COMMUNITY BANKING CORNER
INFORMATION SHARING
CAN IMPROVE REVIEWS
Earlier this year , an article was published on why community banks should participate in 314 ( b ). 1 Covered in the preceding article were reasons why some institutions may choose not to participate and the attempt to dispel each reason . As a refresher , in case you missed the argument for participating , the following were the three common reasons discussed for not participating :
1 . It is not worth the time and effort and is only voluntary .
2 . Even if a bank does participate , other banks that register may either ignore inquiries or not share back .
3 . Institutions are scared to share “ the wrong thing .”
The options for participating
The hope was to persuade readers to take the first step and at least register to participate . Let us suppose that either A ) you were already a participant or B ) after reading , you decided to take the plunge and register . As a participant in 314 ( b ), you now have four options . First , you can simply forget you ever registered and ignore any inquiries that come in from other financial institutions ( FIs ) to gain information on common customers and transactions . Second , you can field appropriate inquiries from other FIs that come in and assist them by answering questions and sharing information but not sending out any requests . Third , you could ignore all incoming inquiries but use the information sharing to further your own reviews and send out inquiries to other FIs . Finally , the fourth option is total adoption , where your institution actively responds to and sends out inquiries using 314 ( b ).
Which option you choose sets up much like game theory . If you are not familiar with game theory , it is a concept that can be used to produce the most optimal outcome for all players involved . Different actions taken by the players result in different outcomes . To illustrate this , consider that if you were to choose option one and not participate at all , your institution and all other institutions would gain nothing — essentially a lose-lose proposition . Options two and three do offer potential gains for each party , but something is being “ left on the table ” by not having each side engage fully . Option four is the optimal choice . If all FIs actively participate and reciprocate with one another , everyone gains the biggest win . The reviews conducted would be more thorough and each institution would have a better understanding of each side of a transaction and their common customer ’ s activity .
Per the Financial Crimes Enforcement Network ( FinCEN ), at the end of the calendar year 2020 , there were 8,400 users representing over 7,000 FIs . 2 It is important to remember that banks and credit unions are not the only participants .
140 acamstoday . org