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University of Washington External Audit Process Discussion
Prevention
Fraud prevention is an important concept that every organization must consider. Indeed, companies should always prepare themselves to navigate the numerous fraud risks attributed to being in business and dealing with vulnerable assets such as monetary finances, resources, revenue, and even funds from investors and numerous other sources. Primarily, organizations should have in place a risk management protocol, a code of conduct, and communication and training approaches in fraud prevention. This memorandum addresses these aspects as they apply to Wells Fargo in the efforts of effectively protecting the company from fraud.
Risk Assessment
1. Products and Services: In 2013, Wells Fargo employees in Southern California were engaging in aggressive tactics to meet their daily cross-selling targets. Approximately 5300 employees were terminated over a five years, for opening new accounts and issuing debit or credit cards without customer knowledge, in some cases by forging signatures, blinded by sales goals (Tayan, 2019). Products and services have several risks at Wells Fargo, where the riskiest ones involve the heaviest possibility of being used for money laundering activities. Wells Fargo should determine how to rate each product and service, whether a particular product or service enables significant volumes of transactions to occur rapidly; does it have plenty of anonymity; does it require identification to complete; or has unusual complexity in them. The company should evaluate by hiring an independent consulting firm to review all account openings from a specific time period and eliminate goals directly related to sales. The company should also develop newprocedures for verifying account openings and introduce additional training and control mechanisms to prevent violations. Some products and services that are particularly risky include private banking, offshore international activity, loan guarantee schemes, wire transfer and cash-management functions, and transactions in which the primary beneficiary is not disclosed.
2. Sarbanes Oxley Compliance: The Securities and Exchange Commission has charged two former top executives at Wells Fargo with misleading investors about the bank’s financial performance. These latest charges accuse those executives of making false statements to investors about the success of Wells Fargo’s operations, including false certifications about the accuracy of Wells Fargo’s financial statements (Kelly, 2020). This is a direct violation of the Sarbanes-Oxley Act, and one the SEC almost never enforces. Wells Fargo management should perform a formal assessment of its internal controls over financial reporting (“ICFR”), including tests that confirm the design and operating effectiveness of the controls and include in its annual report on Form 10-K. External Auditor should provide an independent opinion and traditional opinion on the effectiveness of the ICFR and on the financial statements.
3. Customers: The US Treasury’s Office of the Comptroller of the Currency (OCC) has issued a 25-page order in 2015, mentioning Wells Fargo’s customer due diligence (CDD) practices were “unsatisfactory” (ACFCS, 2019). Customer due diligence (CDD) and Know Your Customer (KYC) initiatives should be designed properly in Wells Fargo to verify if customers are who they say they are, confirm they are not on any prohibited lists and assess their risk factors. Customer and entity risk is extremely complex. Certain types of customers may pose heightened risk. Through customer due diligence, Wells Fargo will gain understanding of the types of transactions in which a customer is likely to engage. This helps identify potential risk and determine an appropriate level of monitoring. Enhanced due diligence (EDD) is applied to those deemed to pose higher risk and their activity should be reviewed more cl
4. Geographic Locations: Wells Fargo should perform risk assessment for its geographic locations, by breaking it down into jurisdictions and countries. They should monitor where individuals reside and what their citizenships are and where businesses are headquartered and where they conduct the majority of their business. There is no single way to risk rate geographic locations, so a number of methods should be used. Some methods for determining geographic risk include looking at heat maps or at defined regions such as High Intensity Drug Trafficking Areas (HIDTA) and High Intensity Financial Crime Areas (HIFCA); finding out whether the country is a member of FATF or has AML requirements equivalent to international best practices; question the overall reputation of the countries; access the website knowyourcountry.com; access the U.S. State Department’s annual International Narcotics Control Strategy Report, which rates over 100 countries on their AML controls. Wells Fargo should consider several steps to
Code of Conduct
Wells Fargo’s code of conduct touches on a wide variety of aspects directed at ensuring that all persons within the company act accordingly and do not sway away from the expected behavior. All employees are expected to comply with the applicable laws and regulations as outlined in the laws of each jurisdiction area the company operates. Apart from that, liable persons are expected to conduct appropriate accounting practices by documenting all necessary information as required by the company, accounting for all transactions, and maintaining all company funds in accounts under the company name. All improper payments will be addressed carefully and with immediate effect, and all confidential information and trade secrets shall be maintained under a high privacy level. The use of company assets and resources must be in line with the company guidelines, and credit reports and employee background checks will be conducted whenever needed or necessary.
Here is the actual proposed code of conduct for the company:
· Serving customers – The company should not access or use customer information except for appropriate business purposes and must protect the confidentiality and security of the customer information.
· Ethical decision making – The company should strive to make good, responsible decisions and to do the right thing.
· Relationship based on honesty, trust, fairness, and respect – Treating customers and other community members with honesty, trust, fairness, and respect contributes to strength and longevity in the business relationships.
· Conflicts of Interest – It should be the Company’s policy that staff members do not engage in personal conduct that will conflict with the interests of the Company.
· Manage risk – The company should take personal ownership of risk management and should contribute and support the work they do to serve its customers, clients, communities, shareholders, and employees.
· Acceptance or giving gifts – Staff members shall not solicit, accept, or retain a benefit for themselves or for any third party from any customer of the Company.
· Comply with laws and regulations – Observe all applicable laws and reporting requirements.
Communication & Training Plan
Ethical training is quite critical for companies and employees and especially for a large corporation such as Wells Fargo. It is imperative that the social and moral perspective is given importance in the way our company indulges in conducting its business practices. The ethics training keeps our company and its management morally grounded and socially aware so that they take business decisions ensuring utilitarianism fundamental and keep any kind of anti-social and unethical perspectives and scandals at bay (Girgenti & Hedley, 2011).
The objective of Wells Fargo’s ethical training program includes:
· Inculcate critical thinking ability among the employees so that they can come up with a way out in any kind of ethical dilemma in business
· For all management and leaders within our company to propagate the culture and value system of the company
· For all upper management to maintain clear communication lines among the stakeholders and process owners as well as overall employees of the company
The following objectives will focus primarily on communication within our corporation:
1. To improve better communication skills, there are various on the job training such as mentoring, coaching & guiding which will help the groups of people working to communicate better and improve the overall performance of the business.
2. Communication is not a one-day show, it must be reviewed and checked properly so that it, not stop the business performance. Proper off the job training in a classroom session & will help to monitor ourselves & will improve the communication group of all to enhance better productivity of the business.
3. Certain communication hacks will help the people working to do the job smoothly such as, how to listen, how to speak when to meet the client, what to communicate, how much to