transactions, effectively serving as an early warning mechanism for banks to swiftly identify potential discrepancies.

Concurrent Audit Procedure

Concurrent audits cover all banking transactions and demand an in-depth comprehension of banking procedures, which include:

• Acceptance of deposits
• Loans and advances
• Cash management
• Safety lockers
• Forex
• Bill payments

Executing a concurrent audit involves translating bank operations into transactions with established checks and balances.

Acceptance of Deposits

Deposit acceptance forms the backbone of any bank, where types of deposits vary by the account holder and purpose. This process includes:

• Gathering account details
• Compliance with KYC and AML regulations
• Setting up accounts in the Core Banking System (CBS)

Essential steps for ensuring accuracy:

Serial No.	Checkpoints	Yes/No
1.	Is the account opening form duly filled?
2.	Is the application signed by an officer?
3.	Are all proofs collected and verified as per KYC and AML?
4.	Are details correctly inputted and the account created in CBS?
5.	Is the signature and photo scanned into CBS?
6.	Are account number, customer ID, and opening date on the form?
7.	Are documents filed and stored properly?
8.	Are interest rates correctly applied and verified via test checks in CBS?
9.	Is the lien marked for fixed deposits with overdraft (OD) facility?
10.	Are charges and penalties correctly applied?

Loans and Advances

Lending is pivotal to banks, who earn by charging higher interest rates. Nevertheless, the risk of non-repayment necessitates rigorous documentation.

Typical loan procedures involve:

• Establishing a client relationship
• Document collection
• Assessing the customer's credibility
• Disbursing and overseeing the loan

Mitigating risks of defaults and frauds requires:

Serial No.	Checkpoints	Yes/No
1.	Is the application completely filled?
2.	Are all documents collected for processing?
3.	Are documents self-attested and verified with originals?
4.	Are credibility checks like CIBIL reports performed?
5.	Are guarantors' documents collected as well?
6.	Are pre-sanction and post-sanction inspections conducted?
7.	Are all processing charges collected?
8.	Do interest rates align with bank policy?
9.	Does the sanction letter include all necessary details?
10.	Are details recorded accurately in CBS?

Cash Management

While maintaining significant cash reserves for ATMs, banks must avoid having excessive cash reserves to prevent interest losses. Audit processes should include:

Serial No.	Checkpoints	Yes/No
1.	Check cash balances in the cash book and adherence to policy.
2.	Conduct random audits for cash verification.
3.	Verify insurance coverage and secure handling of cash.
4.	Validate authorizations for large cash expenses.

Safety Lockers

Banks offer safety lockers to safeguard customer valuables. Auditors must:

Serial No.	Checkpoints	Yes/No
1.	Is the locker register accurately maintained?
2.	Is the rent for lockers collected as per size, and are any deviations justified?
3.	Does the rent account in CBS reflect all activities?
4.	Is the locker insurance policy up to date?
5.	Are there any suspicious locker usage patterns?

Forex

Regarding bank forex operations, the audit should confirm:

• Accurate entry of foreign exchange rates on transaction dates
• Adherence to RBI forex norms
• Correct forex valuation during audits

Bill Payments

Banks handle public utility payments, and auditors should confirm:

• Are standing instructions from customers logged in CBS for automatic payments?
• Accurate reconciliation of utility accounts

Income Leakage

In concluding the audit, ensure all charges have been collected, verify CBS interest rates, and use MIS for analysis of charge collections. The process of rate changes should be documented and monitored closely.

Ultimately, concurrent audits are essential to bridging the gap between when transactions occur and when they are reviewed, acting as the bank's secondary defense line.