I am pleased to present the latest in our series of online reports to the financial services industry about the activities of the FDIC Office of the Ombudsman (OO). Our report summarizes and addresses questions and issues that you identified as being of particular concern during the period July 1, 2005, through December 31, 2005.

We have reported on a number of topics in this issue—Suspicious Activity Reports (SARs), among them. This report offers our readers information about the ways in which SARs are used in preventing and fighting financial crime. The information, which was compiled in cooperation with our Division of Supervision and Consumer Protection (DSC) colleagues, is provided in part to encourage financial institutions to continue their vigilant efforts in helping to fight terrorism and other crimes through the appropriate filing of SARs. Other topics covered in this issue include regulatory burden, deposit insurance applications, public customer identification training, the Gramm-Leach-Bliley Act, the Real Estate Settlement Procedures Act (RESPA), risk management examinations, and the Truth in Savings Act.

Ombudsmen spend a significant amount of time researching issues and answering questions posed by contacts, in addition to resolving complaints. The FDIC Office of the Ombudsman is no exception, as evidenced by the topics addressed in this report. Industry inquiries cover the wide span of regulatory matters, from accounting principles to zero-coupon investments. To respond successfully to such a large variety of topics, the OO is fortunate to have a staff with broad knowledge of bank regulatory issues, excellent research skills, and a great deal of curiosity. We also rely on subject matter experts throughout the Corporation, but particularly in our Division of Supervision and Consumer Protection. To foster the working relationship between the OO and DSC and draw on their valuable expertise, we also offer DSC staff 30- to 120-day detail opportunities to work as ombudsmen in our office. During these details, DSC staff members advise the OO on complex industry issues, participate in research and trend analysis, report on matters arising from our outreach and problem resolution services, and provide training and technical assistance to OO staff on emerging industry issues, examinations and other supervisory matters. This helps to equip OO staff with the knowledge and tools they need to more effectively respond to banker inquiries.

In an effort to introduce the OO to all FDIC-supervised banks, the OO embarked on an ambitious five-year outreach program; this year marks the fifth of this outreach effort. Your responses to our quarterly banker survey have indicated increased awareness and understanding of our role, which is the program's objective. During 2006, we plan to reach out to the 1,305 banks that we haven't yet contacted, as well as develop a new outreach program that will begin in 2007.

The OO is here to help you with your questions and concerns, and honors requests for confidentiality. To find out more about the services the OO provides, or to contact us for assistance, click on www.fdic.gov/about/contact/ask/contactinformation.html#Ombudsman.

What You Told Us:
During the second half of 2005, OO staff spoke with 791 financial industry representatives through visits and telephone calls, industry-sponsored conferences and FDIC events. Approximately 82 percent reported overall satisfaction with the FDIC's regulatory process, three percent were dissatisfied, and the remaining 15 percent expressed no opinion. The following are examples of comments and suggestions expressed by bankers during outreach activities:

• Regulations: Of the 218 comments received about regulations affecting banks, 178 involved some degree of dissatisfaction. Of the latter group, 52 percent characterized regulations as burdensome and another 35 percent viewed some regulations as unfair or outdated. The Bank Secrecy Act (BSA) continued to be the subject of greatest concern among bankers, primarily because of the high cost of compliance with what many banker contacts perceived as little benefit. Of the BSA comments, 84 percent were negative. The BSA regulation is almost universally described as "burdensome." Rural community bankers stated that they do not want to be measured by the same gauge used for money center banks. One banker said that BSA procedures seemed like "searching babies at airports." Another banker believed in the spirit of the law, but did not want to be a "watchdog for society." In addition, doing business with money services businesses continued to provide challenges, but "zero tolerance" of filing errors appeared to be less of a concern.
  
  
• Suspicious Activity Reports: One banker, who described reviewing Suspicious Activity Reports (SARs) as "eye opening," suggested that SAR results be published to show that the information is being used by law enforcement and to highlight the positive results of the filings. The OO contacted the staff of the Anti-Money Laundering and Financial Crimes Branch in DSC, who provided the following about where to find more information about SAR data and examples of the integral role that SAR data play in fighting certain types of crime.

  All SAR data are compiled by the Financial Crimes Enforcement Network (FinCEN), which periodically publishes the SAR Activity Review. This online periodical contains guidance on how to file SARs and other related documents, and it includes a section devoted to examples of how SARs were used to solve cases. Those examples can be found at http://www.fincen.gov/le_success_stories.html.

  In addition, the Federal Bureau of Investigation (FBI) produces a yearly online report entitled Financial Institution Fraud and Failure Report. The Fiscal Year 2004 report, accessible at http://www.fbi.gov/publications/financial/2004fif/fif04.pdf - PDF 6mb (PDF Help), provides statistics on SARs filed about crimes related to check kiting, check fraud and counterfeit checks on page 3. Financial institution fraud case summaries begin on page 36.

  In 2005, the U.S. Department of the Treasury released the first government-wide analysis of money laundering in the U.S., entitled U.S. Money Laundering Threat Assessment. The document is the product of the interagency Money Laundering Threat Assessment Working Group and is available at http://www.treas.gov/press/releases/reports/js3077_01112005_MLTA.pdf - PDF 3.9mb (PDF Help). This report discusses how the various agencies use SAR and other BSA data to identify financial patterns and link criminal activity. For example, the report describes how the FBI is developing advanced technologies to further exploit SAR data and how the Internal Revenue Service has established 41 SAR Review Teams that analyze the data to assist in case development.

• Deposit Insurance Applications: Forty-six bankers commented on the insurance application process. Thirty bankers were satisfied with the process, a number of whom commented specifically on the cooperation and assistance that they had received from FDIC regional and field office staff. Echoing the sentiments of several bankers, one banker praised a "terrific" case manager who "went out of his way" to help the bank, which made the bank "want to go out of its way to work well with the FDIC." Comments from bankers who were less than satisfied with the process focused mainly on burdensome paperwork and numerous requests for information. Two bankers, noting a "ton of paperwork," believed that the process could be streamlined.
  
  
• Public Customer Identification Training: One banker suggested that the FDIC provide training for the public on the requirements of customer identification. The banker stated that one of his bank's biggest challenges is explaining ID requirements to customers. Believing that the industry, regulators and the public have a vested interest in these programs, he recommended that the FDIC work with other regulators and trade associations to undertake a national advertising and educational campaign to teach consumers, including money services businesses, about the value of customer identification programs.

Your Requests for Assistance:
During the last six months of 2005, 450 financial industry representatives contacted the OO for assistance. Over 93 percent of those requests were for guidance, information and the identification of subject matter experts. The remaining requests were complaints for which the OO provided options, conducted research or facilitated a conflict resolution. Examples of issues raised include the following:

• Gramm-Leach-Bliley Act: Guidance was requested in developing procedures to respond to bank customers whose financial information may have been compromised. One banker asked whether a bank's failure to disclose the sharing of non-public data with a third party constituted a violation. Two bankers wanted to know the circumstances in which the FDIC needed to be notified about the unauthorized disclosure of customer information.
  
  
• RESPA: Banker questions concerned such matters as incentive/award programs for realtors, items to include in HUD-1 disclosure, the appropriateness of suspending disclosures until pre-approved customers consummate loan agreements, and how to reflect real estate taxes on the good faith estimate when the bank is not escrowing taxes.
  
  
• Risk Management Examinations: Bankers sought guidance on a number of issues raised as a result of their recent reports of examination. They included questions about supervisory loan-to-value limits on land development loans, dependency ratio benchmarks, liquidity policy development, loan classifications and formally disputing examination findings.
  
  
• Truth in Savings: The intricacies of the Truth in Savings Act frequently prompt questions from the financial services industry. One banker asked whether erroneous monthly service fees on business checking accounts had to be refunded. Another banker inquired about whether the bank can run a promotion that includes a waiver of early withdrawal penalties. A third banker asked whether charging fees for not maintaining a minimum balance precludes advertising the accounts as "free checking."
  
  

NOTE: If you have comments or suggestions about this semiannual report, please contact FDIC Ombudsman Cottrell Webster at (703) 562-6040, or by e-mail at cwebster@fdic.gov. To receive e-mail notifications of future OO semiannual reports as soon as they are posted to the FDIC's Web site, follow the instructions at www.fdic.gov/about/subscriptions/index.html .