For Us or Against Us?

When we talk about "over-regulation" in this industry, most times we think of the many rules, policies, procedures, requirements, mandated actions and legislation that keep our compliance officers awake at night and our training officers more prone to tranquilizers than most. We certainly have our share when you consider Regulations A through Z and then AA through FF, not to mention all the other requirements with the word "Act" behind the title.

There is another "over-regulation" that is starting to concern some in our industry, however. In taking a look at some of the recent actions taken against financial institutions, we find that in addition to private class actions, there have been combinations of two or three banking regulators, the Security Exchange Commission (SEC), the Department of Justice, FinCEN, state banking departments, insurance agencies, securities authorities, and state attorneys general who have all used their authority to investigate, bring charges, assess civil money penalties, and restrict the activities of a financial institution, all based on the same facts and incidents.

Is it really necessary or desirable that a half-dozen authorities use the same set of facts as the grounds for prosecuting the same financial institution? Since being deputized by the government under the terms of the USA Patriot Act of 2001, financial institutions have looked at the requirements of reporting under that Act with an eye towards which of the regulatory authorities can hurt them the worst. Is it any wonder they have taken to "defensive filing?" One compliance officer told me as far as filling out Suspicious Activity Reports go, he teaches his people, "When in doubt - Fill it out!"

The new reasoning is that if you decide NOT to file, you must document all your reasons to explain to the examiner why you didn't. Which takes more time than it does to file. So while FinCEN would like us to file only important, relevant SARs, the practical fact of the matter is the banks are going to take the time-saving, easy way out and file. For if the examiner doesn't agree with your reasoning, you lose anyway.

Privacy concerns have grown to such proportions now as to completely discourage financial institutions from talking to each other even in case of blatant fraud. Lawmakers did not seem to take that into consideration when they prohibited "exchange" of information.

It just seems to me that we have enough to do keeping up with all the regulations that come out of Washington without looking over our shoulders all the time to see who is walking behind us with a big club. It really is time the government started working with us instead of against us.

Copyright © 2005 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 15, No. 8, 8/05