Tuesday, June 18, 2024

October 2011 Legal Briefs

By Mary Beth Guard

State Statutory Changes

• Small Estate Cash Release
• Protection and Preservation of Property During Foreclosure
• Time limit for customer to sue on indorsement problem
• Minor garnishment changes

The Big Why


State Statutory Changes

Small Estate Cash Release

The first time I ever appeared before the state legislature, it was to practically beg the House Banking Committee to pass proposed Section 906 of the State Banking Code to establish a workable method for banks to transfer funds to the known heirs of a deceased customer.  The year was 1991.  I hadn’t been the OBA’s general counsel for long, but I had spent most of the 80s as counsel for the Banking Department and had felt the pain of bankers who simply didn’t have a workable solution to present to the bereaved love ones of a recently deceased customer.
Those of you who have been in banking for many years remember what it was like.  Your customer died.  Relatives would come in, seeking to withdraw whatever small amount was in the decedent’s account.  You would explain that because they were individual accounts and there was no payable on death beneficiary, the funds now belonged to the estate of the deceased customer and only the court-appointed executor or administrator could touch them.  “But there isn’t enough of an estate to pay for hiring an attorney and going through all the court proceedings,” they would protest.  Rock, meet hard place.

So, the statute, which was enough of a compromise that it not only got the legislature’s vote, but was even enacted with an emergency clause so it took effect April 29 of that year (rather than the typical November 1), provided a much-needed alternative.

Fast forward to 2011.  Effective November 1, 2011, the dollar amount covered by the provision has been quadrupled, thus making it applicable in a much wider range of circumstances.  Keep in mind, however, that the statute contains strings and conditions and will not apply in some circumstances.  Here is what you need to know:
Citation:  Title 6 O.S. Section 906 (Section 906 of the State Banking Code)
Covers:  Single ownership accounts without payable-on-death beneficiaries.  Add together all single ownership accounts without PODs owned by the decedent.  Do not include any amounts in joint tenancy accounts or any amounts from accounts where your customer had named one or more payable on death beneficiaries.
Limit:  You look to the amount of the aggregate deposits held in the name of the deceased individual in your institution in single ownership accounts without PODs.  The amount upon the death of the sole owner must be $20,000 or less for this statute to apply.  (Before the 11/1/11 amendments the amount was $5,000 or less.)
Excluded.  Situations where the customer left a will.  Why?  Because if the customer did not leave a will, the funds pass under what is referred to as the “law of intestate succession.”  That means that the estate would be distributed to the known heirs of the deceased individual.  If there are no heirs, it escheats to the state.   We have all known people who were closer to their friends than their family, or who felt their family members were just fine financially (or were provided for through life insurance or a trust), or who just plain didn’t like their relatives and didn’t want them to have a dime.  That is their choice, and this statute respects it.  If the individual left a will, the estate should be distributed in accordance with the will.  If the guy wanted to leave all his money to the Ancient Aliens Foundation, far be it from us to disturb that plan.
Requirement for affidavit:  To avail themselves of the benefits of this statute, the dollar amount limit must be complied with, there can’t be a will, and the known heirs of the deceased must provide an affidavit (a sworn statement, signed before a notary) to the bank that includes certain required content, as follows:
• The affidavit must be sworn to and signed by the known heirs.
• It must show and relationship of each heir to the deceased.
• The affidavit must establish jurisdiction (for example, by attesting to the fact that the deceased individual was a resident of Oklahoma).
• The affidavit must assert the decedent did not leave a well.
• The signers must swear that the facts set forth in the affidavit about jurisdiction, heirship, and the fact that there is no will are true and correct.

Once a compliant affidavit is received:  The bank may transfer the funds to the known heirs.  Doing so takes the bank off the hook.  The statute specifically says the payment pursuant to the affidavit discharges the bank from liability as to any other party (from heirs to creditors of the deceased) and it discharges the bank from liability for any estate, inheritance, or other state taxes that may be due from the estate or as a result of the transfer.
Note that under this statute, it doesn’t matter how much your customer has in total assets.  All you look at is whether he had $20,000 or less in POD-less single ownership accounts at your bank.  Maybe he had a few million in joint tenancy accounts with right of survivorship or a boatload of money in some POD accounts in your bank, or a large amount of money in single ownership accounts at other institutions.  Doesn’t matter.  You put blinders on and just look at how much he had in sole ownership accounts at your bank without PODs and you go from there.  If there is a will, everything comes to a grinding halt.  If there isn’t, and the heirs cooperate and produce a compliant affidavit, everybody’s happy.  Well, maybe not the creditors or the folks who wish there had been a will and they had been in it.

It’s an age old problem.  This statute provides a much-needed solution, even if it’s just a partial one.
Be sure all the relevant people in your institution are aware of this increase in coverage of this statute to $20,000.

Protection and Preservation of Property During Foreclosure

If there are delinquent homeowner borrowers in your neighborhood, you may understand the frustration that exists when the homeowner has given up and moved out, the lender has not yet taken title to the property, and the vacated mess becomes an eyesore, a tempting target for vagrants, and a haven for mosquitoes (in the algae green swimming pool in the backyard) or termites.

If your institution is the lender on such a property, you know how quickly it can deteriorate and lose value.
A new law codified at 46 O.S. Section 302 that takes effect November 1, 2011 provides some new options for a creditor to protect and preserve abandoned or vacated property during foreclosure proceedings.  Here’s how it works:
The statute uses the terminology plaintiff/mortgagee throughout.  For simplicity’s sake, I’m going to use the term creditor in this article.
The creditor must commence action to either foreclose or to enforce the remedies in a mortgage or contract for deed.
The creditor must either believe, know, or have reason to know that the property is abandoned or vacated.
As a result of the abandonment:
1. Physical deterioration and devaluation of the property is occurring or has occurred;
2. There exists a risk to the health, safety or welfare of the public, or any adjoining or adjacent property owners, due to potential or actual acts of vandalism, loitering, criminal conduct or the physical destruction or deterioration of the property; or
3. There exists a risk of additional legal process for violation of law, ordinance, unpaid taxes or accrual of liens.
If the above conditions are present, the creditor may seek a court order to protect and preserve the property pending the disposition of the suit, action or proceeding before the court.
Once the motion has been filed and a court date obtained, the creditor must give a certified copy of the motion and hearing notice to the sheriff in the county in which the property is located, along with a written request for the sheriff to post a motion and hearing notice on the property.  The property must, of course, be within the sheriff’s jurisdiction.

The hearing date must be a t least 15 days from the date of posting or service of the motion and hearing notice.
Within three days of the receipt of the request the sheriff is required to physically inspect the subject property and determine whether or not the property is abandoned or occupied.  The sheriff may designate a deputy or reserve deputy to perform the inspection and posting or service.

When the sheriff’s physical inspection of the property takes place, the sheriff must either post a copy of the motion and hearing notice in a conspicuous place on the property or physically serve an occupant of the property with the notice, depending upon what the sheriff finds.

There is a fee to be paid for this service.  The sheriff shall receive from the creditor a sheriff’s service fee not to exceed $150.00 for the inspection of each property.

If the sheriff determines the property is abandoned or vacated, the required motion and hearing notice is then posted on the property and the sheriff makes a return of inspection and posting to the creditor.  On the other hand, if the sheriff determines the property is occupied or appears to be occupied, the sheriff is required to attempt actual service of the motion and hearing notice on an occupant of the property.  If a person is not available to accept service or cannot be found, the motion and hearing notice is to be posted in a conspicuous place on the property and the sheriff makes a written return of inspection and service to the creditor.

The timing for the sheriff’s written return of inspection and either of posting or service (which one depends upon what the sheriff found) is that it must be placed into the mail within 3 days of the date of the actual inspection.  The sheriff’s return indicates whether the motion and hearing notice was posted or served, attests to the fact that a physical inspection of the property was conducted, and indicates whether, in the best judgment and belief of the sheriff, the property was either abandoned and vacated, or it was occupied by either the defendant/mortgagor or a lawful tenant or other person.  The sheriff must give his reasons for his belief of whatever determination he made.
So, the motion is filed, the hearing is set, the sheriff’s department does its inspection, the notice is posted or served.  The statute says you can additionally notify (or attempt to notify) the defendant/mortgagor in another manner, such as publication at least twice in the 15-day period preceding the hearing in a publication of general circulation in the jurisdiction where the property is located.  This is optional, however.

If the defendant has legal counsel of record, the copy of the motion and hearing notice must, of course, be furnished to that counsel.

At the hearing, the court is to hear testimony of the parties, including anyone who claims to be an occupant or tenant of the property and who is not a named litigant in the pending litigation.  Testimony regarding the property’s current and previous condition should be provided by the creditor, as well as testimony regarding why the property is believed to be abandoned or vacated.

If the defendant/mortgagor or an occupant or tenant shows up and convinces the court the property is not abandoned or vacated, the court must deny the creditor’s motion, but must instead order the person who is living there to protect and preserve the property under threat of contempt of court if they fail to do so.

If the hearing is held and the defendant/mortgagor or an occupant or tenant doesn’t show up and doesn’t provide a compelling reason for not showing up, the court is required to enter an order directing the creditor to take action to protect and preserve the property pending and in anticipation of foreclosure or other enforcement of remedies in the mortgage IF the court finds that the property appears to be deteriorating or at risk of deteriorating as a result of abandonment, vandalism or any unlawful or intentionally malicious act.  Once that court order is issued, the creditor takes possession of the property and must secure it.  The court can change its mind later and vacate and set aside the order.

Because it is likely there may be personal property present, there is one other requirement – an inventory requirement.  The way it works is that once the judge has issued an order to protect and preserve property, the court must direct the creditor to do an inventory of any personal property remaining on or about the subject property, or have the personal property inventoried by an independent person.  The inventory must be filed in the court case file.  No timeframe is given for this requirement, but it is in the creditor’s best interest to do it as soon as possible.

Time limit for customer to sue on indorsement problem

(Yes, that’s the way it’s spelled in the statute.  With an “i.”  Live with it.)
The statute of limitations on a customer’s claim that an item charged against an account is not properly payable due to a forged or unauthorized indorsement is three years.  The big question is when does that three year period start to run?  An amendment to the UCC answers that question.

Title 12A of the Oklahoma Statutes, Section 4-401, which deals with when a bank may charge a customer’s account, is amended, effective November 1, 2011, with the addition of a new paragraph (e) that reads as follows:
(e) The statute of limitations on a customer’s claim that an item charged against an account is not properly payable due to a forged or unauthorized indorsement begins on the date the item is finally paid by the bank, without regard to care or lack of care of either the customer or the bank.

Previously, litigants took the position that the statute didn’t begin to run until after the drawer of the check learned about the problem indorsement and that could be years after the check was paid.  The law favors finality.  This new provision provides it and reinforces the UCC’s general “You snooze, you lose” philosophy.

Minor garnishment changes

The legislature made some minor changes to the state garnishment statutes.  Here’s what you (or your bank’s attorney) needs to know:
Effective 11/1/11:
• Title 12 O.S. Section 1173 was amended to add a new paragraph J which reads as follows:
J. A noncontinuing earnings garnishment may be suspended or modified by the judgment creditor upon agreement with the judgment debtor, which agreement shall be in writing and filed by the judgment creditor with the clerk of the court in which the judgment was entered. A copy of such agreement shall be mailed by first class mail to the garnishee, postage prepaid by judgment creditor.
• Title 12 O.S. Section 1173.4 (which deals with Continuing Lien on Earnings) was amended to insert the words “or is not paid by the garnishee within thirty (30) days from the date of the garnishment summons, and” within paragraph F, which now reads (after the added language), as follows:
F. Within seven (7) days after the end of each pay period, or, if the judgment debtor does not have regular pay periods, or is not paid by the garnishee within thirty (30) days from the date of the garnishment summons, and after any payment by the garnishee to the judgment debtor, the garnishee shall file an answer with the court clerk, and pay the amount withheld to the judgment creditor’s attorney or to the judgment creditor, if there is no attorney, together with a copy of the answer which shall state:
• Paragraph G of the same section is also modified.  It used to provide that the continuing lien on earnings attached to subsequent nonexempt earnings until one of the following occurs:
1. The total earnings subject to the lien equals the balance of the judgment against the defendant owing to the plaintiff;
2. The employment relationship is terminated;
3. The judgment against the defendant is vacated, modified, or satisfied in full;
4. The summons is dismissed; or
5. One hundred eighty (180) days from the date of service of the affidavit and summons have elapsed; provided, an affidavit and summons shall continue in effect and shall apply to a pay period beginning before the end of the one -hundred -eighty-day period even if the conclusion extends beyond the end of the period.

That language was modified.  Here’s how the paragraph reads as of November 1, 2011:
1. The judgment against the defendant is vacated, modified, or satisfied in full;
2. The summons is dismissed; or
5.3. One hundred eighty (180) days from the effective date of the summons have elapsed; provided, an affidavit and summons shall continue in effect and shall apply to a pay period beginning before the end of the one -hundred -eighty-day period even if the conclusion extends beyond the end of the period.

• Deleted from the middle of Title 12 O.S. Section 1183 (Examination of Garnishee by Deposition or Interrogation) is the following sentence:
Attached to any discovery request or notice of deposition shall be a statement that, upon failure to answer or appear, a judgment may be taken against the garnishee by default for the amount of the judgment and costs which the judgment creditor shall recover or has recovered against the defendant in the principal action, together with costs of the garnishment, and that the garnishee may also be proceeded against for contempt.
I don’t have the back story on why that was deleted.  Odd, but there you go.

The Big Why

When I was a kid growing up, I challenged everything.  I’m sure I was more than a handful (probably the reason I didn’t want any little goobers of my own), because I wouldn’t willingly do anything (or refrain from doing anything) until I felt I had been given a good explanation of why I was being asked to do so.
“Don’t run with scissors,” said my mother.  “Why not?” I queried.  I was in a hurry to get from point A to point B.  “Well, if you slip or trip, you could lose control of the scissors and they could go flying across the room and injure someone or something, or you could end up impaled on them and you could die.”  Alrighty.  Got it.  Not interested in an embarrassing demise.

Bank employees are constantly told “Do this, do that, don’t do the other thing.”  There are enough requirements and restrictions and prohibitions to give us all an Excedrin headache.  Training is constant, changes occur nonstop.  Sometimes, we overlook the value of stopping to take the time during training to explain the genesis of the requirement or prohibition  It is much easier to get buy-in (and thus compliance) when a banker understands what I refer to as “The Big Why” – the reason a particular law or regulatory requirement exists.  It also works with procedures, too.  Let me give you an example.

You have a procedure that requires that guests accompanying a renter into a safe deposit box must be identified and must sign a log indicating who they accompanied and the time period they were in the vault.  Why?  Because if there is a mysterious disappearance from any renter’s safe deposit box during a particular period of time, you want to be able to demonstrate that you knew, at all times, who was in the vault.  This would aid in your investigation and possibly point to a culprit.

Another example.  Customer has a joint account with his wife.  Husband dies.  A few weeks later, wife wants to deposit checks payable to husband into what used to be their joint account.  You can’t do it because those checks are now property of the estate.  They are subject to claims of creditors, and even if there aren’t any creditors, the funds represented by those checks will be distributed according to the deceased individual’s will or, without a will, to his heirs.  If you allow the checks to be deposited into the joint account, you’re ignoring all the rights of the other individuals (creditors, devisees, legatees, heirs) and saying “Oh, but I want the wife to have this money.”  Who died and made you the check fairy?

I find that it helps for bankers to place themselves in someone else’s shoes, whether it’s a customer, another bank, another creditor, law enforcement, or whoever.   In that spirit (and because there is absolutely nothing new on the regulatory front this month!), we are initiating our series “The Big Why.”


Imagine you are a brave soul who signed up for the National Guard.  What you thought would be a fun and challenging romp as a weekend warrior has now resulted in your being called to active duty and sent to Afghanistan, far away from your home, your family, your job and everything familiar.  Dodging improvised explosive devices and random bullets, living in deplorable conditions, eating disgusting food, enduring sleep deprivation, you are putting your life on the line for your country, fighting to ensure freedom for all.
There you are, in your foxhole or tent, or riding around in a tent, and you start worrying.  “Did my mortgage payment get made on time?”  “How am I going to cover payments on that car loan?”  “If I pay my credit card bill with its high interest rates and lots of charges I incurred before I knew I was going to be called to active duty, I’m not going to have enough money to live on or to support my kids.”    With your thoughts distracted, you can’t protect yourself and your fellow soldiers, you can’t concentrate on your commander’s orders.

What a wretched situation that would be.  That’s why the Servicemembers Civil Relief Act (and its predecessor, the Soldiers’ and Sailors’ Civil Relief Act) exists.  The intent of Congress was to give peace of mind to the servicemember by granting special protections to their rights and property interests while they are in the service of our country. The provisions of the Act allow servicemembers to have their legal rights secured until they can return from the military to defend themselves.

Because the servicemember may be earning less than prior to active duty, the law places a cap of 6% (and that includes all charges and fees, other than a bona fide charge for insurance) on the maximum interest rate for pre-service obligations.  The thinking was that when an individual incurs a debt (whether it’s a home loan, car loan, or whatever it might be) and subsequently joins the military, the person’s circumstances have changed.  The payments they could afford previously may be beyond their means now.  At the time the 6% was instituted, it was intended to be an upper cap.  Interest rates were generally lower.  In more recent times, with interest rates being higher (particularly in the 80s, because remember that the SCRA isn’t only in effect during times of war), the 6% provision meant lowering the contract interest rate.

If you understand the reason behind the 6%, you understand why it isn’t sufficient to just lower the rate to 6% and leave the payments the same (thus allowing the person to pay off the loan early).  The debt must be re-amortized so the payments are lowered and the burden is reduced.

Other provisions which help remove the distraction of financial matters from the servicemember allow the servicemember to terminate things like installment contracts on vehicles (they have to return the vehicle, obviously), provide a stay of legal proceedings involving the service member, prohibit foreclosure of the servicemember’s real estate or self-help remedies of creditors on personal property unless a court order is obtained.


Imagine that you just got your paycheck.  You have a pile of bills you need to pay, so you swing by the bank, make your deposit, then start writing checks.  The next thing you know, you’re getting a notice from your bank that it has bounced some of those checks.  You immediately call to inquire why and the bank tells you that, unbeknownst to you, it has slapped a hold on the deposit of your paycheck, so you can’t use the funds from it yet.

In the late 1990s, this was a scenario that presented itself over and over again.  It was an area that was completely unregulated.  Financial institutions were free to impose whatever length of hold they saw fit.  Not surprisingly, there were some abuses.  One national poll showed that some financial institutions were imposing holds of up to three weeks – even on cashier’s checks drawn on a bank around the corner.

What happened next was pretty predictable.  Bank customers complained to Congress and Congress did something to address the problem.  That “something” was the Expedited Funds Availability Act (EFAA), implemented via the Federal Reserve Board’s Regulation CC.

In the law and regulation, they tried to strike a careful balance between the goal of allowing the customer to have access to funds from deposited items at the earliest possible time and the competing goal of protecting financial institutions against fraud losses.

The approach was ingenious, but complicated.  They went through and looked at the risk posed by various types of deposits, then categorized them by risk, giving quicker availability for less risky items, such as cashier’s checks, cash, postal service money orders, and allowing the financial institution to delay longer on more risky items, such as ordinary checks.

Another factor was whether the item was local or nonlocal.  Since it could take longer to find out if a nonlocal check was going to be paid, the Regulation allowed a greater delay in availability.  Over the years, the Federal Reserve has consolidated its check processing regions.  Now all checks are considered local checks.
Other factors included whether the deposit was made by the payee in person to an employee of the bank, whether the deposit was made elsewhere (such as at a nonproprietary ATM).
Under Reg CC, the maximum length of time an institution can delay availability for each type of deposit is set forth.  An institution may, however, grant availability quicker, reserving the right to impose holds on a case by case basis.

The regulation applies to all customers, all types of accounts, other than MMDAs and savings accounts.  Why are those excluded?  Because, unlike a checking account, the customer typically doesn’t want to turn around and withdraw the deposited funds immediately.

In recognition of the fact that the normal hold times might not always be sufficient, the Reg carved out six special instances where longer delays may be imposed.  Those are known as exception holds, and they can come into play with new accounts, with reasonable cause to doubt collectability, with redeposited checks and more.
Because of the EFAA and Reg CC, customers are united with their money more quickly, while at the same time financial institutions can utilize the holds to protect themselves against fraud and other check-related losses.  There is a consistency from one financial institution to another, so customers have expectations that are in line with reality.


Imagine you are a young woman in your 20s with a great job.  You’ve found your dream house and you show up at your local bank to apply for a mortgage loan.  The loan officer gruffly turns you away, saying that you ought to wait to buy a house until you’re married.

Or maybe you are married.  Your husband is still in college.   You’ve finished.  You have a great job.  You go apply for the loan on the dream house.  The loan officer tells you there is no way you will be approved for the loan because you are young and newly married and likely to get pregnant and quit your job.  Besides, if you are married and want a loan, both of you need to apply.

You’re an African American or a Hispanic.  You’re looking at ads for a local lender that has amazing rates on a type of loan you’re interested in, but you notice in every single one of them every person pictured is white.  You think “They only do business with white people.  I would be wasting my time to apply there.”

You’re an Irish Catholic in the 50s.  You can’t get a banker to talk to you.

You’re on unemployment.  Your car breaks down and you need a loan to buy a used car that will allow you to search for a job.  The loan officer won’t even take an application from you because you aren’t working, even though your unemployment compensation payments just started and you’re getting more than enough to service the debt.

These are just a few of the unfortunately too common scenarios that resulted in the need for the Equal Credit Opportunity Act (implemented by the Federal Reserve Board’s Regulation B).      The law sets forth nine prohibited bases for discrimination in any aspect of lending.       

A lender cannot discriminate on the basis of
• Race
• Color
• Religion
• National origin
• Sex
• Marital status
• Age
• the fact that all or part of the applicant’s income derives from any public assistance program; or
• the fact that the applicant has in good faith exercised any right under the Consumer Credit Protection Act

The goal is for lending decisions to be made solely on the basis of creditworthiness, without regard to the color of skin, gender, whether a person is married or not, where the person came from, the religion an individual practices (or the fact the individual does not choose to practice any religion), the fact that the person has utilized protections given in the law, such as the opportunity to exercise a right of rescission or make a claim of error on an electronic fund transfer, or the fact that all or part of his income is from a public assistance program.

It’s a numbers game.  Either the applicant has the funds to service a debt or doesn’t.  The law also prohibits discouragement on a prohibited basis.  It doesn’t just focus on turn-downs either.  If a person has to pay a higher interest rate, or gets a shorter term to repay, or must pledge more collateral, or is dealt with more harshly after delinquency – and the reason for any of those negative actions is one of the prohibited bases, the law is violated.

It’s comprehensive protection.
Think about it.  How many people could achieve their goals without any form of credit?  Have a credit card to be able to conveniently travel.  Obtaining a mortgage to buy a home.  Getting financing for a new set of wheels.  Funding expansion of a business.  Credit is vital to the economy.  We all suffer when its availability is restricted due to factors that have nothing whatsoever to do with creditworthiness.                                                                                                    


A few years ago, a book came out with the title Finders Keepers.  It was a true account of an out of work dock worker who stumbled across a canister of nearly $1 million cash that had fallen from the back of an armored car on its way to the Federal Reserve branch.  It provides incredible insight into the mind of an individual with ill-gotten gain who is desperate to figure out a way to keep the money safe.

Imagine you were a drug lord, making enormous amounts of money.  Do you want to keep it at home, under the mattress?  Look around at your gun-totin’ buddies who would slash your throat in a heartbeat if they thought they could make off with your cash.

Narcotics traffickers and other criminals want to put their money in the bank for the same reason the rest of us do – peace of mind.  Law enforcement people will tell you that if you follow the money, you can often find the crime, even if you didn’t know ahead of time that there was a crime.

The Bank Secrecy Act, through the use of the Currency Transaction Report and the Suspicious Activity Report, provides vital information to law enforcement authorities to aid in prosecutions, to identify money that may be subject to forfeiture, to help them connect the dots from one wrongdoer to another, and to tip them off to the fact that something criminal may be going on.

Let me give you an example.  A bank in the D.C. area filed a fairly ho hum Suspicious Activity Report, merely noting that their customer was regularly depositing large amounts of cash, always in hundred dollar bills, always under the CTR reporting threshold.

When the IRS called to ask a few follow-up questions, the agent almost hung up before remembering one more thing he wanted to ask.  “Where does this guy work?”  “Oh, “ the banker replied, “he works for the place the stuff is made.”  “What?!?!?” bellowed the agent, “He works for the Bureau of Printing and Engraving?  You’ve got to be kidding me.”

Without the reporting requirements of the Bank Secrecy Act the Bureau might never have known it had a thief in its midst.  What started as a routine trip down to the test cash vault, where all entrances were to consist of two persons, ended up with the guard letting this one gentleman enter alone.  After all, he was the #5 man at the bureau.  While inside, he had a little day dream about how no one was watching and he could take some cash, hide it on himself, and waltz out without anyone knowing.

He didn’t do it that day, but that rotten seed had been planted in his mind and it started to grow.  He tried to go into the vault alone again, thinking surely he would be turned away without a second person to enter with him.  Once again, he was admitted by himself.  He grabbed a wad of cash and stashed it in an inner pocket, telling himself he was really just testing procedures and when they discovered the cash on him he would use it as a teaching tool to reinforce the need for dual control.  When they didn’t catch him, he lamented their faulty security and took the cash home.  Over and over and over again.

While it may seem like an intrusion into your customers’ privacy, the fact is that the Bank Secrecy Act reporting requirements have resulted in countless crimes being discovered and solved.  In terms of the Suspicious Activity Report, it all begins with a banker thinking/feeling “Something just ain’t right.”


Dwelling-related lending.  It is such an important part of our economy.  The Equal Credit Opportunity Act is in place to prohibit discrimination in all aspects of credit on prohibited bases, but how can the government know whether it’s working?  One tool is the Home Mortgage Disclosure Act (implemented by the Federal Reserve Board’s Regulation C).  The Loan Application Register (HMDA-LAR) submitted by lenders allows the government to determine whether financial institutions are serving the housing needs of their communities and helps identify possible discriminatory lending patterns.

We will explore More of “The Big Why” in future editions of Legal Briefs.