Mar 2007 Financial News

Compliance becomes a new mantra at NCB

Mar 16, 2007

Confidence carries a high premium in the banking world. So, soon after National Commercial Bank (NCB) got wind that a branch might have breached money-laundering laws by not reporting threshold transactions, it built out a whole new compliance unit to cut the probability of a repeat.

In fact, the bank wants it never to happen again. The tarnishing of its image is a price it considers too high to pay.

The structure that NCB has put in place over the last three years appears to have made compliance almost into a religion for the bank.

Repeated training

Ignorance being no excuse for breaching laws, NCB decided that its officers would go through repeated training on their, and the bank's legal obligations to report certain transactions - whether they fall in the category of 'suspicious', carrying an illicit whiff, or 'threshold', hitting the US$50,000 or equivalent trigger point.

It also put officers in each branch to oversee the flock, to ensure no one strayed from what the law demands.

In 2004, the Group Compliance Unit was formed. It is run by company secretary Jennifer Kelly.

Kelly and her team has one central job: "Keeping employees abreast of reporting requirements under the law," said NCB assistant general manager and communications head, Sheree Martin. But the functions vary.

So, atop the training and retraining sessions, Kelly's unit has central oversight for compliance across thenetwork, ensures that the reporting structures are in place, and is charged with forging relationships with external parties on legal developments and the like - all the while keeping staff focused on the bank's obligations and penalties for non-compliance.

Criminal liability aside, the bank would also be looking at the cost to its reputation. That's a cost that eventually snowballs to the bottomline.

Right now that bottomline is healthy and expanding - the way its boss Patrick Hylton likes it.

NCB, under new owner Michael Lee Chin, in five years has come from being a bank near the edge of failure to No. 2 position in the commercial banking sector.

Its profits last year were $5.5 billion; assets were $223 billion to September 30, putting it in pole position on that measurement alone. Since then its main rival, Bank of Nova Scotia Jamaica Limited with assets of $200 billion, has acquired an investment house whose assets total $38 billion. BNS continues to trump NCB on loans and deposits, and has a larger capital base.

The transactions that NCB is now answering for in court, happened a year into its transition from state sponsorship to private ownership, and two years before its new boss Hylton took over, succeeding Aubyn Hill in 2005.

He would already have known NCB intimately, having been at the forefront of the negotiations -- then as head of state bailout agency Finsac Limited -- for its sale to Lee Chin's AIC Limited, which acquired a majority 75 per cent of the bank in 2002.

It is Hylton who is now travelling overseas to reassure those with whom the bank does business that what NCB is answering for in the courts is not failure to report 'suspicious' transactions as was reported in the media, but allegations of non-compliance on automatically reporting six threshold transactions by an alleged drug dealer at a rural branch in 2003.

It suits the bank to steady the nerves of its agents and partners, given its foreign exposures.

According to the last central bank report on the commercialbanking sector to September 2006, NCB was due just under $10 billion from foreign financial institutions, but was even more exposed in its liabilities to overseas banks and investments houses, $29 billion.

The six transactions amounted to US$870,000 [PAGET, IS THIS THE CORRECT FIGURE?], and not US$20 million, nor US$27 million as different media houses had reported.

The case, which was mentioned in court toward the end of February, remains in the early stages of the proceedings.

Alongside the unit, NCB has deployed compliance officers throughout its 45 branch network, to police activities at their respective postings.

"Logistically, it's a challenge to report those $50,000 transactions," said Martin.

The compliance officers are independent of Kelly's unit, she said.

The new structures, inclusive of an online training platform, costs the bank ----------$$$$$$$ ------------ each year.

Training sessions are held quarterly -- the next one will be on the new Proceeds of Crime Act (POCA) -- and are compulsory, said Martin.


Source:
Lavern Clarke, Business Editor
The Jamaica Gleaner
Friday 16th March, 2007

http://www.jamaica-gleaner.com/gleaner/20070316/business/business5.html