This past week, we participated in a second visit to Nogales by the FDIC (federal deposit insurance corporation). The first visit stemmed from a letter we sent requesting that the Chairman of the FDIC visit the border and hear directly from the business community about banking challenges they were facing. The Chairman responded quickly and sent Regional Director Stan Ivey and his team to Nogales in March to speak to the Ambos Nogales Hispanic Chamber and other business leaders. The first meeting was helpful in providing real examples to the FDIC which regulates Banks across the nation.
This recent meeting, however was a first of its kind. Director Ivey in partnership with the Arizona Bankers Association invited twelve financial institutions as well as our Ambos Nogales Hispanic Chamber, businesses and elected officials. The group that gathered had a strong interest in border banking issues.
The meeting focused on educating the business community on the Bank Secrecy Act and the pressures that Banks are under to mitigate risk. In a January letter to bank CEO’s, the Chairman of the FDIC suggested a case-by-case risk based approach. He had received letters and communications from businesses along the border about deposit accounts being closed and the challenge in getting commercial loans due to the perceived risk of money laundering.
The FDIC discussed a number of top concerns related to cross border transactions. They were 1) ACH transactions, 2) Foreign Bank Account reporting, 3) Declaring cross border cash transactions and 4) wire transactions and beneficiaries. There concerns stemmed from the challenge that information was not as readily available on foreign businesses, owners, customers, signers on account and it was difficult to follow the trail of money through the system. Traditional internet and Lexus searches were not sufficient for cross border transactions and did not provide the level of details required by the banks.
Both President Obama and Governor Ducey have spoken about the importance of doubling trade with Mexico in the short term. The outcry from our chamber and other business groups has centered on the challenge to grow and expand our businesses without adequate capital. Both Senators McCain and Flake as well as many of our congressional delegation have been advocates for our federal legislators to tackle this issue.
The conversation with the FDIC is promising, but ultimately we are looking for solutions. There is a void in banking along Arizona’s border. The federal regulatory environment has caused some banks to react by eliminating their retail presence or entire industry groups as clients. We were encouraged to have so many financial institutions in attendance. There is a business opportunity for a financial institution with good financial controls in place to work with legitimate, long standing businesses.
To find a solution to this challenge facing businesses along the border, banks must have risk mitigation policies in place to reduce concerns and work with businesses on a case by case basis. The FDIC also encouraged businesses to build meaningful relationships with their bankers to ensure that they understand business operations. Ultimately, the business of lending is based on trust. Arizona has been slowly recovering from the economic recession. Trade with Mexico is a key driver for our economic recovery and acquiring capital to grow is vital. Thank you to the FDIC for highlighting this issue at Arizona’s border. It’s time for a solution to our Border banking challenges.