Ombudsman Report to the Industry
Message from Cottrell L. Webster, FDIC Ombudsman
I am pleased to present
the latest in our series of online reports to the financial services
industry about the issues and problems raised to
the FDIC Office of the Ombudsman (OO). This report covers the period
January 1 through June 30, 2007.
During this six-month
period, most bankers expressed overall satisfaction with the FDIC.
Even so, many who contacted the OO had concerns with regulatory
topics such as the Bank Secrecy Act (BSA), FDIC deposit insurance assessments,
the FDIC applications process and the FDIC Special Alerts system. Follow-up
on previous issues, such as fraudulent cashiers’ checks and FDIC efforts
to keep bankers informed, are included in this report. Problems with
the FDIC examination process, especially the lack of communication
with bankers, replaced burdensome regulations as the most frequently
Also addressed in this report is the importance of designating an FDICconnect
coordinator so that institutions have immediate access to FDICconnect
transactions, including invoices for FDIC deposit insurance assessments.
In July, Linda Beavers – a 29-year FDIC veteran – was named our Regional
Ombudsman for the Atlanta and New York regions, as well as for the Memphis Area states (Arkansas, Louisiana, Mississippi and Tennessee).
Ms. Beavers’ previous positions include case manager in the Memphis Area Office and risk-management examiner in the Kansas City Region,
where she focused on commercial real estate, large banks, problem banks, trust examinations and information technology reviews.
Ms. Beavers is a graduate of the University of Missouri with an M.S. in Economics, and the Stonier Graduate School of Banking.
With her diversified background and extensive FDIC experience, Ms. Beavers is well suited to address the variety of concerns brought
to the OO. She can be reached at (678) 916-2385 or by e-mail at LBeavers@fdic.gov.
I recently had the privilege of speaking to FDIC examiners at an FDIC Dallas
Regional training conference. I was happy to report that their efforts
have contributed to the FDIC’s largely positive reputation with the
institutions we supervise. I conveyed concerns raised by representatives
of minority depository institutions that the markets these banks serve present challenges in the
areas of loan underwriting and BSA compliance. Unique markets often require
unique solutions, and I asked the examiners to be open to suggestions that
Having concluded our five-year industry outreach program at the end of 2006,
our outreach efforts have shifted to minority and de novo institutions. All institutions are welcome to confidentially report to
the OO their concerns and suggestions about the FDIC in its regulatory role. The OO reports the concerns and suggestions without
attribution to allay any fear of retaliation or reprisal. OO employees are available to assist with any matter regardless of your
location. Visit our Ombudsman web site for more information.
||Cottrell L. Webster
Office of the Ombudsman
What You Told Us:
During the first half of 2007,
433 bankers contacted us with requests for assistance. In addition, OO staff spoke with 109 financial industry
representatives through outreach visits, telephone calls and industry-sponsored conferences. This report
summarizes your comments, suggestions and questions, and provides new information on issues addressed in
Secrecy Act/Anti-Money Laundering (BSA/AML): BSA/AML has consistently
been the subject of many comments and complaints received by the OO over the
past several years. In our last report, the
OO noted a significant drop in the number of negative comments, and the reduced
number of comments and complaints continues.
Although the number of comments has been reduced, the issue has not disappeared
and bankers continued to express concerns about BSA in terms of burden and the
high costs of training and
implementation. Bankers also complained about not receiving feedback about Suspicious
Activity Report (SAR) filings, which gives rise to a concern that the data are
not used. Although we cannot address how law enforcement authorities use SAR
information, the FDIC routinely reviews SARs as part of its examination and off-site
monitoring processes. The OO offers these hyperlinks (underlined and in blue
font) to publications that respond to those concerns.
SAR Information and Publications:
SAR Activity Reviews, available at the linked web site, discuss the preparation, use and value of SARs, and
explain that law enforcement feedback cannot be provided when it might jeopardize
ongoing cases. Recent SAR Activity Reviews expanded the discussion of law enforcement cases
to better demonstrate the importance and value of BSA data to the law enforcement
community. The May 2007 issue presents a comparative analysis of depository institutions’ SAR
filings related to reporting unlicensed/unregistered money services businesses
prior to and following April 2005 FinCEN guidance.
BSA Violations: The Winter 2006 edition of the FDIC’s Supervisory Insights
highlights recent USA PATRIOT Act changes, discusses the types of BSA-related
violations cited in examination reports,
and clarifies the difference between a significant BSA program breakdown and
technical problems. The Supervisory Insights article also provides examples
of best practices for maintaining strong BSA and Anti-Money Laundering
Assessment Invoices Through FDICconnect: The Deposit Insurance Reform Act brought a number of changes to the method of assessing deposit insurance premiums,
including a one percent per day penalty for late assessment payments. During the June assessment cycle, the first under the
Deposit Insurance Reform Act changes, FDIC employees were surprised that a number of banks were not reviewing their assessment
invoices on the FDICconnect secure web site. They found that a significant number of banks were not able to review their
assessment invoices because they had not designated a replacement FDICconnect coordinator after the previous coordinator
FDICconnect is a valuable
resource for bankers. The immediate electronic receipt of assessment invoices through this secure web site is just one of its benefits.
FDICconnect offers an increasing number of opportunities to conduct business and exchange information with the FDIC efficiently and
securely. The web site allows banks to electronically file branch applications, view Special Alerts, order FDIC signage, and
transfer bank data for examinations, among other transactions.
Access to FDICconnect
requires that each bank have an authorized coordinator who can log on to
the web site and authorize access for other bank employees to conduct various
If you are unsure who serves as your bank’s designated coordinator or you need
to register a new coordinator, the FDICconnect Help Desk is ready to assist
you. The Help Desk can be reached by calling 1-877-275-3342
(menu option 1, 1, 5) or by e-mail at FDICconnect@fdic.gov. Your e-mail should
include your full name, the name and address of your institution, a work telephone
number, and a full description of your question or problem. Information on the
FDICconnect Business Center explains how to designate a new coordinator. The
Designated Coordinator Registration Form is available from an FDIC examiner,
FDIC regional or field office, or the FDICconnect Help Desk.
Enforcement Orders: Some bankers have
reported difficulty in conducting pre-employment background screening on the Federal Financial Institutions Examination Council (FFIEC)
Web site’s Enforcement Actions and Orders page because it requires a separate
search of each regulator’s list. The FDIC is working on a project with other regulatory agencies to consolidate the enforcement orders.
This new feature will allow users to search the Federal Reserve, FDIC, Office of the Comptroller of the Currency (OCC),
Office of Thrift Supervision (OTS) and National Credit Union Administration (NCUA) enforcement decisions and
orders simultaneously. This feature should be available in late 2007.
Pre-Examination Information Requests:
Bankers remain concerned about the limited time they are allowed to respond to pre-examination requests and the volume of
requested information. Some bankers also believe portions of the requested information have not been reviewed because
examiners have requested the same information multiple times during examinations.
FDIC regions have implemented automated templates for tailoring information
requests for risk examinations. These templates should reduce the amount
of information requested which, in turn, may reduce duplicative information
Institutions frequently ask the OO how to report fraudulent cashier’s checks to the FDIC.
An e-mail should be sent to email@example.com along with any details, your
contact information, a copy of the fraudulent item, and a voided authentic check. A scanned copy is preferred because
extraneous information can more easily be eliminated from a scanned version, and details on faxed
checks are often difficult to read.
of counterfeit and authentic checks are not included with the Special Alerts on the FDIC’s web site to prevent their use in
fraudulent activity. However, they are available through FDICconnect and are included with the paper copies of Special
Alerts mailed to financial institutions. Anyone may register for online subscriptions to Special Alerts and a variety
of other useful publications at the FDIC's Subscriptions
The growth in financial
fraud is troubling. Of particular concern is the significant increase in the number of counterfeit cashier’s and official
checks and the upsurge in phishing and pharming incidents.
- Fraudulent Cashier’s Checks: In 2004,
the FDIC issued 106 Special Alerts primarily concerning counterfeit cashier’s checks. That number almost doubled to 202 in 2005,
and more than tripled to 342 in 2006. The number of Special Alerts for counterfeit cashier’s checks issued through mid-August 2007
- Phishing and Pharming: Incidents of phishing (e-mails asking for confidential personal information) and pharming
(redirecting web traffic to fake web sites created to collect confidential personal information) have grown exponentially over
the last several years. In 2004, financial institutions reported only 4 phishing incidents to the FDIC. In 2005, that number
increased to 219, and the FDIC participated in shutting down 81 fake web sites. In 2006, the FDIC recorded 3,892 bank phishing
incidents, and the FDIC participated in taking down 900 fake websites. The Consumer Alerts – Phishing Scam web page on the
FDIC Web site was created to inform and warn consumers about phishing. This web page also lists related financial institution letters (FILs), press releases, brochures and FDIC Consumer News articles.
If you have comments or suggestions about this semiannual report, please
contact FDIC Ombudsman Cottrell Webster at (703) 562-6040, or by e-mail
To receive e-mail notifications of future OO semiannual reports as soon as
they are posted to the FDIC's Web site, follow the instructions at the FDIC's Subscriptions