Due diligence: two important words for all those who wear the white hats

RMA Journal, The, Oct, 2004 by Harris S. Berger, William F. Gearin

Employee Responsibilities

Employees are responsible for adhering to the Due Diligence policies when opening any type of account relationship, i.e., new accounts, DDA, loans both consumer and commercial, and any other relationships that could create liability to the FNB. They must be alert for any activity that would constitute a violation of local, state, or federal law. Employees are responsible for reporting these situations to their supervisors immediately upon discovery.

Notes

(1) A blow-by-blow account of the S&L crisis is a demonstration in creating conditions for a "perfect storm." For those who like to reminisce, visit http://www.fdic.gov/bank/historical/s&l/.

(2) Some personal recommendations from the authors:

* Corporate Resolutions (212-691-3800) in New York City, managed by Ken Springer, is an example of a versatile company specializing in due diligence investigations for the banking industry.

* Now that banking is global in nature, CTC LTD (407-655-3111) in West Palm Beach specializes in obtaining information in foreign countries. Fred Rustman, a former CIA operations officer, is the principal.

* Security Software Solutions (800-681-8933) in Tucson--Tim Rollins, president--has information on Social Security numbers. They now have the capability to provide a name and address on a given number on either an individual inquiry or in batches up to 10,000 and beyond. After Shawmut National Corp. lost $2.5 million to a con man from Texas, the bank checked his SSN and learned he had used his father's first name and SSN on the loan because he had just been paroled from state prison in Texas for loan fraud. For the minimal cost of verifying the SSN ($1.35), Shawmut could have prevented a $2.5 million loss.

* A source of due diligence service in the Northeast is National Data Verification Services (781-681-8000), Dan Lalumiere, president.

Harris Berger, formerly a senior credit officer at Bank of America, is a partner of the bank consulting firm of Webb, Berger & Associates. Bill Gearin has 51 years of combined experience in law enforcement and banking and retired from Shawmut National Corporation after 27 years. Since his retirement, he has performed bank security consulting services for financial institutions across the U.S.