On agenda: Bank Secrecy Act, concerns about state budget

Compliance with the Bank Secrecy Act regarding cash transaction reports and concerns about the State of Mississippi raiding funds collected from financial institutions earmarked to fund the Mississippi Department of Banking and Finance are two issues that are expected to be major topics at the 117th-annual

"One of the things that is going to be discussed at the convention is the Bank Secrecy Act provisions regarding transaction cash action reports, and the concerns we have," said MBA President T.E. "Gene" Walker of Forest, chairman of the board and CEO of the Bank of Forest. "We all realize our civic and corporate responsibility in regard to this matter. But it is one of those things that the deeper you get into it, the more you do. There have been some banks penalized heavily. We are all trying to ratchet up our sophistication and internal compliance to make sure we are doing all we can to follow the law. It is going from point A to point B so quickly that it is taking some catch up time. We are all concerned, and want to make sure we handle this adequately from the banking industry side."

While bankers want to do their part to safeguard the country against money laundering and financing of terrorism, Walker said it is important that banks be given adequate time and regulatory guidance to comply without being penalized.

Bank regulatory compliance specialist Phillips Gay, a consultant with Compliance Advisory Service in Ft. Lauderdale, Fla., will speak on this issue at the conference Thursday morning.

"It is a timely topic," Gay said. "A lot of bankers are nervous about the subject. The focus of my remarks is about managing the bank's internal programs as it affects managing risks for money laundering or terrorist financial activity."

The Bank Secrecy Act has been on the books since 1970. But government regulations have become more stringent since 9-11, and 30 to 40 enforcements actions have been taken in the past several years against banks, including one bank in Mississippi, AmSouth.

Gay will be telling conference attendees that regarding enforcement, the focus is not so much on technical compliance violations as deficiencies in the adequacy of the bank's program.

"What banks need to know is their program has to go beyond technical compliance to the laws and the regulations, and has to go into the issues of managing the risks to the bank of not complying with the law," Gay said. "Better procedures might be dealing with the likelihood of a problem. You have a finite number of resources, and know what the risks are in certain areas. It seems logical to direct the appropriate level of resources to dealing with the highest level of risk. Banks have a large database of customers, and certain types of businesses lend themselves to more risk of money laundering. It makes sense to develop resources to closely monitor those."

Another concern of Mississippi bankers is the budget for the State of Mississippi. The Mississippi Department of Banking and Consumer Finance is funded from assessments paid by banks, finance companies, pawn shops and check cashing facilities. None of the funds that support the department come from the general fund.

Walker said they have had a problem in the past few years with the Legislature taking funds out of the Department of Banking and Finance for general fund uses.

"We are concerned about properly funding that department," Walker said. "We are concerned about having adequately trained and adequately compensated bank examiners. We want to be able to attract qualified and adequately trained examiners to do the job so we will have strong banks and good examinations in Mississippi. It is a major issue for us."

The state statute says if there are excess funds, they should be used to reduce the assessment in subsequent years. Instead of that being done, in recent years the excess has been absorbed into the general fund. For example, in the 2003 budget, the Legislature removed $2.5 million in funds from the banking department.

Since the Mississippi Legislature adjourned this year without reaching agreement on a budget, it isn't certain what is going to be done for FY2006. But Walker said it appears likely another $250,000 may be moved out of the banking department.

There is also concern about a proposal to put a cap on salary increases for the entire department (as well as all other state employees). Walker said without salary increases that keep in line with what is paid by private industry, it will be hard to retain experienced examiners.

Other topics under discussion at the convention will include programs for sharing robbery and fraudrelated information.

Thom Kerr, a Florida Bankers Association executive, will discuss the new Fraud-Net software program that enables the sharing of this information among financial institutions.

Walker said the MBA has decided to join the Fraud-Net program to help banks and law enforcement work together to fight and control fraud not only within Mississippi, but across the region.

The keynote speaker by the MBA Convention will be American Bankers Association chairman Elizabeth A. Duke of Wachovia Bank in Virginia Beach, Va., who is the first female chairman in the association's history. She will bring attendees up to date on national banking issues.

Arizona State University economics professor Dr. Stephen Happel will give a presentation on applied micro-economics. And Ty Warren, a senior consultant with Extreme Arts & Sciences, will speak regarding strategic planning and human relations. In addition to the speakers, the convention that is the largest gathering of Mississippi bankers each year will also provide great opportunities for networking for bankers and bank associates, said Mac Deaver, MBA executive director.

"More than 500 bankers and their spouses, plus 300 attendees from financial institution-related firms, are expected to attend," Deaver said. "The convention will also have a trade show with 66 exhibitors, who will feature products and services useful to financial institutions. It will also feature a golf tournament, tennis tournament and other entertainment."

Sponsors of convention-wide events include Trustmark National Bank, BancorpSouth, Stockett & Thomas Agency, LLP, and Clark Consulting. At the annual business session on Saturday, new officers and board of director members will be elected.