Western Banker July/August 2022

WesternBanker I S S U E 4 2 0 2 2 A P U B L I C AT I O N O F W E S T E R N B A N K E R S

WHAT’S INSIDE: 8

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PURPORTED CONSUMER PROTECTION MEASURE TRAMPLES BORROWER’S RIGHT, INCENTIVISE INSTITUTIONAL INVESTORS

PUBLIC BANK ADVOCATES CHARGE AHEAD

A LOOK BACK WITH IMMEDIATE PAST CHAIR OF THE BOARD, JAMES BECKWITH

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Contents I S S U E 4 2 0 2 2

P. 12

P. 8

DEPARTMENTS 6

FEATURES Purported Consumer Protection Measure Tramples Borrower’s Rights, Incentivizes Institutional Investors

Message From WB President and CEO Stephen G. Andrews

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2022 WB Advertiser Index

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Public Bank Advocates Charge Ahead

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Labor & Employment Round-Up

Meet Our 2022-2023 Chairman

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A Look Back with Immediate Past Chair of the Board, James Beckwith

Ask the Compliance Guru

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P. 28

New Associate Members

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Associate Member News

26

Endorsed Partners

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2022 Women in Banking Photo Gallery

View this issue and past issues ofWesternBanker online any time at westernbankers.com

WesternBanker is the official publication of Western Bankers.

Western Bankers 1303 J Street, Suite 600, Sacramento, CA 95814, P: 916-438-4400/F: 916-441-5756, Email online at westernbankers.com. ©2022Western Bankers | NFR Communications, LLC.All rights reserved.WesternBanker is published four times each year by NFR Communications, LLC forWestern Bankers and is the official publication for this association.The information contained in this publication is intended to provide general information for review, consideration and member education.The contents do not constitute legal advice and should not be relied on as such. If you need legal advice or assistance, it is strongly recommended that you contact an attorney as to your circumstances.The statements and opinions expressed in this publication are those of the individual authors and do not necessarily represent the views ofWestern Bankers, its board of directors, or the publisher. Likewise, the appearance of advertisements within this publication does not constitute an endorsement or recommendation of any product or service advertised.WesternBanker is a collective work, and as such, some articles are submitted by authors who are independent ofWestern Bankers.WhileWestern Bankers encourages a first-print policy, in cases where this is not possible, every effort has been made to comply with any known reprint guidelines or restrictions. Content may not be reproduced or reprinted without prior written permission. For further information, please contact the publisher at 855.747.4003.

Graphic Art: ©iStockphoto.com/ Inna Kharlamova; fstop123;Warchi; Cimmerian; 2d illustrations and photos; JamesBrey

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Who Should Attend

The Conference

f CEO f President f Bank Secrecy Officer f BSA Officer f Know Your Customer f Enterprise Risk Manager f Marketing Officer f Directors f Deposit Officer

f Chief Administrative Officer f Chief Operating Officer f Chief Financial Officer f Chief Credit Officer f Chief Lending Officer f Chief Compliance Officer f Compliance Officers f Treasury Management Officer f Branch Operations Officer

This exciting virtual conference includes valuable networking and vital learning sessions on topics such as cryptocurrencies, lending, digital banking, and RegTech, as well as the risks, opportunities, and important legislative updates for the banking cannabis industry. Registration is FREE for Western Bankers members. CPE credits will be offered.

Brian Brooks

Carey Ransom

Carson Lappetito

David Wexler

Eric Sprink

Jer Wood

Jontae James

Patti Wubbels

Rafael DeLeon

Robert Johnston

Ryan Canin

Shawn Rhodes

Featured Virtual Speakers Stephen King Steve Miller

Tony Repanich

Walter J. Mix III

Wayne Miller

Join Us Online September 19-20, 2022! / Attend from your office or home. Registration is FREE for WB members! / Get the schedule and register today at Westernbankers.com/fc22

Message From WB President and CEO Stephen G. Andrews

Stephen G. Andrews President and CEO Western Bankers SAndrews@westernbankers.com

This 60-day period is especially intense for the government relations team as they advocate and negotiate measures impacting the banking industry.

Late Summer is Busy Time to Advocate on Your Behalf

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s we enter the last few weeks of summer, the current economic turbulence and market condi tions make it especially critical for our industry

This 60-day period is especially intense for the govern ment relations team as they advocate and negotiate measures impacting the banking industry. Washington, D.C., Visit In addition to the California advocacy efforts, Kevin Gould, Executive Vice President & Director of Gov ernment Relations, and I recently traveled to Wash ington, D.C., to meet with members of the California Congressional Delegation to discuss several important issues impacting the banking industry. Topics included banking and climate change, cannabis banking, Central Bank Digital Currency, cryptocurrency, and ECORA. We had the pleasure to meet with Sen. Dianne Feinstein, Reps. Young Kim, Michelle Steel, and Juan Vargas, as

to be laser-focused on advocacy efforts.

California’s legislators returned from their summer re cess August 1 and have 30 days to review thousands of legislative proposals before they recess for the Fall and midterm elections. We anticipate that many measures pending in the legislature will be amended in the fol lowing days and weeks, and our team will be vigilant in vetting measures and opposing changes that nega tively impact our industry. The Governor will have until September 30 to sign or veto the measures that are passed by the legislature.

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well as staff from Republican Leader Kevin McCarthy, and Reps. Jackie Speier, Brad Sherman, and Maxine Waters’ offices. We also met with Rep. Connie Con way, California’s newest member of Congress. In September, we will be traveling back to Washington, D.C., for a Joint Visit with the Florida Bankers Associa tion. We encourage you to join us for this event which includes meetings with Members of Congress, regula tors and committee staff. This is a great opportunity for emerging leaders and seasoned veterans alike to engage in the legislative process and advocate on behalf of the banking industry by sharing your banking expertise, challenges and successes. To learn more about the Joint Visit at https://www.westernbankers.com/joint-visit washington-dc. Professional Development In May, we were thrilled to host an in-person Women in Banking Forum, at the Hyatt Regency in Huntington Beach, Calif. It was exciting to reconnect with members

2022. Registration information is available at https:// www.westernbankers.com/fc22. We will round up the event schedule with the Lending & Chief Credit Officers Conference in October at the Ritz Carlton, Laguna Niguel in Dana Point, Calif., and the Regulatory Compliance & Risk Management Conference in November at Caesars Palace in Las Vegas, Nevada. We are grateful for your trust, membership and sup port, and look forward to seeing you at an upcoming event.

Sincerely,

in-person and meet so many new bankers who joined us for the very first time. You can find several pho tos of the event in the pages of this issue of the magazine. In July we hosted the two-day Virtual Directors Forum. The event, designed for bank directors, presidents, CEOs, and executive staff, included more than 100 attendees. The program featured topics including recruiting talent, strategic planning, the economy, and much more. We recently transitioned our Fin tech & Cannabis Forum from an in-person event to a virtual one. Unfortunately, the ongoing COVID challenges have limited the ability of many of our members to travel and to serve as many members as possible, we are offering compli mentary registrations to this confer ence for Western Banker members. We have an impressive line-up of speakers and encourage you to join us on September 19 & 20,

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WesternBanker | Issue 4 2022

Purported Consumer Protection Measure Tramples Borrower’s Rights, Incentivizes Institutional Investors

By Kevin Gould, EVP, Director of Government Relations, California Bankers Association

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measure working its way through the California Legislature makes sweeping reforms to how real property in foreclosure is sold. Applicable to all real property, including commercial and residen tial, Senate Bill 1323 bifurcates the methodology for the sale of property at foreclosure by requiring that proper ties where there is equity, defined as debt not exceed ing 90 percent of appraised market value, be sold by a licensed real estate agent on the open market. Property that does not have equity, defined as debt exceeding 90 percent of appraised value, would proceed to be sold un der the existing trustee auction sales process authorized

under the power of sale terms found within most uniform deeds of trust. To level set, in today’s real estate market, the measure would apply to the vast majority of proper ties that are in foreclosure. For equity sales, which is the measure’s focus, the bill dictates that the initial open market price must be set at the appraised value for at least 30 days. If not sold within that time-period, the price may be reduced by 5 percent and listed for another 30 days. As proposed, this process repeats itself four times, or 120 days, at which point the unsold property may be sold at a trustee’s auction.

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While aligned with the overall goal of trying to maximize owner’s eq uity in the sale of the property, CBA and other real estate trade as sociations have argued that the ap proach envisioned by the measure is conceptually flawed and mechan ically unworkable. Fundamentally, the measure ap pears to trample on borrower’s rights. Under the terms of the mea sure, the trustee is required to hire a real estate agent. But, under this established relationship, the real estate agent’s client is the trustee, not the borrower. The legality of a trustee hiring a real estate agent to sell a home that the borrower still owns is questionable. Here the Leg islature is setting a policy that once

the foreclosure process reaches the point of filing a notice of sale, that the borrower’s rights with respect to the property they still own, and perhaps occupy, cease to exist and that a third party will be making decisions that may not be in the best interest of the borrower. In what has historically been a ministerial role, trustees would now be burdened with significant discretion leading to legal liabil ity and potentially clouding future transactions. In fact, it’s question able that a title insurance policy would be issued on transactions under this scheme making these properties toxic. CONTINUED ON PAGE 10

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WesternBanker | Issue 4 2022

CONTINUED FROM PAGE 9

The measure also applies retroac tively to existing contracts. Stan dard uniform instruments establish a power of sale but do not contemplate the approach envisioned by the bill. Ultimately, applying the bill retroac tively may raise legal arguments per taining to impairment of contract. Setting aside whether the approach taken in SB 1323 is legal, the mea sure prompts a number of very ba sic questions, such as how a trustee would escape criticism from the borrower who would ordinarily be in control of the sale of their own property. For example, how does the trustee select a real estate agent and was it the right one, pick from competing purchase offers, show the property to prospective purchasers if the borrower isn’t cooperative, or make representations as to the con dition of the property? Proponents think they have solved these concerns through recent amendments. One amendment es

Under this established relationship, the real estate agent’s client is the trustee, not the borrower. The legality of a trustee hiring a real estate agent to sell a home that the borrower still owns is questionable.

tablishes a process for the trustee to “randomly” select a real estate agent from a “statewide database” made available by the California Department of Real Estate (DRE), or if not available by the DRE, then from a database maintained by “a statewide trade association of real tors”. Another amendment dictates how a trustee picks between competing offers by establishing a waterfall test. First, the trustee must accept the highest value offer. However, if there are multiple offers at the same

amount, the trustee must pick the offer where the purchaser intends to occupy the property. If these factors are equal, the trustee must accept, in descending priority: • The offer with a waived in spection contingency; • The offer requiring the least third-party financing; and, • The offer with the soonest closing date. Interestingly, given the waterfall es tablished in the measure, it priori

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tizes institutional investors that may be situated to offer the highest price, have the fewest contingencies and/or rely on the least amount of financing. This result is counter to the Legisla ture’s more recent focus of discour aging institutional investors and pri oritizing first-time, owner-occupant homebuyers. Just stepping through a standard sales transaction, under SB 1323, who signs seller’s disclosures or a grant deed? In fact, a trustee would be unable to accurately make repre sentations as to the condition of the property required in typical seller’s disclosures. Further, given that the measure requires the property be listed at appraised market value, questions have been raised on how to establish that value if the borrower isn’t cooperative. Proponents think they have resolved that concern too by requiring the appraisal be based on an exterior-only appraisal if a complete visual inspection of the interior and exterior is impossible because the borrower denies the ap praiser access.

Given the trend over the past many years, where mortgage borrowers rights have been strengthened, it’s astonishing that the Legislature is poised to strip borrowers of their rights through this proposal. Instead, why not advance a public policy so lution that incentivizes the borrower to take action and control, particu larly when they have equity in the property? CBA and other real estate trades have been trying to find common ground with the proponents. While we don’t think the current approach is work able, we have offered an alternative that puts the borrower in control. The counterproposal postpones a trustee’s sale if the borrower pro vides a valid listing agreement, gives the borrower time to close escrow if there is a valid purchase agreement and establishes a minimum bid re quirement aimed at preserving the borrower’s equity if a trustee’s sale occurs. Unfortunately, the propo nents have rejected this counterpro posal and are moving forward with their approach.

At this stage, the measure has passed the Assembly Committee on Judi ciary and is pending action on the Assembly Floor. Since the bill was amended in the Assembly, it will re turn to the Senate for a concurrence vote. Should it pass at each of these points, the measure will be sent to the Governor for consideration.

Kevin Gould is the Executive Vice President and Director of Government Relations for the California Bankers Associa tion. He joined the CBA in 2004, bringing with him more than

seven years of legislative experience. In his role, he oversees the management and operation of CBA’s state and federal government relations department and serves as one of CBA’s three registered lobbyists. Gould’s advocacy responsibilities and issues focus mainly in the areas of bank operations, commercial lending, and wealth management issues. You can reach him at kgould@calbankers.com.

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WesternBanker | Issue 4 2022

Public Bank Advocates Charge Ahead

By Jason Lane, Vice President and Deputy Director of Government Relations, California Bankers Association

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ast month, the San Francisco working group estab lished to form a public bank finalized the group’s membership and hired public banking consultant HR&A Advisors to formulate a plan to establish

• Achieve fiscal stability within the first three years. • Provide loan support to underserved sectors of the local economy. • Address local infrastructure needs. • Reduce local government dependency on Wall Street banks. • Decrease local fossil fuel and other harmful in vestments. • Partner with local financial institutions to the eco nomic and social benefit of all. • Mitigate economic inequity in the region. • Serve as a model for public banks around the state and the country. The purported goals, as listed in the report which was au thored by a former Senior Policy Advisor to the Rhode Island General Treasurer, is to make loans to local small businesses, in cooperation with local community development financial institutions (CDFIs) and local banks, provide capital to non profit affordable housing developers for property acquisition, and provide lending for small scale climate change projects. The projections detailed in the report show that with a $40 million investment from the cities of Oakland, Berkeley, Richmond, and Alameda County, the bank will lend over

San Francisco’s first public bank.

According to a news release issued by the working group:

Last June, the Board of Supervisors took an important step towards setting up a public bank for the city by unani mously passing the Reinvest in San Francisco ordinance introduced by Supervisor Dean Preston. Another dramatic step came on April 15, 2022, with the first official meeting of the Working Group, composed of financial profession als and community representatives charged with prepar ing a business plan for the bank. After being approved by the Board of Supervisors, the plan will be submitted to the California Department of Financial Protection and Innovation in Sacramento. Other members of the group include and one executive from the banking industry and one from the credit union industry, in addition to com munity development and consumer protection advocates. Across the bay, the Public Bank Eastbay group, a coopera tive venture among the cities of Oakland, Berkeley, and Richmond and Alameda County released a robust viability study to:

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$120 million by the third year of ex istence. By the end of a decade, the original investment will result in over $250 million in assets, and almost $400 million in loans made. San Francisco and the East Bay col laborative, in addition to the City of Los Angeles, are rushing to submit applications for approval to the De partment of Financial Protection and Innovation, which is not permitted to grant licenses after seven years from the date of published regulations. Finally, Governor Newsom has proposed $4 million in funding for CalAccounts, a state financial insti tution that will offer fee-free deposit transaction accounts. Last year, the legislature approved AB 1177 which creates a blue-ribbon task force to

San Francisco and the East Bay collaborative, in addition to the City of Los Angeles, are rushing to submit applications for approval to the Department of Financial Protection and Innovation.

examine the unbanked population and requires an analysis of existing private sector solutions, and the risk and cost of those private sector so lutions in comparison to the CalAc counts proposal. Jason Lane is vice president and deputy director of government relations for the California Bankers Association and manages California state tax policy

for the association, which involves analyzing legislation and regulatory activity, and the development of policy positions for the association. Lane is one of three lobbyists at CBA and, in addition to his

primary focus on taxation, he also lobbies on be half of the association on issues related to the state budget, and consumer lending legislation.

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WesternBanker | Issue 4 2022

Labor & Employment Round-Up The California Legislature considers new labor and employment laws that will further regulate business operations in the Golden State By Melanie Cuevas, Vice President of Government Relations, California Bankers Association

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workplace absenteeism, and a significant expansion of pay equity data reporting. The legislature must complete its work on August 31, sending measures to the Governor for signature or veto. Most measures, unless otherwise specified, that become law take effect on January 1. Outlined below are the top workplace-related measures that the business community is tracking and that CBA has advocated on alongside our business trade association advocacy colleagues. Protections for Workplace Absenteeism SB 1044 (Durazo) – This measure protects employees who leave or refuse to report to work because the employee feels unsafe, regardless of existing health and safety stan dards or protections, by prohibiting employers from

t is said that banks succeed when our communities succeed and, likewise, they suffer when our communi ties suffer. That sentiment similarly carries over into the realm of policy – labor and employment-related leg islation proposed by California lawmakers impacting the broader business community not only will force changes upon banks as employers, the changes also impact banks’ customers and the state’s business climate. California employers, already accustomed to navigating the state’s rigorous employment obligations, must keep track of new changes approved by the California legis lature each year. While we have already seen the defeat of several problematic proposals, lawmakers continue to consider several employment-related measures, among them are proposals for a four-day workweek, excusing

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face civil penalties and requires em ployers to maintain records of job descriptions and wage rate history for each employee, subject to inspec tion by the Labor Commissioner. In 2017, similar legislation was vetoed by then Govern Brown, who wrote in his veto letter, “…it is unclear that the bill as written, given its ambigu ous wording, will provide data that will meaningfully contribute to ef forts to close the gender wage gap. Indeed, I am worried that this ambi guity could be exploited to encour age more litigation than pay equity.” Will CA Adopt a Four-Day Workweek? AB 2932 (Low) – This proposal to shorten the regular workweek from 40 to 32 hours for private sector em ployers of more than 500 employees was ultimately shelved because there was too little time to fully study its implications before taking the legisla tive step of implementation. The mea sure proposed to make this change at the same total compensation and required overtime to hourly non-ex empt workers for hour in excess of 32 per week; California is one of the few states with the eight-hour daily overtime threshold. After AB 2932 was held, two nonprofit groups an nounced a 6-month pilot program of 70 U.K. companies trialing the four day workweek with no loss of pay, as long as employees maintain the same level of output. Pending results of the trial, which concludes in December 2022, California lawmakers may re visit this idea. Workplace Technology Accountability Act AB 1651 (Kalra) – While this spe cific measure was shelved, we expect conversations on this broader topic to continue. The Workplace Tech CONTINUED ON PAGE 16

taking or threatening adverse action against employees in these circum stances. The measure also prohibits employers from limiting employees’ use of mobile phones or other com munication devices if the employee wishes to communicate about their safety, seek emergency assistance or assess a state of emergency. Enforced by the Private Attorney Generals Act (PAGA), the measure subjects em ployers to potentially costly lawsuits if they dispute an employee’s decision or have another employee take over job duties. It is worth noting that it is already a crime in California to re

quire an employee to remain at their place of work if there is a notice to evacuate or leave. Reporting Pay & Gender Data of Employees SB 1162 (Limon) – This requires private employers with 100 or more employees to submit annual pay data reports to the Department of Fair Employment and Housing (DFEH), which is required to publish the pay data report on a public website. The measure additionally requires em ployers with 15 or more employees to maintain and share pay scale data for any job postings or potentially

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WesternBanker | Issue 4 2022

CONTINUED FROM PAGE 15

California has always kept employers on their toes when it comes to changing employment laws, and this year has proven to be no exception.

nology Accountability Act was a sweeping proposal to build upon the CCPA and CPRA regarding human resources data, aimed at workplace monitoring, technology, and auto mated decision-making and artificial intelligence. Biometric Data Collection SB 1189 (Wieckowski) – Another measure seeking to build upon the CPRA, SB 1189 proposed to re quire private entities that collection biometric information to develop and make available to the public a written policy, including a retention schedule and guidelines for destroy ing biometric information, the defi nition of which includes “faceprint, fingerprint, voiceprint, retina or iris image, or any other biological char acteristic that can be used to authen ticate the individual’s identity.” The measure did not provide exemptions for uses related to safety or security. This measure was also shelved for the year. Accessing Court Records SB 1262 (Bradford) – While we spend a lot of time playing defense, we also support measures too, and SB 1262 is one of those helpful

changes for the business commu nity. If enacted, the measure would restore the long-standing use of driver’s license numbers and dates of birth as search filters in accessing California court indexes. This prac tice was dismantled last year due to a California Court of Appeals decision, drastically limiting back ground checks. This measure has re ceived unanimous support through the process thus far. What’s on the Horizon? Workplace-related measures like those illustrated above typically im pact a broad swath of industries, garner significant attention in the Capitol and in headlines, and re quire both political acumen and re sources to combat or defeat. While employers won’t know the fate of

these or other measures in the 2022 legislative session for a few more months, the CBA advocacy team will continue to work on behalf of our members’ best interests and pro vide updates on poignant legislation to our membership. California has always kept employers on their toes when it comes to chang ing employment laws, and this year has proven to be no exception. Melanie Cuevas serves as the vice president of govern ment relations for the Cali fornia Bankers Association, where her advocacy portfolio focuses mainly on issues related to cannabis, debt col lection, labor and employment, political reform, privacy, and agricultural, student and military lending.

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MEET OUR 2022-2023 CHAIRMAN

GEORGE LEIS, President & Chief Operating Officer

George Leis is the Presi dent & Chief Operating Officer for Montecito Bank & Trust. Leis joined the bank in July, 2016. Montecito Bank & Trust is the oldest and largest locally owned communi ty bank in Santa Barbara and Ventura counties. Founded in 1975, the bank operates 13 branch offices in Santa Barbara, Goleta, Solvang, Mon tecito, Carpinteria, Ven

Prior to 2006, Leis was a managing director, U.S. prod ucts head, and national practice leader for investments at Deutsche Bank Private Wealth Management. He also served as a senior vice president and director of the private client services center at Wells Fargo, and as a senior vice president and manager for Bank of America Private Bank. Leis began his banking career with Security Pacific Na tional Bank in Retail and Commercial Banking. A gradu ate of California State University, Northridge (CSUN), he is a Certified Trust and Financial Advisor. Leis’ community involvement is exemplified through his service to universities and charities throughout Southern California and beyond, including: • National Disaster Search Dog Foundation (Board Chair) • Western Bankers Association (Chairman Elect) • YMCA of the USA (Vice Chair) • Santa Barbara Zoo (Board Member) • Channel Islands YMCA (Board Member) • Santa Barbara Historical Museum (Board Member) • Santa Barbara Botanic Garden (Board Member) • California State University Northridge (Board Member) A distinguished alumnus of Cal State Northridge, Leis is a prior board member and prior committee chair for the CSUN Foundation board of directors. He has participated on numerous other CSUN boards, including the College of Business and Economics advisory board and the College of Social and Behavioral Sciences Ambassadors.

George Leis President and Chief Operating Officer Montecito Bank & Trust

tura, Camarillo and Westlake Village.

George was formerly a managing director for MUFG Union Bank, N.A. He was named the national sales manager for The Private Bank after becoming regional president of Union Bank’s Central Coast region with the acquisition of Santa Barbara Bank & Trust (SBB&T) in December 2012. Previously, Leis was president and chief executive officer of Pacific Capital Bancorp (PCBC), a $7 billion in assets community bank holding company that included SBB&T. PCBC had more than 1,000 employees and 47 branches. After joining SBB&T in March 2006, Leis was the ex ecutive vice president for two divisions, Wealth Man agement and Information Technology, and was the chief information officer. He was responsible for 500 staff members and a $78 million budget.

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WesternBanker | Issue 4 2022

A A Look Back with Immediate Past Chair of the Board, James Beckwith

s I look back on my year of service as 2021 Chair of Western Bankers Board of Directors, I thank you for the honor and privilege of serving you during a particularly challenging time for financial in stitutions. In May 2021, we continued to navigate the global pandemic and its impact on the health and safety of our employees, shareholders and the communities we serve. We were also responsible for ensuring the stability of our respective organizations’ financial performance. I know Five Star Bank was the benefactor of the many meaningful relationships I had the opportunity to create through Western Bankers. As Board Chair, my goal was to meet with as many of you, in-person, as possible. In so doing, I enjoyed advo cating on behalf of the association and our industry and creating a forum for learning, networking and exchang ing ideas. I knew the intangible benefit of sharing ideas with bankers across the Western United States would be immeasurably valuable and impactful. Today, I can say this has certainly been the case. Throughout 2021, I participated in numerous discussions regarding the implementation of organizational policy

and how to best serve customers. We also discussed how to adapt to changing technologies and manage the regu latory environment. Western Bankers offered clarity on numerous topics and served as a bastion of information and support. As Board Chair, I hope I was successful in bringing awareness to the association’s solutions-driven programming. I strongly believe that by working together, we elevate the banking profession while perfecting our craft. I also be lieve Western Bankers will provide its members the tools, support and guidance they need, just as it has done for me. As I pass the baton of Board Chair, I encourage you to maximize your membership, get connected and share your expertise with your peers. I am confident Western Bankers will help all of us move into the future informed, focused, prepared and connected.

Best, James Beckwith Western Bankers Immediate Past Board Chair President & CEO, Five Star Bank

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Compliance Alliance

Q&A

Ask the Compliance Guru

Q: We have an instance where a customer is wanting to open a benefit account for a fellow church member whose wife has recently become ill. His initial intention was to set the account up under his name and tax ID information and he would direct the funds to the individuals. However, our institution does not typically open these types of accounts and we’re hoping for recommendations and/or what is consistent in the banking industry for these types of benefit accounts. A: There are several methods that may be used when opening these types of accounts: • A simple trust can be drafted, and an account can be opened in the name of the trust. Treat the account as you would treat any account opened under an irrevocable trust agreement. • An account opened in the name of the persons to be benefitted. Treat the account as you would treat any individual/single-party or joint/multiple-party

account. The victim(s) must be authorized to transact on the account. • An organization actively involved in the process of assisting the family may be willing to open an account in the name of the organization into which the collected funds will be deposited. For example, a local church or other charitable organization assisting the victim(s) may be willing to open and administer the account. Treat the account as you would treat any account opened by an organization. The three methods described above are the only practical methods which should be considered. However, there are some banks that allow customers to open these types of accounts as informal trust, such as “FBO” or “ITF” accounts. If the bank will consider this, please note the following: • Treat the account as you would any individual/single party or joint/multiple party account with a POD.

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interp-6/#6-b-Interp-2 Therefore, consumer liability in these instances is generally going to be limited to $50 if the consumer notifies the financial institution of the loss or theft of an access device within two business days of learning of the loss or theft of the access device, or up to a maximum of $500 if the consumer fails to provide notice within that time period. Q. For a TRID construction loan disclosed as two transactions, what should we disclose as the interest rate if it’s variable we don’t know what the rate will be during the permanent phase? A. If it will have an adjustable rate and the rate is unknown when the Loan Estimate is provided, the bank should disclose the fully-indexed rate, which is the rate calculated using the index and margin at the time of consummation. If the index and margin that will be in effect at consummation must be provided, the fully indexed rate disclosed may be based on the index in effect at the time the disclosure is delivered. “1. Interest rate at consummation not known. Where the interest rate that will apply at consummation is not known at the time the creditor must deliver the disclosures required by § 1026.19(e), § 1026.37(b) (2) requires disclosure of the fully-indexed rate, defined as the index plus the margin at consummation. Although § 1026.37(b)(2) refers to the index plus margin “at consummation,” if the index value that will be in effect at consummation is unknown at the time the disclosures are provided under § 1026.19(e) (1)(iii), i.e., within three business days after receipt of a consumer’s application, the fully-indexed rate disclosed under § 1026.37(b)(2) may be based on the index in effect at the time the disclosure is delivered. The index in effect at consummation (or the time the disclosure is delivered under § 1026.19(e)) need not be used if the contract provides for a delay in the implementation of changes in an index value. For example, if the contract specifies that rate changes are based on the index value in effect 45 days before the change date, creditors may use any index value in effect during the 45 days before consummation (or any earlier date of disclosure) in calculating the fully-indexed rate to be disclosed. See comment app. D-7.iii for an explanation of the disclosure of the permanent financing interest rate for a construction-permanent loan.”

• The person establishing the account is the owner of the account and the victim is the designated beneficiary. This means that the funds given to the victim to establish the account will not belong to the victim once deposited into this type of account. • Ownership passes at the death of the account owner to the victim. • If the victim dies, the funds do not pass to his/her estate. The funds belong to the owner of the account. • Checks made payable to the victim should not be deposited into this type of account, unless the victim properly endorses the check. • The owner’s TIN is used for IRS and CIP purposes. In addition, Compliance Alliance has a thorough cheat sheet regarding benefit and memorial accounts, here: https://compliancealliance.com/find-a-tool/tool/benefit memorial-fund-accounts-cheat-sheets/ Q. Our customer received a phone call from someone telling the customer that the customer’s computer was about to be hacked. The person convinced the customer to allow remote sign into the customer’s computer to “stop the hacking process.” In this process, the customer provided both of his debit card numbers and PINs. The fraudster used these to then purchase gift cards. We feel the customer was clearly negligent in this case, but does that help the bank at all? A. Unfortunately, when fraudsters gain access to accounts by persuading consumers to provide their access device (e.g., authorization or authentication code), Regulation E generally considers such situations to be unauthorized electronic fund transfers. Regulation E’s commentary specifically states that “[a]n unauthorized EFT includes a transfer initiated by a personwho obtained the access device from the consumer through fraud or robbery.” https:// www.consumerfinance.gov/rules-policy/regulations/1005/ interp-2/#2-m-Interp-3 Furthermore, according to the commentary, “consumer behavior that may constitute negligence under state law, such as situations where the consumer wrote the PIN on a debit card or on a piece of paper kept with the card, does not affect the consumer’s liability for unauthorized transfers: https:// www.consumerfinance.gov/rules-policy/regulations/1005/

Comment 37(b)(2): https://www.consumerfinance.gov/ rules-policy/regulations/1026/interp-37/#37-b-2-Interp.

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WesternBanker | Issue 4 2022

Associate Member News

CogniVision Introduces Document Viewer CogniVision, leaders in document display technology, introduced CogniVision OneView, its patented universal viewer for Enterprise Content Management (ECM) systems that dramatically reduces the time to review and find information from search results by a factor of 10. “Search typically takes one to five seconds. However, reviewing search results and finding specific information within documents is often tedious, time-consuming, and takes a long time,” said Basker Krishnan, chief executive officer. “We reinvented the display technology from the ground up to address this persistent problem.” Today’s traditional search technologies display results as textual summaries organized by relevance and importance. However, the human brain operates in an analog world, storing and recognizing information as images rather than text. CogniVision OneView is the first major reinvention of document viewing and display technology in decades that leverages a person’s innate pattern recognition and cognitive capabilities in finding information extremely fast without having to read through pages of tedious text. CogniVision OneView offers a unified user experience and faster search across multiple systems and repositories within an enterprise, such as ECMs, core business systems, shared drives, and other sources. It can also display search results from any AI search engine to improve relevance and information findability. Initial deployments have proven invaluable to banks and financial institutions and can address significant pain points in other enterprises. CogniVision OneView is provided on a subscription basis and is available for deployment on-premises, in a private cloud, or as a secure SaaS.

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