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Bank Compliance: An Issue for Treasury in Every Sector

  • By Andrew Deichler
  • Published: 10/19/2015
kyccompDENVER – During an industry roundtable for colleges and universities, treasury and finance professionals discussed the difficulties they are currently facing surrounding compliance with their banks. Fifth Third Bank sponsored the industry roundtables at the 2015 AFP Annual Conference, each of which focused on a different sector. Other roundtables covered banking, government, insurance, manufacturing, retail, utilities and health services.

Nancy Majerek, CTP, treasury manager of the University of Notre Dame, who hosted the session, discussed the challenges that many universities who operate internationally face when working with banks in certain countries. “What I’ve experienced is—it’s like a fire drill every time there’s some new form that needs to be filled out,” she said. “I just got an email this morning about one of our bank accounts in Israel and the bank shut down our ability to operate, because we didn’t have a tax form completed. They sent it to us two weeks ago, and I wasn’t able to get our tax department, our general counsel and our executive vice president together to fill out the form before they shut down the operation.”

Thankfully, Notre Dame had a priest on staff who actually went into the bank and actually begged for the university to access its accounts so it could pay its employees and vendors in the area. Eventually the bank relented. “You hate to have a fire drill like that,” she said. “It takes me away from my mission—moving forward and building strategy for the university. It’s one of those compliance issues that just takes away your time and attention.”

In addition to academic treasurers, the session also featured a number of practitioners from global development organizations (GDOs). All of these organizations operate in dangerous countries all over the globe, and are thus dealing with strict know-your-customer (KYC) regulations from their banks. “One thing we learned the hard way was—when you enter Nigeria or Afghanistan or South Sudan, your profile with your bank goes into a high-risk profile,” said Sassan Parandeh, CTP, global treasurer for ChildFund International. “You enter Sudan and all of a sudden you might find that your operations in India just got cut. So you need to be really mindful of that strategy and you should have a voice from the treasury department at the table with the people who are the decision makers of where you go.”

Parandeh advised treasurers to have terrorist-vetting policies in place and to show their banks that they are complying with them. “In fact, give them a copy of your policy to ease your profile,” he said. “That profile management is critically important; be ahead of that curve. Don’t wait until you find out that your bank accounts everywhere are getting disabled and you need to start fixing it.”

Majerek agreed that profile management is key to operating internationally. She explained that she’s had several long discussions with her banks in which they explained to her what their compliance requirements are. “Spend that time managing your profile with your bank so that your banker knows why you’re there and they’re going to be your advocate in the compliance area,” she said.

Majerek, a former banker, acknowledged that many banks ask for more than they need. When it comes to KYC compliance that often means giving banks detail information on all of your key people. “You have to know when to push back,” she said. “I told them, we’re not giving copies of passports and home addresses for everybody on the board of the university. That’s not possible. So what we’ve done is, we’ve boiled that down to a smaller group—a handful of people who are responsible for the operations of the university. And that’s what we’ll give to the bank. But we’re not going to keep updating this information, because we’re not your standard corporate entity that has owners. We’re doing business differently and you have to really push to make sure your bankers understand that.”

Still, when any organization enters a high risk area, banks are going to ask a lot of questions and treasurers can only push back so much. Therefore, Parandeh advises treasurers to educate their boards and the rest of their organizations that banks are going to require information. “You have to inform your executives and as you onboard board members, let them know that you operate in very high-risk countries,” he said. “As part of our due diligence, you need to be prepared to provide personal information.”
 

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