Board of Governors of the Federal Reserve System

One of the many basic tenets of internal control is that a banking organization ensure that employees in sensitive positions be absent from their duties for a minimum of two consecutive weeks. Such a requirement enhances the viability of a sound internal control environment because most frauds or embezzlements require the continual presence of the wrongdoer.

In light of recent events involving significant trading losses caused by illegal activities, we believe that it is necessary to reemphasize the importance of this internal control procedure. To this end, we request that you send the attached guidance to each domestic and foreign banking organization supervised by the Federal Reserve in your district. A copy of a suggested transmittal letter is also attached.

In the attachments, we emphasize that each banking organization should assess its significant risk areas before developing a policy regarding this matter. After making this assessment, the organization should require that employees in sensitive key positions, such as trading and wire transfer, not be allowed to transact or otherwise carryout, either physically or through electronic access, their assigned duties for a minimum of two consecutive weeks. The prescribed period of absence should, under all circumstances, be sufficient in duration to allow all pending transactions to clear. It should also require that an individual's daily work be processed by another employee during the employee's absence.

If you have any questions regarding this guidance, please contact the appropriate Board officer responsible for domestic or foreign bank supervision.