Information overload?

Northwestern Financial Review, Jul 15-Jul 31, 2003 by Bengtson, Tom

With the passage of the USA Patriot Act following 9-11, bankers find themselves in the trenches in an effort to root out terrorists. New customer identification rules are supposed to be in place at all banks by Oct. 1. Bankers are being required to record more information about customers and retain that information much longer than they otherwise would. I am confident that bankers will do their part; I wish I could be a little more confident about the various government agencies that might use this information.

A month after the World Trade Center terrorist attack, the Wall Street Journal reported that Mohamed Atta received $100,000 in wire transfers from the United Arab Emirates a year before the terrorist attack. A bank, which is unnamed in the 10-11-01 Journal article, filed a suspicious activities report (SAR). No action was taken on the report and Atta is now suspected of having flown one of the airplanes into the World Trade Center. The article says the Treasury Department's Financial Crimes Enforcement Network wasn't even aware of the bank's report until after 9-11.

Bankers don't have a choice about complying with the Patriot Act, the Bank Secrecy Act or any other rules pertaining to potential crimes. But bankers would feel a lot better about more demanding information collection requirements if they knew existing rules were already being used effectively. According to this particular Journal article, one key piece of information was missed. You can't say the terrorist attacks of 9-11 would have been avoided if someone had followed up on that SAR, but I think we'd all feel better had it not been missed. Certainly, if the bank hadn't filed the report, someone would have blamed the 9-11 attack on the bank.

With more than 150,000 SARs filed every year, bankers need to know what the follow-up plan is for such information. If bankers already are providing more information than can be reasonably processed, then perhaps the effort should be refined to collect and report only the most important information.

Bankers are actually fortunate in that they are already doing many of the things required by the Patriot Act. Other sectors of the financial services industry, not accustomed to significant regulation, will feel the impact of the Patriot Act much more than banks. But whenever a new compliance obligation is added to the banking industry, you hope it is worthwhile. The war against terrorism is a very important effort, but it won't succeed unless everyone is doing their part. No banker wants to do his part only to watch the next guy drop the ball.

By Tom Bengtson, Publisher