Sometimes I Wish For The Good Old Days

Sometimes I Wish For The "Good Old Days"

Some of us that have been in the financial industry for longer than a little while sometimes get frustrated with the "new kids" on the block? and with the new worries that Congress and the regulators are piling on the industry.

It has long been the practice, especially among security officers, to share information freely with other security officers-knowing that confidentiality will be honored.

If a kite was going down in my shop, and I knew there were two or three other financial institutions involved, I would call the security officer of each one and apprise them of the situation so they could take action on the account, and not lose money due to the fraud. (Of course, security officers will understand that I didn't call until I was sure I was whole! That went without saying!)

If we were in a loss position by the time we called the other financial institutions, and the kite was obvious and blatant, and they still had money, we indemnified the other institution and they would send us the funds they had on deposit. They would then notify their customer that they had done so?and close the account. If the customer, who had already violated a federal law by kiting, decided to sue them, we (the indemnifying financial institution) would have defended them. In my almost 25 years in the business, I've never heard of a suit being initiated in this kind of case.

We didn't check with our attorney, or with our compliance officer to see if we could call each other or indemnify each other. It was just part of our way of doing business. We were able to do our job and protect our financial institution.

Life isn't so simple any more. Now, before we call that other financial institution, we have to be careful we are not "invading privacy" and risking being sued. If we call the FBI, or the Secret Service, or (in the case of structuring or money laundering) the IRS for help, we have to be sure we are not violating the Financial Right To Privacy Act or the Bank Secrecy Act.

If human resources or personnel has some reason to want to check further on an application of a former bank employee, all they can get out of the prior employer is the date of hire and the date of leaving. They are even hesitant to answer the "Would you rehire?" question. As a matter of fact, most refuse to answer. As a result, you may be hiring the employee that was fired with cause from another financial institution, and putting your shop at risk. (And you're probably paying a higher salary because you are hiring someone with prior experience!)

I don't often yearn for the "good old days." But being a security officer, or a compliance officer, or even a financial institution lawyer was easier when you didn't have to watch for "incoming" from all sides?when we could share information without fear of winding up in court making somebody wealthy at our expense.

Copyright © 1994 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 5, No. 3, 11/94