Bank Lawyer's Blog

Feds To Tribes: Don't Bogart That Roach, Roll Some More

At the same time that the federal government is trying to drive Native American tribes out of the payday lending business, it is encouraging them to get into the pot business. As long as the file those Cheech & Chong SARs that were created out of whole cloth.

Indian tribes can grow and sell marijuana on their lands as long as they follow the same federal conditions laid out for states that have legalized the drug, the U.S. Justice Department said Thursday.

[...]

Oregon U.S. Attorney Amanda Marshall said that the Justice Department policy addresses questions raised by tribes about how legalization of pot in states like Oregon, Washington and Colorado would apply to Indian lands.

“That’s been the primary message tribes are getting to us as U.S. attorneys,” Marshall said from Portland. “What will the U.S. as federal partners do to assist tribes in protecting our children and families, our tribal businesses, our tribal housing? How will you help us combat marijuana abuse in Indian Country when states are no longer there to partner with us?”

How will we help you combat marijuana abuse? By telling you that it's OK to grow it? Makes sense to me.

Here's the rub: most tribes don't want anything to do with it.

But many in Indian Country are wary of compounding existing drug and alcohol problems by growing and selling pot.

The Yakama Nation in Washington state recently banned marijuana on the reservation and is trying to halt state regulated pot sales and grows on lands off the reservation where it still holds hunting and fishing rights. The Hoopa Valley Tribe in Northern California has battled illegal pot plantations on its reservation that have damaged the environment.

In South Dakota, the Oglala Sioux Tribal Council this year rejected a proposal to allow marijuana.

Oglala Sioux tribal Councilwoman Ellen Fills the Pipe, chairwoman of the council’s Law and Order Committee, said Thursday she needs to review the federal policy more thoroughly but that given her long background in law enforcement, she opposes loosening marijuana laws.

“For me, it’s a drug,” Fills the Pipe said. “My gut feeling is we’re most likely going to shoot it down.”

In Oregon, former Klamath Tribes chairman Jeff Mitchell said communities everywhere deal with drug and alcohol issues, and tribes are likely to proceed carefully.

“I have confidence in tribal government that they will deal with it appropriately and they’ll take into consideration social and legal aspects, as well as other implications that go along with bringing something like that into a community,” Mitchell said.

Obviously, the tribes have more common sense than the feds, and much more than a majority of voters in states that want to jump on board the cannabis gravy train and ride it 'til it derails in a cloud of smoke.

Moreover, as US Attorney Mitchell helpfully observes, the activities of the tribes in this respect would violate federal criminal laws. Which is why, other than for a few outliers, the banking industry in states like Colorado and Washington, continues to refuse to have anything to do with the marijuana business.

Maybe between casino gambling and pot, the tribes ultimately will have revenge on the people who took their land and put them on reservations, further weakening an already deracinated popular "culture" that seems, in many respects, to be revolving quickly, in an increasingly tight concentric circle, around the drain hole of history.

Wouldn't that be ironic?

MJ Law 101

Being hooked up with a Colorado-based firm, I've given a lot of thought (and blog space) to the intersection of law (particularly banking law) and marijuana. As a result of these deep thoughts I'd like to say...uh...ummm..yeah...

What?

Dude!

It turns out I'm not the only one hanging out at corner of Bank and Bong Streets. So has professor Sam Kamin of my former place of abasement, The University of Denver's Sturm College of Law. According to a recent article by the editor of the The Denver Post's "The Cannabist" column, Professor Kamin will teach a course entitled "Representing the Marijuana Client." The description of the course does not describe whether the emphasis will be on representing clients who are under the influence of marijuana, are engaged in the state-lawful, federal-unlawful marijuana-related business, or are, themselves, marijuana. Taken literally, a "marijuana client" could be a joint, a roach, an edible, or merely a pipe bowl of stems and seeds.

Among the topics addressed in the course description will be "banking," and we assume that does not refer to a type of turn performed by an airplane, but, rather, the legal issues surrounding a commercial bank providing services to a marijuana-related business. As we recently pointed out, that aspect of the course can summed up rather quickly: it's illegal under federal law.

See, we saved potential students some time and money. We here at bank lawyers blog are all about mentoring.

On the other hand, as Kamin rightly points out, the issues involved are many and complex.

When I was on the Amendment 64 task force and just thinking about an edible — what can be in it, who’s determining what’s in it, what the dosage is, how you indicate the dosage, how you make sure it’s safely packaged, how it can be advertised,” he said. “Every small piece of it has so many regulatory issues, so if you’re working in that area, running a MIP (marijuana-infused product manufacturer) or something, the state, local, federal regulations of that are mind-boggling.”

As they are if you're trying to bank one of those businesses.

We wish Professor Kamin and his students well, because, this is an issue that is not going to simply disappear in a cloud of smoke. Moreover, it's not an issue confined to Colorado, but one that affects a growing number of states. Therefore, Kamin's closing statement is very cogent.

“It’s an expertise our students will have and others won’t,” he said. “There’s a lot of demand for this — and we’re trying to position our students well to fit in there.”

Yes, when it comes to marijuana, there has always been a lot of demand. As long as the students who take the course do not (even casually) partake of the subject matter, they might actually be able to render some useful advice to those in need of it.

State Nullification: Inhale Deeply

When we asked a couple of months ago whether the Cannabis Co-operative Credit Unions that have been authorized by Colorado law were "dead on arrival," we thought that the answer was "yes." Yet, there appears to be a beating heart and hopeful heart in this body, inasmuch as the State of Colorado recently granted the first such charter.

There  are a couple of catches, however. First, the NCUA still has to grant deposit insurance, which may be a couple of years away (although Colorado law allows the co-op to open its doors as long as it has "applied" for NCUA insurance). The second is that state law requires that the credit union have access to the Federal Reserve system via a master account. One of the attorneys for the credit union asserts that the credit union has a "right" to a master account. I'm not so sure, but I guess we'll see, won't we? 

This development comes on top of anecdotal evidence that a few banks are providing financial services for marijuana-related businesses and that the federal banking regulators know about it and are "tacitly" approving the same (in other words, not writing up the bank in an examination for engaging in this activity, as long as they have the right "risk-management policy" in place). If those instances denote a trend, then apparently "prosecutorial discretion" is waxing in areas other than illegal immigration. Apparently, you have to be involved in a much more heinous business like legal payday lending, check-cashing, legal gun-selling, deposit advance lending, overdraft protection, and legal online match-making before you offend the ethical sensibilities of the US Justice Department and the federal banking regulators. Engaging in organized drug financing in violation of federal criminal statutes is not worth the while of the current occupants of the executive branch of the federal government.

On the issue of whether or not recreational marijuana use ought to be decriminalized at the federal level, I'm an evangelical agnostic. I believe deeply, based solely on divine revelation and natural law informed by reason, that there are valid arguments on both sides of the issue, and I'm willing to listen to rational argument both for and against the proposition. However, the fact remains that what Fourth Corner Credit Union and those who assist it in servicing marijuana-related businesses is illegal under federal criminal laws. They are violating federal drug laws, and, arguably, engaged in a conspiracy to do so. There are a number of convicted felons whiling away their days in federal penitentiaries for having engaged in organized activity to promote the cultivation, harvesting, processing, distribution, and sale of marijuana, and the "processing" of funds derived from such activities.

This nation once almost went to war with certain states (South Carolina being the most prominent) over the theory of "nullification," whose advocates asserted that states could "nullify" within their borders the application of federal laws with which the state disagreed. President Jackson was prepared to use federal troops to invade any state that tried to put that theory into practice. Although the specific issue at that time involved tariffs, and today it involves the use of drugs, one hundred and eighty years later we seem to be on the verge of the same war, in which certain states think that they can, by changing their state laws on drugs, somehow nullify the effect of federal drug laws within their borders. A critical difference today is that the federal authorities are not only not prepared to combat the nullification effort, they appear to be accommodating it.

With several states, and the District of Columbia, enacting recreational marijuana use legislation earlier this month, and with more states expected to consider similar legislation in 2016, the issue is not going away and it's not just a problem for Colorado and Washington state. Personally, I think it would be better for the respect for the rule of law to have a debate in Congress over the merits of changing federal drug laws, or, at the very least, to have the Justice Department go through the process of considering the removal of marijuana as a Schedule 1 controlled substance. Moreover, for those financial institutions and those that aid and abet them in financing marijuana-related businesses, January 2017 could bring the second coming of a John Ashcroft wanna-be as Attorney General, and the worm could turn. If that happens, the discretion of prosecutors may be to nail your hide to the side of a barn. After all, I remember when "open bank assistance" and "forbearance" were not dirty words for bank regulators. Times change. Stuff happens.

Actually, I don't expect such cautionary advice to concern those most at risk. They're too busy inhaling and munching.

Cheech and Chong Join The FDIC

There was some rather surprising news this week via the American Banker (paid subscription required) regarding banking: the FDIC is following FinCEN's lead in telling banks in Colorado (and elsewhere) to "smoke 'em if you've got 'em."

The Federal Deposit Insurance Corp. has quietly aligned itself with guidelines from the Financial Crimes Enforcement Network that are meant to assuage bankers' fears about the burgeoning marijuana industry, American Banker has learned.

[...]

Back in February, when Fincen released its guidance, the FDIC declined to comment on the document. But on Monday, FDIC spokesman Greg Hernandez confirmed that the agency is currently using the Fincen guidance.

The FDIC's decision to use the guidance is significant because federal banking agencies had previously refused to say whether they'd align themselves with the document, which is part of a broader Obama administration push to foster state-level experiments with marijuana legalization.

[...]

During one recent bank examination, an FDIC official told the bank's directors that the agency is in alignment with Fincen's marijuana guidance, according to Lance Ott, a consultant to the bank who heard the discussion. At the same time, the FDIC employee made clear that the agency is neither encouraging nor discouraging banks from serving pot merchants, Ott said.

The FDIC official told the bank that marijuana is a higher-risk business because of its dependence on cash and the increased chance of robbery, but that pot businesses do not hold a reputational risk for banks in states such as Colorado and Washington that have legalized the drug, Ott recalled.

One commenter to that article put one ironic aspect of this recent news very well.

Lemme see if I understand this. Two federal agencies, the FDIC and FinCEN, are knocking themselves out to have banks provide services to pot businesses which are legal in only a handful of states, while being illegal under federal law. Yet the FDIC, until just recently, actively participated in overt (Operation Chokepoint) and still participates in covert efforts to pressure banks to discontinue providing services to so-called alternative financial service providers, such as check cashers, money remitters and payday advance companies, that are legal in most states and are registered (legal) with FinCEN as Money Service Businesses. Where is the logic??

Logic? You want logic? Silly boy!

At the same time that the FDIC is inhaling deeply, its counterpart in the credit union arena is apparently blowing cold.

A New Mexico credit union closed its marijuana business accounts after a negative reaction by a NCUA field examiner, according to Paul Stull, president/CEO of the Credit Union Association of New Mexico in Albuquerque.

“From what I was told, the field examiner's reaction was quite over the top,” said Stull, who declined to name the specific credit union involved in the alleged incident. “The examiner said there was no way this could be done legally.”

The credit union closed the accounts after an examiner threatened to issue a letter of understanding and agreement if it didn't do so, Stull said. To his knowledge, there are no credit unions currently offering banking services to New Mexico's licensed medical marijuana businesses.

I spoke with the chief compliance officer of a Colorado Fed-member state bank that a Federal Reserve examiner made comments to her bank to the effect "You know, other banks in Colorado are banking marijuana businesses," but when she tasked if that meant that the Fed was taking the position that as long as the bank complied with the FinCEN guidance, the Fed would not object, the examiner backed off and said that he didn't mean to imply that such activity was OK or not OK, but that each bank needed to make an individual risk decision. Whatever the hell that means.

In other words, the federal regulators are all over the board on this issue.

The head of the Washington Bankers Association spoke for all but a tiny minority of banks in both Colorado and Washington (and elsewhere).

James Pishue, president of the Washington Bankers Association, said that the vast majority of banks are still staying away from marijuana because the drug remains illegal under federal law. "There really needs to be a federal solution to this," he said.

Yes, here's the basic risk for a bank that knowingly provides banking services to a marijuana business: The...Bank...Is...Violating...Federal...Criminal...Laws. The bank has to depend on the forbearance of federal government regulators and prosecutors to continue to get away with that law-breaking activity. If that's how you want to roll, go for it. You'll look great in pinstripes once John Ashcroft's doppelganger takes over as Attorney General in January 2017.

On the other hand, you are going to need to smoke dope to comprehend the current regulatory landscape of banking dope.

Hear No Evil, See No Evil Is Not A Smart Game Plan

After posting recently about the jury verdict in New York against Arab Bank on claims under the Anti-Terrorism Act (ATA) by victims of terrorist violence, I ran across an excellent client alert from Sullivan and Cromwell that discusses a decision by the US Second Circuit Court of Appeals, rendered on the same day as the jury verdict, that involves a lawsuit against National Westminster Bank (previously discussed here), and that sheds some light on the standard of knowledge required by the ATA to hold a bank liable.

On the same day, the U.S. Court of Appeals for the Second Circuit reinstated ATA claims against National Westminster Bank (“NatWest”), holding that to violate the ATA, a defendant need only have knowledge that, or be deliberately indifferent to whether, it provided material support to a terrorist organization, and need not have knowledge of whether that support actually aided terrorist activities. See Weiss v. National Westminster Bank PLC, No. 13-1618- cv.

The client alert discusses both decisions, and gives a good primer on the causes of action that plaintiffs are pursuing against financial institutions that provide "material support" (financial services) to terrorist organizations. The discussion of the appellate court's decision is particularly interesting because the Second Circuit overturned a district court's finding that "there was insufficient evidence of NatWest’s knowledge or suspicion of terror financing, despite its provision of banking services to a nonprofit ('Interpal') that was designated by the U.S. government as a Specially Designated Global Terrorist ('SDGT') for transferring money to Hamas."

The Second Circuit held that Section 2333(a) [of Title 18 of USC] incorporates the knowledge requirement of Section 2339B(a)(1), which, following Holder v. Humanitarian Law Project, 561 U.S. 1, 16-17 (2010), “prohibits the knowing provision of any material support to terrorist organizations without r egard to the types of activities supported.” In other words, “Section 2339B(a)(1) does not require a showing that [the defendant] knew it was providing material support for terrorist activity.”

The Court held that because Hamas is designated as an FTO, to establish liability, plaintiffs were required to show only that NatWest provided material support to Interpal with “actual knowledge that Interpal provided material support to Hamas, or . . . deliberate indifference to whether Interpal provided material support to Hamas.” The Second Circuit concluded that the district court erroneously “focused on NatWest’s employees’ knowledge of Interpal’s terror financing as opposed to their knowledge of Interpal’s financing of a terrorist organization.”

The Second Circuit further found that the district court “gave inappropriate weight” to the determination of certain British authorities—namely, the Charity Commission for England & Wales, the Metropolitan Police Special Branch, and the Bank of England—to condone NatWest’s relationship with Interpal. The Second Circuit noted that the findings of those British authorities relied only on the conclusion that Interpal did not support Hamas’ terrorist activities, not “whether Interpal provided any material support to Hamas, regardless of purpose.” In addition, “[e]ven if the British authorities had investigated whether Interpal provided material support to Hamas for any purpose and had concluded that Interpal had no links to Hamas at all, . . . in the face of contrary findings—in this case by the United States Treasury Department—such views of foreign governments could not support summary judgment.”

The Second Circuit concluded that plaintiffs had presented sufficient evidence to create a triable issue of fact on the question of scienter based on (i) evidence of NatWest’s knowledge of Interpal’s SDGT designation, including that Interpal provided payments to Hamas; (ii) evidence of NatWest’s knowledge of payments from Interpal’s accounts at NatWest to Hamas and other suspected terrorist organizations; (iii) evidence that NatWest “had accounts for people connected to Hamas”; and (iv) testimony from the head of NatWest’s Group Security and Fraud Office that NatWest would terminate a customer relationship for suspected terror financing only if the customer was convicted or if there was clear evidence that the funds were used to directly support terrorist activities."

Although the Second Circuit ordered the district court to consider other grounds for dismissal asserted by NatWest, it's determination that NatWest could not rely on the determination of British authorities to avoid liability under the ATA is, as the authors of the client alert "instructive," Among the "instructions" that all banks, domestic and foreign, who do business in this country is that turning a blind eye to the nature of a customer with potential connections to bad actors is a ticket to substantial jury verdict. While playing the role of the three monkeys is not going to win you any acting awards, it may very well result in some adverse jury awards.

In the cases brought thus far, many of the plaintiffs are Israeli citizens. As I said last week, standing between Israel and its enemies is not likely to be a successful long-term business plan. These lawsuits are just one more front in a multi-front war, a war that one side considers "existential." Banks that are smart will stay out of the line of fire.

MJ Co-Ops: DOA?

Readers may recall the brilliant idea for "cannabis co-ops," hatched by Colorado legislators who, sunshine on their shoulders, were not only crying at the beauty of the concept, but apparently flying at 30,000 feet on a Rocky Mountain High. And, of course, as was the case with the Dude's soiled floor rug, they were looking for a way to "tie the room together."

Notwithstanding that the law passed and was signed by Colorado's ever-optimistic governor Hickenlooper (yes, that's his real name) in June, according to this morning's The Denver Post, the idea has generated as much movement as a convocation of stoners with a sweet tooth and a gross of Hasheys Bars.

Even with the flurry of international publicity that swirled last spring around the groundbreaking effort — one that theoretically would allow pot businesses to band together and form their own banking entity — there has been lukewarm interest in giving it a try without first knowing it's not a useless effort.

As such, there hasn't been a formal application to the federal agency that would have to approve one.

That "federal agency" is the Federal Reserve.

For now, the Federal Reserve hasn't said one way or the other — probably because there hasn't been a formal application for access to the nation's financial system.

My guess is that the Federal Reserve will channel the spirit of Nancy Reagan and "Just Say No!" On the other hand, it may adopt the response that federal banking regulators have thus far revealed with respect the requests of the governors of Colorado and Washington for regulatory guidance to banks on banking "legitimate" marijuana businesses in their states: The Mount Rushmore Response. This involves impassive staring and no audible sound.

According to cannabis industry representatives, while no applications have been filed yet, they are "seeing some movement" on the cannabis co-op front. Unfortunately, the initial meeting to discuss the first application never got off the ground when chief organizer "Dave" was unable to gain access to the conference room.

A Good Man(trap) Ain't Hard To Find

Back in 2006, we discussed the problems that one bank had when it installed what was then a relatively new technology called a "mantrap" in a branch located in a predominantly black neighborhood. Activists found the entire idea of bank personnel trapping a robber who just stole a wad of cash from the bank in a vestibule located between a rock and a hard place to be an obviously racist outrage. We were hard-pressed to find the discriminatory connection, but at the time, the bank deactivated the mantrap and opted instead to post signs asking those entering the branch to doff hats, hoods, and sunglasses. Apparently, no rappers banked there, because that strategy to deter would-be thieves generated no protests.

Fast-forward eight years and we find that unrepentant banks are still employing mantraps and...well...trapping men.

A bank robber nearly got away with the heist Thursday, until employees hit a button and trapped him between the bank's two outer doors, state police said.

He was caught in what police call "a mantrap," Sgt. Paul G. Shavack said.

The suspect tried to escape the electronically locked enclosure, attempting to smash the break-resistant glass of the windows and doors, Shavack said.

He managed to cause some damage – but didn't escape – growing frustrated and wearing himself out as bank staff looked on, Shavack said.

Police soon arrived and arrested Stephen D. Dunfee, 38, of the New Castle area, without incident, he said.

Dunfee's mug shot indicates that he doesn't appear to fit any obviously protected group (unless dumbass is now a category of homo sapien entitled to special consideration), and he is bereft of hat, hood, or shades. I think we might have passed beyond the era of mantrap sensitivity into a new time when all robbers are trapped equally without regard to race, creed, color, gender, sexual orientation, or terrestrial origin, a time when being sandwiched in a bank branch vestibule is not only considered unobjectionable but...dare we say it...right and proper.

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I am off the rest of this week to participate in two sessions at the D+H Connections Annual Users Conference in Orlando, Florida. I will see you on the flip side of the Labor Day holiday weekend. Have a nice holiday.

 

FinCEN: All's Well With Marijuana Banking

Apparently, FinCEN chief Jennifer Shasky Calvery has surveyed the battleground that is marijuana banking, decided that the battle has been won, and is telling the world to "move along now, nothing to see here" (paid subscription required).

There are 105 U.S. financial institutions providing banking services to marijuana dispensaries and other pot businesses, a top federal official is expected to reveal in a speech Tuesday.

[...]

Marijuana shops, which generate large amounts of cash and can be targets of thieves, have been lobbying for more access to the mainstream financial system. The guidelines were meant to encourage financial institutions to do business with the industry provided they met certain criteria, and Fincen Director Jennifer Shasky Calvery is expected to declare that the agency's goal has been achieved.

"From our perspective the guidance is having the intended effect," Shasky will say, according to a copy of her prepared remarks that Fincen provided to American Banker. "It is facilitating access to financial services, while ensuring that this activity is transparent and the funds are going into regulated financial institutions."

Reporter Kevin Wack points out what Ms. Calvery does not: 105 financial institutions is less that 1% of the total number of financial institutions, which means that 99% of all financial institutions won't do business with marijuana businesses that are legal under state law as long as dealing in marijuana is illegal under federal law. Most financial institutions in states like Colorado and Washington, where recreational marijuana sales and use are legal under state law, will simply not do business with purveyors of flammable and/or edible hemp-related products.

So, if the "intended effect" of the FinCEN guidance was to encourage financial institutions to bank marijuana businesses, it's difficult to see how she can make that statement with a straight face. In fact, our inside sources tell us that upon leaving the venue of her speech, Ms. Calvery was kidnapped by "Black Ops" storm troopers of the OCC and waterboarded until she coughed up the names of the Gang of 105.

There will be blood...

On another positive note, Ms. Calvery assured bankers that all those SARs they've been filing, including those "Cheech & Chong SARs" that related solely to the weed-related, are not being eaten by FinCEN's pet goat.

Between January and March 2014, teams across the country reviewed more than 180,000 of the more than 290,000 suspicious activity reports that were filed, according to the speech, which also details how the reports have been used to catch various kinds of criminals.

"So, as you can see, BSA reporting does not go into a 'black hole' as suggested by some in the financial industry," Shasky will say.

Well, knowing that 38% of the SARs filed are not reviewed doesn't exactly fill me with anything other than inertia. How about you? Are you all fired up, ready to go (file a SAR)? As to the 62% of SARs that were actually "reviewed," Ms. Calvery does not tell us with what kind of detail those reviews were performed. A cadre of anal-retentive Einsteins parsing the nuances with electron microscopes is one thing. A crew of high school students getting their community service credits in the bag while sitting in a SAR-filled bullpen sipping Red Bull and giving each other wedgies is another thing.

I'm still betting that there's a goat involved.

That Leopard Print Dress Will Look Great Over An Orange Jumpsuit

Our never-ending quest to bring bankers the most current bank-related news often goes under-appreciated by many in the intended audience. Disgruntled compliance drones who desire this blog's author to throw them a bone they can gnaw on until they crack it and suck down the sweet marrow; white-belted, white-shoed retail banking salesmen who desire that I open the door on the path to riches beyond all dreams of Croesus; a Gen Y young dope on punk (or was that a young punk on dope?) whose daddy made him CEO of his very own (actually, Dad's very own) home building company who wants me to serve him a free lunch and give him money for nothing and his chicks for free: all these, and many, many more current, former, and soon-to-be-former readers daily flip me the bird in their rear-view mirror as they "unsubscribe" with extreme prejudice because I either offend their refined sensibilities or--much, much worse--my content "is no longer relevant."

Inasmuch as I spend, literally, several nanoseconds each evening blowing blog posts out of my nether regions carefully crafting each and ever syllable you read on these pristine pages, these criticisms hit home in a way that, for example, a client refusing to pay a monthly invoice would never do. Therefor, in an attempt to reach even my most demanding readers, I offer this evening a story that will resonate with each and every human being, whether bound tightly or only loosely tethered to the world of commercial banking. This is a story as old as the internet and as timeless as Instacam. This is the story of the egg-sucking selfie.

A woman from West Frankfort, Ill. made police work easy when she allegedly stole a colorful, leopard-pattern dress from a small boutique, then posted a picture of herself wearing it on Facebook, police said on Monday.

Danielle Saxton, 27, allegedly took a dress and other items from Morties Boutique on July 11, and was spotted walking away from the store by the owner's son, said owner Gay Williams Morton and police.

The store described the stolen items on Facebook. News travels fast in the small southern Illinois town, and within about two hours, someone sent a link to Saxton's Facebook post, where she'd posted a "selfie" with the message "Love my dress," Morton said.

[...]

Saxton was charged with theft and with failure to appear in court on a warrant in another case, according to West Frankfort Police Dispatch Supervisor John Hampton. He did not know the charge in the earlier case.

The article also reports that Saxton has an unlisted phone number. I guess she was trying to lay low and fly under the radar screen.

There's a valuable lesson for every banker and those who covet their goods and wives: "Stupid is as stupid does" and no matter how dumb you think bank robbers are, they are apparently comparative Einstein's in comparison to dress shop thieves.

Don't ever tell me again that the content of this blog is no longer relevant. Hear me now and believe me later: it has NEVER been relevant.

With luck, it never will be.

 

From now on, the only leopard-pattern dress we want to see on these pages is one that encases Sofia Vegara.

We Won't Tell What To Do Until After We Punish You For Not Doing It

The CFPB isn't the only federal government agency that is promulgating new "regulations" by enforcement action. According to yesterday's American Banker (paid subscription required), the OCC's been playing the same game, especially with the BSA.

Few dare talk about their concerns publicly, for fear of alienating regulators. Privately, they say that BSA exams have become more rigorous and focused in recent years, digging deeper into the weeds of processes, systems and controls. Foot-dragging and shortcomings are being met with stiffer monetary penalties and lengthy lists of demands for systems improvements and additional personnel.

Yet it's not clear that even the regulators know exactly what they want from bank BSA programs. Instead, critics say, they're looking to the private sector for the latest in best practices and then seeking to transmit those ideas to the rest of the industry through regulatory decree.

BSA officers report combing through consent orders and regulatory pronouncements with urgency, looking for clues of subtle changes and what's coming next. "We are now in an era of 'regulation by enforcement action,'" says Teresa Pesce, head of the Americas AML practice at consulting firm KPMG.

"Banks feel that they can no longer look at the statutes and regulations to know what to do," Pesce says. "They have to look at the most-recent regulatory guidance or enforcement action against their peers, and then try to plug those holes, as opposed to creating more thoughtful and sustainable programs."

"Thoughtful and sustainable programs?" What's that got to do with covering your backside, avoiding second-guessing from your "superiors" and your "peers," and protecting your government retirement benefits? Let's get with the program here, Teresa.

According to the American Banker's sources, the causes for the uptick in scrutiny on BSA is open to debate.

Some point to the lingering anger of Congress and the public over Wall Street's role in the financial crisis, and the failure of regulators to catch it. Others note that with banks having largely cleaned up their credit problems, quieting the safety and soundness risks that had dominated regulators' concerns in recent years, all those examiners hired at the peak of the crisis now have more time on their hands.

Idle hands are the devil's workshop.

One former OCC official even said much of this may have to do with career advancement by small bank examiners who want to earn notches in their gun by taking down some too-small-to-fight-me community banks, and thereby be promoted to examining the plutocrats of commercial banking. I guess it's every examiner's dream to make yourself such a pest to Bank of America that it hires you just to get you out of harm's way.

FinCEN's Director Jennifer Shasky Calvery claims it's because FinCEN is getting better at using the billions of bits of information that banks feed into its maw every day via various reporting avenues. She even talks about a bank that included a phone number in a SAR that matched a number found in Osama Bin Laden's file cabinet found by Seal Team Six in the follow-up to ventilating the former terrorist-in-chief. Jennifer won't tell us what the people who parse these nuances did with the number. Maybe the NSA used it to order a truck load of peperoni and italian sausage pizzas to be delivered to a kabob house in Kandahar, demoralizing a phalanx of jihadists. Whatever, she wants banks to know that she and her fellow "sheriffs" are cracking down on banks because all of those SARs they're defensively filing are no longer fed to FinCEN's pet goat.

So, bankers, buckle up and get ready for more _regulating-by-enforcement. What's good for FinCEN's good for the country, and the bad guys are moving too fast to bother with that irksome Administrative Procedures Act. The regulators will tell you what you did wrong after you've done it, not before. If you don't like that, well, that's tough nuggies. In this brave new world, the ends justify the means.