Editorial Priorities

A financial institution on the east coast was fined $368,000 this August for money laundering violations.

The fact that it had been fined for criminal charges was not the worst of the story, reported in the August 1 American Banker. Worse than the fine in 1990 was the fact that in 1986 the bank in question had been warned and cited for instances of having improperly exempted transactions from reporting.

But between 1986 and 1990 it had taken no action toward remedying what Treasury called "a woefully inadequate Bank Secrecy Act compliance program which led to a number of violations and created a situation ripe for money laundering."

Many other financial institutions have been fined hundreds of thousands of dollars for the same offense during the past year. How can it be that in 1990 there still exists any institution that is not aware of the exposure and vulnerability to money laundering and takes no action to protect itself?

The Bank Administration Institute conducted a poll which indicated that the majority of financial institution managers consider training a critical issue over the next two years. However, many institutions (close to half, according to the survey) do not have formal training programs.

There are certain areas where training is not only advisable, it is also mandatory, according to the law of the land. Three of these areas are:

Regulation CC (any employees who have any responsibility in the availability of funds must be informed of the law and the regulation)

The Bank Protection Act (which requires training in case of robbery, among other requirements) and

The Bank Secrecy Act (including the Drug Abuse Act, Money Laundering and currency transaction reporting.)

These training requirements are not new, and should be familiar to every banker. However, in the banking industry where mergers, job shifts, lay-offs and the importing of management from other industries is common, the basic requirements are often overlooked.

Sometimes, the required training is pushed down the list of priorities-replaced by cross selling training, or product knowledge training. These programs are often expensive and time consuming. The responsibility of the required training is then relegated to "on-the-job" training.

A call came into this office one day from a small institution that wanted a loss prevention program for their tellers. The Security Officer explained that he wanted to make tentative plans for the session, but we had to wait until the sales promotion was over. They had a bonus program going for new accounts at the time, and management didn't want to complicate the image of selling by "cluttering up the minds of the customer service reps and the tellers with things like identification and verification!" We could tell there was considerable conflict between the Security Officer and the Marketing Officer!

Much to their dismay, the loss prevention training was too late. By the time we scheduled the seminar, they had opened several fraudulent accounts and a kiting scheme cost them over $300,000. The information on the new accounts application was easily discernable to an experienced, trained new accounts representative as being fraudulent. The loss could have been prevented by the proper training of new accounts personnel.

Marketing and Security need to sit down together and discuss priorities. They can be too costly to ignore!

Copyright © 1990 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 1, No. 8, 8/90