Magazine article American Banker

Trust and Private Bankers Encouraged to Watch for Fraud Schemes

Magazine article American Banker

Trust and Private Bankers Encouraged to Watch for Fraud Schemes

Article excerpt

Private bankers and trust officers need to step up efforts to protect their banks against fraud, according to Louis J. Sozio, a vice president at PNC Bank Corp.

Mr. Sozio, director of asset management and fiduciary compliance for Pittsburgh-based PNC, told attendees at an American Bankers Association sponsored conference here this week that money launderers are increasingly eyeing private banks as potential victi ms of financial fraud. Their schemes range from "free-riding" stock transactions, where they ask brokers to buy stock today with a promise to pay tomorrow, to asking for the assets in a funeral trust when the client is still alive.

"Know-your-customer doesn't mean 'we know Joe Doe and his family. And he lives on the Main Line,'" Mr. Sozio said. "We have to know Joe Doe has the financial wherewithal" he says he does." Know-your-customer rules are guidelines to help bankers ensure mon ey was procured legitimately.

Mr. Sozio's remarks were backed up by Daniel D. Soto, a senior special examiner with the Federal Reserve Board. "You have done such a good job in the retail area of the bank, that the money launderers are looking at other parts of your bank," Mr. Soto sai d.

"These people are just sitting around for hours and hours and hours, trying to think of a way to get into the financial system."

To keep them out, the Fed plans to propose within the next two months refinements in guidelines for compliance with know-your-customer and the Bank Secrecy Act rules.

Concern about suspicious activity comes at a time when new-business development is a top priority for trust and private banking divisions. …

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