"Records? What Records?" "Oops, I'm Bad," Won't Cut It When Important Papers Wind Up in the Twilight Zone. (Compliance Clinic: Mailbox)

Article excerpt

Bank officers began to be concerned about the ability to retrieve and reconstruct records on Sept. 12, 2001, when they realized what had happened to so many records that had seemed so permanent in the Twin Towers the day before. Then came the now-classic case of the Enron/Arthur Andersen records, focusing attention again on the vulnerability and importance of the preservation of important records. Bankers also realize that even if they weren't going to be overly concerned about record retention and retrieval procedures, examiners certainly would be.

Every financial institution needs an expert on record retention, retrieval, and destruction. That person must know which records must be maintained, and in what form; which ones can be kept electronically and which must be in hard copy; which ones can be kept in microfiche-and whether that is always legal.

Once a banker starts considering this matter, questions abound. How long must each type of record be kept? Is there any harm in keeping a record longer than required? New requirements of the USA Patriot Act of 2001 say records may have to be produced in 120 hours. Will the system the bank now uses meet that standard?

Finally, at the end of document's life-cycle, are these questions: Is there a destruction schedule, and where is it? And how, if, and when the time comes, should records be destroyed?

Financial packrats--and their fate

Let's consider one of the problems facing bank document managers, particularly at some smaller banks. That is, some banks may have boxes and boxes of old records--neatly piled in the basement. As a matter of fact, management is often proud that the bank has never thrown away any records at all!

Not all records have to be maintained permanently. A destruction schedule does exist.

For example, a common standard is that records on cashier's checks must be maintained for six years following payment of the check. But if there are 50 years worth of cashier's check records in that basement, and a subpoena is received requiring all cashier's checks payable to a certain individual, there are 50 years worth of checks to go through in order to answer that subpoena. The court says if the records exist, they must be produced.

If the destruction schedule had been carefully followed, only six years worth of checks would have to have been gone through, sparing staff time and bank expense. And having followed established practice is a good reason that will typically stand up in court for not having the other 44 years of cashier's check records.

Standards here, there, everywhere

Unfortunately, no one set of laws or regulations at either the state or federal level governs document retention.

Instead, the standards to be followed appear in all sorts of places. Some retention requirements are included in regulations. Other sources of rules include state laws mandating the maintenance of records for a specific time. Some states, like California, have no general document retention statute for financial institutions; by contrast, New York's rule is one paragraph long and simply states:

"Every bank and every trust company shall preserve all its records of final entry, including cards used under the card system and deposit tickets, for a period at least six years from the date of making the same or from the date of the last entry thereon..."

Colorado, on the other hand, has seven pages worth of schedules, broken down into excruciating detail.

If your state has a schedule, it may be obtained by accessing the state's Department of Banking website. Several this writer tried responded to the search engine on the web site looking for "record retention."

What the feds say

The closest thing to a detailed federal record retention requirement schedule for banks is found in 12 U.S. …