Banks Spending More to Fight Fraud, Meet Regulations

A majority of banks in South Florida plan to spend at least 10 percent more in the next year to fight fraud and comply with federal regulations, a new report says.

Fifty-two percent plan to increase their spending at least 10 percent, compared with 40 percent in Central Florida and 25 percent in North Florida, according to a survey by one of the state’s larger accounting firms, Kaufman Rossin, which has offices in Miami, Fort Lauderdale, Boca Raton, Palm Beach Gardens and Naples.

Banks in Broward, Palm Beach and Miami-Dade counties already lead the state in filing suspicious activity reports to regulators, the survey found after analyzing responses from 95 bank compliance officers in the state. Not a single bank in Central or North Florida files 50 or more suspicious reports a month — but more than 10 percent of South Florida banks do, the survey found.

The high number of reports in South Florida shows they’re doing a good job in overseeing transactions, said local bank analyst Ken Thomas. “They are being very diligent in their work,” he said.

In fact, South Florida banks plan to hire more staffers in the year ahead to further comply with regulations and scrutinize suspicious transaction, the survey found.

The extra spending concerns Drew J. Breakspear, the Florida commissioner of the Office of Financial Regulation. He thinks that banks are being overwhelmed with new regulations from the 2010 Dodd-Frank Act, which was designed to rein in financial abuses that led to the recession. Especially smaller Florida community banks are being caught up in what Breakspear called a “tsunami of nearly 20,000 pages of rules and regulations.”

“But banks here also are spending more to avoid becoming part of the region’s high incidence of Medicare fraud, money laundering, identity theft and other economic crimes,” said Jason Chorlins, a co-author of the survey and director of regulatory compliance in Kaufman Rossin’s risk advisory services practice. South Florida, for example, has had the nation’s highest rate of identity theft for five years, according to the Federal Trade Commission.

In fact, the high incidence of economic crimes is creating an extra expense on South Florida banks to watch for shady transactions, bank analyst Thomas agreed.

South Florida banks also have to be concerned about the influx of money from other countries being deposited in U.S. banks, Chorlins said. “A lot of international money is coming into South Florida,” he said.

That raises a concern that South Florida banks will unknowingly get caught up in black market foreign currency exchanges — 61 percent of South Florida banks said that’s a “very important” issue, compared with 11 percent of banks in Central and North Florida, according to the survey.

Jason Chorlins, CPA, CFE, CAMS, CITP, is a Risk Advisory Services Principal at Kaufman Rossin, one of the Top 100 CPA and advisory firms in the U.S.