Seminar on Banking Best Practices and Compliance
Under Secretary for Management
SUZANNE MCPARTLAND, PROGRAM MANAGER, OFFICE OF FOREIGN MISSIONS: Good morning and thank you for coming to this banking seminar. We really appreciate you making the effort especially with our weather today. With that, I would like to introduce Under Secretary Patrick Kennedy, who is our Under Secretary for Management, and he is overseeing our banking portfolio at least for the foreign mission part of it. So with that…
PATRICK KENNEDY, UNDER SECRETARY FOR MANAGEMENT: Thank you very much, Suzanne. Good morning and welcome all of you to the Department of State today. Thank you for braving the cold and whatever amounts of snow is in the neighborhood that you came from. I think this is an important event today and we are very, very pleased to have you be able to hear our presentation from two major United States banks in alphabetical order: The Bank of America and Citibank.
Both Citi and Bank of America participated in our last seminar in June 2013, about eight months ago, on banking and diplomatic bank accounts in today’s regulatory and commercial environment. We wanted to revisit some of the same ground but also to get the latest updates from our highly professional colleagues. The Department of State fully understands and appreciates the important role that banking plays in diplomatic and consular activities in enabling you to effectively carry out your official duties and daily activities, and we know that from our own experience because, as some of you may be aware, the United States maintains some 285 diplomatic, consular, and missions to international organizations around the world, and so we know that we have to be banked and we very much appreciate both the equity and the requirements under international law that we assist you in that regard.
We also know that it is not easy, always, for you to identify a bank when you need one. We continue to work within our own government and with great partners like Bank of American and Citi in that regard. However, you also should be aware that there is no requirement in international law that we must give you a bank and, unlike in some countries where banking is a part of the government, in the United States banking is very, very much a commercial activity regulated by the United States Government, but neither I nor the Secretary of State nor the President of the United States, for that matter, have the ability to command within our private commercialized banking system. But we have for you today two experts, two banks that do this, that have worldwide presence, and as I said, we’re very appreciative of that. With that, let me again thank you for coming. Let me certainly encourage you to ask questions. Suzanne McPartland, Cliff Seagroves, who is off taking his daughter to school because of the delayed school openings, will be here shortly. The entire Office of Foreign Missions is at your disposal. Their command from the Secretary of State is to be your front line, your means of assisting in issues large and small, and so with that, let me turn it back over to Suzanne.
MS. MCPARTLAND: We are very pleased to have Oliver Moss and Kevin Troxell from the Bank of America to give a presentation on banking. They have a PowerPoint that will be used and, with that, I will let you start.
OLIVER MOSS, DIRECTOR AND MARKET EXECUTIVE, GLOBAL GOVERNMENT DIVISION, BANK OF AMERICA: There we go…good morning everybody. Thank you for participating and, Ambassador…I guess he just left…so…Ambassador Kennedy, thanks very much, and Suzanne, thanks, it’s a pleasure to be here today. I’m Oliver Moss, I’m the director of the Global Government Division of Bank of America, and it’s a pleasure to be here today to speak to you. And we’re happy to answer any questions and I’m glad to have my colleague, Kevin Troxell, here as well from our Global Financial Crimes Compliance Group.
We wanna provide a general overview of what the activities that we provide to diplomatic missions here in Washington but we also do that across the United States. But really, the real focus is really on best banking practices, and Kevin will do the bulk of the conversation.
So this is basically a summary of the topics that we will be talking about. And as you can see, the real focus is on the compliance aspect which Secretary Kennedy alluded to.
What Bank of America does, what our group does, is we provide services to diplomatic missions throughout the United States, and in select countries around the world. We manage those centrally. I have colleagues of mine who are here as well, who manage these relationships in Washington as well as in New York.
We handle only the official accounts in my group. Our consumer bank deals with individual services for diplomats and senior political figures, known as SPFs, as well as their relatives who are considered politically exposed persons – those are acronyms that you’ll probably hear – also known as PEPs, and Kevin will talk about those.
The basic services that we provide in our group are really demand deposit checking accounts, basic account services for diplomatic missions, for embassies and consulates, and UN missions. We provide payments – these entail checks, wire transfers, debit cards, credit cards subject to credit approval. We handle receipts – basically money that is collected that you do in your capacity from your consular offices via check, cash, money order, credit cards and debit cards, and then we provide you the tools to be able to manage your accounts that way which would be access through an online electronic portal for information reporting. We do extend credit – again, in most cases a diplomatic mission doesn’t borrow money from a bank, but we do provide corporate credit cards subject to credit approval, and certain other credit facilities, letters of credit and things of that nature, overdraft facilities, again, subject to approval. Foreign exchange is the other area that we are involved with, and to a certain extent, investment and savings accounts to the extent that there are excess funds that are not used on a day-to-day basis. And then, extending beyond that, Bank of America would provide services such as bond service, bond issues, and debt instruments for governments.
For individuals, basically, they’re very basic banking services for individuals who are senior political figures or diplomats. Checking and savings accounts. Again, wire transfer services, checks, debit cards, and certain credit products such as automobile loans and personal credit cards that we do subject to Bank of America, in this case, having an official relationship with the mission itself.
And with that, I’ll turn it over to Kevin, and we’re happy to answer any questions afterwards or in the meeting afterward.
KEVIN TROXELL, VICE PRESIDENT, GLOBAL FINANCIAL CRIMES COMPLIANCE, BANK OF AMERICA: Thank you Oliver. As Oliver mentioned, my name is Kevin Troxell, and I’m in Bank of America’s Global Financial Crimes Compliance Group. Like most American children, I grew up dreaming of being in the compliance field (laughter) but in all seriousness, I found my way into this group, and I’m truly honored because I had the opportunity to learn about this business and this very important mission that you yourselves are providing and serving here, so it’s an honor in this business – I know it means a lot to Oliver and it means a lot to me, consequently. So I wanna start just by briefly skimming through the legal framework. The two main, I guess, laws that we’re contending with: the Bank Secrecy Act and the Patriot Act – I’m not gonna go into too much detail on these but I highly recommend that if you’re having trouble sleeping, it’s very interesting. So I’ll skim through this – I do wanna focus briefly on what’s called a Currency Transaction Report – a CTR. This is a requirement for cash and currency transactions for a report to be filed with the U.S. Government when they aggregate to be over $10,000 in one day. This is…it’s important to know the distinction between a CTR and a Suspicious Activity Report. A CTR is not indicative of a suspicious activity. In fact, where some entities run into trouble is when they try to evade this report; they try to structure their transactions below the reporting limit. This activity is called structuring and is, in fact, illegal and will be reported to law enforcement. So a CTR is not a bad thing. And you should just understand that this is part of banking law that we have to comply with and just be aware of that.
To set the table about the regulatory environment that we’re currently in, I think most of you have probably heard of Riggs Bank – this was the bank largely considered the bank of the embassies in the ‘90s and early 2000s. In 2004, a fine was levied on them by the OCC and FinCEN, and the reputational damage that Riggs suffered ultimately brought the bank down and they were forced to sell their assets. An example of what was happening within Riggs Bank – in their embassy banking group – they were assisting former Chilean dictator Augusto Pinochet and diverting government funds and setting up off-shore corporations. Additionally, there was some other impropriety within the embassy banking group, so, you know, this was one of the first big examples of an anti-money laundering penalty impacting a bank, and ultimately in this case, Riggs was unable to survive this incident.
Another big one that caught the attention of banks worldwide and made the news in a big way was with HSBC in 2012. They were levied with a $2 billion fine. And this was result of a general, according to the report – U.S. Senate report – a general lack of compliance culture and a lack of anti-money laundering controls throughout their North America business. So, you know, I think one thing…this penalty really made everyone take note that the OCC has heightened expectations for our risk management. The OCC’s concerned with high risk businesses and how the banks are managing this customer population. So the impact of foreign missions consequently is embassies, consulates, and missions, are considered by our regulators to be a high risk industry, so this is going to directly impact you.
So I wanna show you an example of your company in the high risk industry space. Money Service Businesses – these are your check cashers, your money transmitters – they have to be licensed and there’s often unlicensed MSBs – this is a particular area of concern. Correspondent banking. Senior political figures and politically exposed persons of which I know there are several in the audience today, and certainly some of your colleagues fit into this category. And this is one that’s been probably – some of you have felt the impact of this over the past year in that banks are collecting additional due diligence for SPFs and PEPs. One of the things that banks have been tasked with doing is determining the source of wealth for a senior political figure, and this can be a particularly sensitive question to ask, and we understand that, and we are trying to do that as delicately as possible, but it is an expectation of our regulators that we obtain and document this information . So that’s a big one. Charities, marijuana businesses, and virtual currency. We certainly understand the risk of these different populations are very, very different. Embassies, consulates, missions and senior political figures – the stated risk is the potential for the diversion of public funds or, general, just impropriety and misuse of public funds. And obviously, marijuana businesses – the difference is pretty stout, and not having studied that studied business at all, so I don’t know what the risk there would be other than…I don’t think any of the banks are genuinely excited about embracing that sector at the moment.
So this leads us to the challenge that banks are facing with high risk industries. The challenges that our regulators expect us to have: enhanced due diligence; increased monitoring routines – this takes people, it takes systems, it’s expensive, and, you know, as any private enterprise, you have to look at the risk versus reward of a certain sector. So, in addition, we have fines being levied by our regulator. So that equation – the risk versus reward equation can be thrown out of balance pretty easily. So one solution to this is what’s called de-risking, and that is when the bank exits an entire customer type or just doesn’t intend to serve a certain customer type because the costs are too high and the potential revenue isn’t there. This is something that’s happening. It’s a trend right now in the industry, and our regulators have taken notice. I’ve added a quote in there from the controller of the currency of the United States, talking about the perils of de-risking or how de-risking should not be the first solution that we go to. So, you know, I think they recognize that some of the regulations have driven the banks into this practice, but the fact remains that with the current regulatory environment this is something that banks are going to be doing.
The second option is to embrace sound risk management through enhanced due diligence and potentially costly monitoring. Basically, banking high risk industries the right way. And this is something that with the embassy, consulate and mission business that we, Bank of America, have committed to doing, and our colleagues at Citi as well. This is a sector that we believe in and we’re willing…we’re willing to do what’s required to maintain this portfolio. One thing that can help is the adoption of banking best practices which is more or less why we’re here today to talk about.
So I’m gonna talk about best practices from a product standpoint. The first product is cash. There’s an old saying that “cash is king.” In this case cash is not king. We understand the need for cash. It’s legal tender and there are always gonna be needs for cash but it does possess some characteristics that make it less desirable of a product from a compliance standpoint but also from an efficiency of your business standpoint. It’s obviously…it’s non transparent – it’s hard to know where cash is coming from and where it’s going to – it’s more difficult to track these funds, and it’s inconvenient to transport. I know D.C. is a very safe city but no one feels comfortable carrying around thousands of dollars of cash, and that cannot be recovered if lost. So best practices with cash, because like I said, we know there are still needs for this product. Understand currency and transaction reporting, which I discussed previously. Be ready to anticipate questions from your bank regarding large inflows and outflows of cash. That’s a regulator expectation. Our regulators expect us to be able to tell them immediately where cash is going to and where it’s coming from. And if there are large cash requests that you have, it’s a best practice to notify your bank not only for compliance reasons but also your banker can assist you with getting that cash or proposing alternative solutions.
Check is an easy one. It’s easier to track your funds. It’s convenient. A best practice for checks is to make your payments directly to your vendors. One thing that we want to avoid is conducting embassy business through personal bank accounts. This is something that our regulators have explicitly called out. So we want to avoid reimbursement. I understand that there are always gonna be situations or the need may arise that fits an emergency need for cash or you’re out, but the goal is to make your payments directly to the vendors, and that makes our job easier, and it helps with internal bookkeeping and efficiencies. And again, anticipating questions around the source and destination of funds. That’s gonna be a common theme throughout this.
Debit and credit card. These are convenient, portable. It’s easy to track funds. And I think one of the best features about debit and credits cards are the security aspects. The potential to have fraudulent purchases refunded, reimbursed…there’s a variety of secure features for this, and I know it always makes the news when a big retailer or vendor, Home Depot or Target gets hacked, and credit and debit card numbers get stolen. To my knowledge, I don’t think much, if any, actual loss happened to any consumers. And this is largely due to the security features available with these products. And again, this makes it easier to make your payments directly to your vendor which we certainly support.
And then, wire transfers. These are…again, it’s easier to track the destination of funds and they’re convenient. This is the preferred method for funding from international sources and repatriating funds back to an international destination. And again, we encourage an open dialogue with your bank whenever there are gonna be non-recurring wires or special funds coming in or going out. We certainly encourage that dialogue.
A cash management platform is something that can really benefit the operations of a mission. This allows you to conduct transactions from this platform. Bank of America – the cash management platform of Bank of America is called CashPro. It helps to simplify and streamline operations. This allows wire transfers, checks to be written, ACH – this is for the automatic and recurring payments for payroll. It certainly simplifies those operations, and there’s a variety of features that a cash management platform can provide, and we would encourage you to talk to your banker about this option. And then something like merchant card services – this is when you have a machine – a card reader at your place of business to take in fees for consular services. This allows for funds to be immediately credited to your account, it reduces the risk of fraud or theft with the transport of cash or other products and, generally, a credit card would obviously be subject for credit approval, but this is a very viable product and it can really help streamline and make your operation more efficient. And again, we would encourage you to contact your banker if this is a service that you’re interested in.
And then, personal accounts – because everyone here has to maintain their own personal account – there are best practices for personal accounts as well. Again, the big one is to use this account for your personal use and avoid conducting embassy business through your personal account. This is probably the number one thing that, when we’re looking at this business from a compliance reason, this is where the most questions arise. And again, it’s not illegal but it’s something…it truly is a best practice to keep your personal account and your business activities separated. And then there’s some general best practices here for personal accounts. And I know from looking at the diplomatic community, often times personal account management is better than the rest of the general population. We’ve seen that bear out in revenue and statistics. So, you know, I know most of this is second nature but I do encourage you to take a look at these best practices ‘cause they will make our lives easier and, more importantly, it’ll make your lives easier.
And then I have – and the rest of the presentation I have some contacts from Oliver and our Global Government Division and, additionally, some appendix materials that I won’t go into. They just serve to reinforce the regulatory environment that we’re in, and the laws and regs that we’re contending with. So with that, I’ll turn it over – turn it back to Suzanne. Thank you for your time. Again, it’s an honor to be here speaking to such an esteemed group of individuals. Thank you.
MS. MCPARTLAND: And now we have our representatives from Citi to present to you as well. And we are very honored that we have both Bank of America and Citi here, for sure.
Jim Millette and Phil Edmonds. Jim is now the head…Jim is the head of Citi for embassy banking, and Phil Edmonds is his compliance person.
JIM MILLETTE, DIRECTOR, GLOBAL HEAD OF EMBASSY BANKING, CITI: It’s a pleasure to be here. I didn’t wanna have a separate slide deck and I wanna thank my friends of Bank of America. They did a great job on the overview. We both get oversight from the same oversight group, so I’ll try to give a little presentation that doesn’t duplicate that. I come from a little different perspective. I actually spent 30 years in this building, and I’m well familiar with foreign affairs and I’m honestly learning banking – I’ve been in this job for about six months now. I wanted to talk to you about two things: one is transparency consolidation, and efficiency, and then I’ll go into some specific issues on compliance with Citibank. And again, Bank of America laid out the issues – they’re difficult and we all try to deal with them as best we can.
What I wanna talk to you about on the efficiency side – we’re all facing from our host governments tight resources and finding the best way to doing business – and in my days in foreign mission that gets back to a threat at the embassy level of control. We all feel when you work at the front line embassy that the home office may really not understand your needs, your problems, etc. So what I believe there’s a way of embracing that with the tools in banking, so that you can present back your operations in a consolidated way and still maintain your independence, and our tools could allow you to do that. I think you can embrace these consolidations or fight them. I know I did it for 20 years. I think if you embrace them in the right way even as you, as the ambassador in a country have control over your consulate, and maybe, even though there’s independence between the two, you can use banking tools to show a single vision, and back to your home ministry so that it looks like you’re a lot more integrated and consolidated than you necessarily may be or you could be fully [inaudible] – the tools could allow you to actually control what goes on at all your consulates. And then you could really go outside and have a conversation with your ambassador at the permanent mission which would be – we understand how these two entities don’t always come together – you’re independent, you wanna work independently, but there’s tools that from a financial perspective can give a single snap shot to folks in your home ministry that allow you to present that. So I think our tools would allow you to do that and I’d be happy to discuss that with you.
Secondly on compliance. It was alluded to the difficulties we have. A couple of things to point out to you specific to Citibank: one, when our bankers come in and discuss with you up front, there’s something they call an account profile that is very important. To Citibank that is the key to all monitoring. So the more robust, the more complete you make that account profile, the less we have to come to you with individual questions, and what that says is values and volumes. How many transactions you’re gonna have, what are the transactions like? For example, we will have annotated in there, salaries. You’re gonna pay an x number of employees on a bi-weekly basis with general dollar values of x. Well, lo and behold, you have an annual bonus period where you give out bonuses once a year, if that’s not caught in the APF, and we see those payments hit outside of that bounds, we’re gonna have to come ask you about ‘em. And, you know, I’ve had a lot of conversations with number of foreign mission, they don’t have like having those questions asked especially about salary. I think you can be your strongest advocate by working with our bankers and giving us sound values and volume so that we can…when we evaluate what’s going on, we can understand what’s going on.
Second, as was well pointed out by my colleagues at Bank of America, cash and electronic transfers. As much as possible, use the electronic platform and cash. And I think my friends from Bank of America would say the same thing, if you’re in a situation, you have to use cash or you have to do something radically different, come to us in advance. We can work with you in advance, and do these transactions in a reasoned way, and then we don’t have the problems afterwards with the regulators. So I would strongly encourage a strong communications at our relationships mangers level – I think you all know our relationship managers – use them as your friend to help through the process. When they get blindsided then it gets to be a confrontational situation that’s not good for any of us. I think if we work together, we can get there. And again, for any of you who want some afterwards, I have a little handout that has out contact relationship managers. And now I’ll turn it over to Phil if there’s anything he wants to add. Thank you.
PHIL EDMONDS, DIRECTOR, AML ADVISORY, GLOBAL EMBASSY BANKING, CITI: Thanks Jim, thanks Suzanne, the State Department for having us. Oliver, Kevin, I thought that was a great presentation. Tell Bill Fox I said, “Hi.” I actually came from Bank of America before I went to another institution. I’m now proudly at Citi. Before that I was a prosecutor in New York. So I come at this with a different perspective. And so, what I wanna do is talk to you, and I have three things to offer for your consideration.
The first thing I wanna talk about is when you look at the regulatory landscape and what’s happened in banking in the past five years, and you think about the regulations and how they’ve changed, fewer banks will be in the embassy banking business, right? That’s a reality. So if you go back to 2011, JPMorgan Chase exited the commercial side of embassy banking business. They had a large bank right across from the UN in New York, they were about two or three in this embassy banking space, and in 2011, they decided to completely exit it because of the some of the things that Kevin talked about in terms of the cost benefit and the compliance challenges that are before them, specifically in this space.
There was an article that came out in the Washington Post around 2011, in March, when they decided to officially exit the business and there was a large, high-ranking diplomat that indicated , “Well, it’s number one, a little bit disconcerting that JPMorgan got out of the business but two, all these banks are asking our questions I don’t think that they should ask us. Specifically, why are you taking large sums of cash out? Why is this wire transfer coming in?” And they took a stance they didn’t understand why they were asking. And the point is, is that we don’t think anybody or anticipate anybody in this room is going to launder money, however, the U.S. Government is forcing banks to institute certain controls and to make sure that the flows going through these embassy banking accounts are transparent and well documented. And so for you, if you’re working at an embassy and you have to deal with your MOFA back home, those are things that you should be communicating to them. And you heard Kevin talk about cash and, of course, you can’t avoid cash, and everybody likes cash, and yes, cash still is king for some folks and for certain countries in terms of what you’re used to back home. But what I suggest to you is you think about alternative methods. Right? So there’s no way you can altogether avoid cash, but think about some other ways that you can transact, pay hotels, pay vendors. And you heard about online payment systems, you heard about checks, and I urge you to use those kind of products instead of cash.
The other thing that I guess I wanna stress for you is what to expect on a go forward basis. You heard about the regulatory landscape. Let me just throw some numbers out to you, and I do this in a way to shock you, but in a way so you can start thinking about what we in the banking industry have to contend with. So in 2012, HSBC, the largest bank in Europe, paid a $1.9 billion fine. And one of the things that they had problems with was their embassy banking space. So what did they do? They started to streamline their portfolio, and at that time, in about early, early 2012, they got out of 20 relationships, and they’ve since streamlined their portfolio quite a bit. It’s an excellent bank, and there was an article on the New York Times about them just on Monday, in terms of some of the challenges that they’re facing, but those are challenges that all banks are facing. So that’s in 2012. In 2014, there was a $2 billion fine that JPMorgan paid, and they’re under a cease and desist order. And then there was the biggest fine in banking around March 2014, Crédit Suisse paid $2.6 billion for some of their tax difficulties. But nonetheless, it’s because the regulators are focusing on banks and making sure that banks implement strong internal controls. And so what does that mean to you as folks who have to deal with your home government and deal with the banking community here? And what I suggest to you is, like any relationship, and a banking relationship is a relationship, there has to be open dialogue and open communication. Right? So talk to your banker early and often, and be open to suggestions – and as I said before, instead of cash think about checks. Instead of international wires, think about wiring money in, specifically in the U.S., and think about online platforms. And so…and also, if you have specific events that you know are coming up – specifically delegations. So you may have a large delegation coming in from your home office, and very senior officials from your home government, let your banker know that the delegation is coming and expect that you will have a banker ask you about their names, their dates of birth, and their passports. Those are things that the banks are required to ask. Now, whether or not you, in turn, turn that information over because of your privacy laws or some restrictions that you are under in terms of your home government, and what your home government allowed you to provide, that’s a different issue. But expect the question. And the earlier you let us know that something like a delegation or a large conference is occurring here in the United States, we can work together to come up with alternative methods of payment where we can both feel comfortable.
And lastly, what I wanna talk to you about, and we’ve alluded to it, is what to avoid. I was at a bank a couple of years ago and we kind of tracked specific transactions that we thought were problematic. So I’m gonna take a short time to just run through some of the things you may wanna avoid.
We’ve talked about this large cash deposits and cash withdrawals. But specifically, immediate withdrawals of cash following a deposit or receipts of funds from unexpected sources. So, in other words, we’re building profiles of you and we have in our documentation, and Jim told you at Citibank, a profile form is being created for you. And so what we have is a list of vendors that you use. So you pay your phone bill, you pay your utility bill, you use car services when delegations come over. But there are instances where we won’t know who those vendors are. And so, if we don’t know who those vendors are, please anticipate that we will ask you. But we’re also doing research on who those vendors are. So if you know that you’re gonna use a vendor that we don’t know about it, let your banker know.
Cash deposits followed by immediate disbursements of funds to third parties. Right? So we know that there are certain payments that you’ll make every month, but sometimes there’ll be payments made to third parties like vendors and other people that we don’t know. Sometimes you’ll pay your employees or reimburse your employees for travel allowances and things like that, please let us know because those are things that we have to monitor and we have to know because the regulations require it.
Customers conducting transactions on behalf of non-account holders. And so, years ago we struggled with this at another institution because you don’t pay certain taxes – you’re tax exempt. You pay for vehicles and ship them back home because you get them cheaper here, and then you pay for a specific shipping service, and you’ll ship certain vehicles back to your home country. You can’t transact in your personal account – number one official business – number one you use your tax exempt status, right, for personal reasons. Right? So expect questions about that from your banker.
Obviously Kevin alluded to this misuse of government funds. That comes in many forms, but if you have your banker who is asking questions about specific entertainment, specific gifts, I’d watch out for that as well. And lastly, expect requests for specific documentation. Let me give you an example of that, and I’ll do this in closing because I would be remiss if I didn’t bring up the Riggs case because Riggs is ground zero for embassy banking. They actually had to sell their business. They paid, I think, a $25 million fine and sold their business, and that business was since exited by Wachovia, right, and another part of their business went to a large UK bank. But, General Pinochet who ran Chile – he was the head of state – had a banking profile – so Jim talked about this account profile form which every bank is going to require of you. And in his profile – and this is in the U.S. sub-committee and investigations report, so this is nothing that’s secret – he’s documented as being a retired general; never talks about…he was actually the head of state; never talked about, in this profile, that there were certain legal cases going on against him in Spain and in other places; it talked about his initial wealth was profits and dividends from several businesses that were family owned but there were no specifics about what those family businesses were, how much was being derived out of those family businesses. And so, if you have money that you’ve inherited, money that is coming in because you own a property back home and you’re getting rent from that, expect that your banker is gonna ask you specific questions about those very things. And the more detailed your profile is, the less questions that the bankers will ask you because they’ll have that information on file. And lastly, investment income and pension fund payments. And the profile indicated that he was worth somewhere around $300,000 to $500,000 but the cash on hand was only $20,000, which suggested that the anticipation was money was gonna come in and immediately go out. And so when you’re building your profile with Citi, I hope it’s Citi, but if it’s Bank of America, or any bank here in the United States, try to build a robust profile, try to be transparent and open in terms of what’s going on. Anticipate delegations and large payments that you may need in the future. With that, I will close and I look forward to the question and answer session, and feel free if you don’t feel comfortable asking questions in this environment, I hope you will take us and talk to us personally after this or pick up the phone and call Jim at Citi, and we’d be happy to answer any questions. Thank you.
MS. MCPARTLAND: Well, that’s certainly a lot to take in at the moment, and there is a diplomatic note on banking best practices that was sent out last year which is available on the OFM website, and all of your missions were given copies, but we’re happy to resend any of those things. And now I’d like to open this for any questions if our presenters would like to come up to the stage, there’s a microphone for each one, and if there are any general questions people would like to ask, the microphones are on either side.
AUDIENCE MEMBER: Yes, I have a question. I’m Cheryl Edson, I’m a Program Manager in OFM dealing with mostly tax issues, so this might actually be a question that bleeds more into the tax area. But we get a lot of questions from missions who ask, “What is this W-8 form or my bank is asking me to fill out a W-8 or a W-9?” And we do answer those questions and we point them to the W-8EXP, but I’m wondering if one of you might be willing to take this opportunity to explain why it’s important for the account holder to fill out a W-8EXP or a W-8BEN, if asked by their bank. If not, that’s OK.
MR. MOSS: Yeah. Yeah, that’s a good question. That is a form that is required by the Internal Revenue Service, and it’s basically…it’s a form that addresses tax withholding on interest-bearing accounts, but it needs to be completed by every client of the bank. For most U.S. entities, if it’s a corporation or an individual, they have a tax ID number, they have an employer identification number, social security number. For individuals or entities that are non-resident, it’s basically a form that pertains to a certificate of non-residency, and there are some new forms that are coming out – I think actually IRS – our tax department contacted us, and so there are new forms. They do have to be refreshed periodically, so when the account is opened you’ll have to fill out the form. Unfortunately, that refresh process has generally been three years, I don’t know if it’s shorter now, but sometimes it has to get refreshed. Complete the form – if you have questions, I would ask your banker to complete that. I will say, you know, it is a legal form that’s from the Internal Revenue Service. It does have to be completed because if it’s not completed you can risk having your account shut down.
AUDIENCE MEMBER: But can I reiterate that the form does not go to the IRS and that it’s really just kept on file for the bank purposes of…of ensuring that…?
MR. MOSS: I don’t know that. I must confess, I don’t know that. It’s a form that we require. I don’t know if it’s a form that goes to the IRS, but if we don’t have the form completed, you know, that would be cited. Yeah, it’s our file. Right.
AUDIENCE MEMBER: OK. Thanks.
MR. MOSS: Do you wanna add anything Jim or?
MR. MILLETTE: No…no.
MR. MOSS: OK.
MS. MCPARTLAND: Anyone else? Well, in that case…oh, please.
AUDIENCE MEMBER: Hi good morning. My name is Sonia Meyer, I’m from the Timor-Leste Embassy. I have a basic question. It’s about a personal account or individual account. It’s like, if one diplomat has ended his mission, is it possible that he can still maintain open his account or he has to close the account whether with the Bank of America or with Citibank? Thank you.
MR. MILLETTE: I’ll start. Basically, in our world there’s a significant difference between a personal account and the embassy account, and a personal account is personal. It’s based on their relationship in this country. If they stay in this country they can maintain that personal account. If they’re going overseas assuming that where they’re going, if it’s within the regulations of the bank to keep that, they’re just totally independent. The reason we wanna know that, we care about funds going between the corporate account or the embassy account and the personal account, but to us it’s a different matter, and if you are a SPF or something, there’s monitoring that happens on your personal account, but beyond that, that’s a private matter.
MR. EDMONDS: Let me just say that there is no requirement to close a personal account when you leave your post here. We’re an international bank so we anticipate that you will have banking accounts possibly in the U.S. and in your home government and other places, so there’s no requirement to close an account once you leave your post here.
MR. TROXELL: Yeah, and I’ll just add, again, it’s…it’s…different banks have, I think, different policies regarding this. One thing that’s important for banks, especially with SPFs or any high risk customer, is the ability to get into contact with the customer, so that may be made more difficult if upon the completion of a term, an ambassador moves back home. If we can’t, on a periodic basis, get in touch with the individual, that’s something that often leads to account closure, and that really applies to anyone not just senior political figures. But I think just maintaining that relationship and, you know, just being able to respond to whether it’s a mailing, an email or a phone call, that’s important. And, obviously, that’s made more difficult if someone has left the country. But it’s certainly possible to maintain that account, I think, if the communication is kept up.
MR. MOSS: And the only other thing I would add is it’s really based on what the needs is. If the intent is for somebody who’s a diplomat here, they’re here for a specific period of time – one year…anywhere from one year, five years, six years – when the tour of duty is over, generally what’s the need for you to have an account here in the United States? I mean, it could be that the individual has children that are studying here in the United States, but in general, there probably wouldn’t be any need, and it becomes more cumbersome as well for the individual to manage the account in a proper way to avoid overdrafts and things of that nature, so that’s the only comment that I would make.
MS. MCPARTLAND: Thank you very much. Any other questions? In that case I ask that we can adjourn to the reception area where there is still coffee and tea and some other little things, and you can have informal conversations with our bankers, and I ask that we give them a big round of applause.
Thank you so much.