Protect your organization and clients from loss with a financial institution bond, designed to complement your institution’s existing management and professional liability program. Keep reading to learn more about financial institution bonds or contact ALIGNED to speak with a financial institution bond expert.
What is a financial institution bond?
A financial institution bond is a type of crime or fidelity bond. Despite the name, they function as insurance policies rather than bonds. They are designed to protect banks and other financial institutions from losses relating to employee dishonesty, forgery, burglary, robbery, and other crimes. These types of bonds are mandatory due to regulatory requirements for various financial institutions and regulatory bodies.
Is a financial institution bond the same as a fidelity bond?
Yes, a financial institution bond is a type of fidelity bond. Fidelity bonds are designed to protect companies and their clients from employee dishonesty. Financial institution bonds are a type of fidelity bond created specifically for financial institutions like banks, asset management firms and insurance companies.
What are the main types of financial institution bonds?
There are three main types of financial institution bonds:
- Form 14
- Form 24
- Form 25
There are also several types of financial institution bonds, and which one is right for you depends on the type of financial institution you run. For example, fidelity bonds exist for asset managers, banks, insurance companies, investment companies, and broker-dealers.
What do fidelity bonds cover?
Fidelity bonds can protect your financial institution from a wide range of risks, though the specific risks depend on the bond you choose. For example, if a hacker sent an email to a bank pretending to be a customer, asking the bank to send them a sum of money, and the bank employee, following protocol, wired the money, only to discover later the request was fraudulent, your bank can be protected under your fidelity bond.
Other risks your fidelity bond may provide coverage against include the following:
- Computer fraud: This protects against the theft of funds resulting from a computer hack.
- Assured’s funds transfer and social engineering fraud: This provides coverage for the firm’s capital in the event that an executive or vendor is impersonated.
- Customer’s funds transfer and social engineering fraud: This covers the loss of funds from a customer’s account if someone impersonates a customer.