Spinning Plates of Efficiency

In this episode of Wrestling Payments, host Joe Casali uses a unique metaphor—the spinning plates act from the Ed Sullivan Show—to explore the complexities of compliance, risk management, and operational efficiency in financial institutions. He shares insights into how organizations must continuously monitor and adjust their processes to stay in alignment with evolving regulations, emphasizing that compliance is not optional but a foundational part of doing business.

Joe examines high-profile cases, including Robinhood’s $30 million fine and Cash App’s $175 million penalty, to illustrate the consequences of neglecting a "culture of compliance." He highlights the need for clear risk assessments, robust fraud prevention measures, and proactive training to avoid regulatory pitfalls. These examples serve as cautionary tales for financial institutions striving to maintain trust and stability.

The episode underscores the importance of ongoing education and vigilance in financial operations. Joe’s engaging discussion invites listeners to rethink compliance as an opportunity to excel rather than a burden to endure.

To hear this episode and many more like it, listen here or subscribe to Wrestling Payments on Apple Podcasts,  Spotify, or anywhere else you listen to podcasts.

For show notes, transcripts, and other resources visit www.wrestlingpayments.com.

Host: Joe Casali, EVP, NEACH

#wrestlingpayments #wrestlingpaymentspodcast #paymentspodcast

Transcript

NEACH - Wrestling Payments - Spinning Plates of Efficiency

Season 3, episode 1

Joe Casali:  [00:00:00] hey, welcome to Wrestling Payments. This is take two of this episode because I had no audio. So, we're gonna go through the whole episode again. I think maybe this time I'll be better at it because I had a rehearsal. I'm here to share a thought. Really a, you know, a nagging thought. , or an idea. Or give you a little peek inside my head.

Which is, , could be scary. Stick with me. What we're going to talk about is, is how I look at compliance, knowledge, skill building, efficiency, all of those things. So I, if you, if you're new to the show, I work at an association for financial institutions. We teach them all about electronic payments. I'm a little fidgety, so I'm going to try to stop moving around.

, we teach them all about electronic payments and, , there are really. , and I, I'm sure this is true in any [00:01:00] industry, there are things you need to learn and, and steps you need to implement in order to be compliant without, with whatever regulations or rules or procedures, , you have in your industry.

In our industry, it's, it's, it's financial institution, it's banking regulations, financial regulations, rules, laws, all of those things. And at one point I couldn't get out of my head. Something I connected with from my childhood with being compliant, being up to date with everything you're supposed to know and do.

And, and that changes all the time. So, let me, let me bring you back, bring you back to my childhood. Back in the day, we didn't have American Idol or America's Got Talent. We had the Ed Sullivan Show. And the Ed Sullivan Show was a variety show. You got to see your stars on there, the Beatles were on there.

Um, local acts [00:02:00] were on there, but one of the acts you would see on Ed Sullivan and then other shows, maybe even the gong show, that one, that one was a hoot if you're not familiar with the gong show, was the spinning plate act. And I have a video if, um, if you're listening to this, I want you to use your imagination.

The, the, the performer would have, , all of these sticks standing up. In front of them on a table and they would take a plate and they would spin the plate and then they would whip the, whip the plate around with the stick and then at, at the, the peak of it, the plate would be spinning on the point of the stick.

Then they would go to the next stick and do the same thing. Looking back at the first stick to make sure the plate was still spinning. Then they would go to the next stick and so on. And they would go down different. Channels, areas, if you will, [00:03:00] spinning all these plates and I'm going to play it in a second but I want you to think of that as operations, compliance, risk management, finance.

I make that connection in my head. So let's, let's take a look at the show and this is, , this is from Ed Brin, plate spinning. Oh, on the Ed Sullivan show. I didn't even know this is the one that That reminded me of what I would see as a kid. But, if you're watching on YouTube, , this is another video. You should go to that video.

This is not my video. Please don't take me down because I'm showing someone else's video.  

screen recording: oh, notice,

Joe: , oh, and he has a little transfer stick, [00:04:00] making sure everything keeps running at the right spinning and level. Now it slows down a little, right? Looks like it's almost gonna fall off, but then he gives it some attention. Make sure it continues to spin. Everything's working at the right speed and function.

And, and just a little bit to We can pause, stop that because the people listening are going, I don't know what he's doing. This is from the Ed Sullivan Show. All credit and, and rights to that video, to the Ed Sullivan Show. That is not our content. But as you think of this, I want you to think of the news, news reports you hear.

Right? So we hear news reports all the time of bad things that happen. And I'm not going to go into a lot of examples, but I got a couple of examples that, that I did think of the spinning plates as I got this example. Here's the very first one. Right? So this is the very first one. This is the, , a fact that Robinhood [00:05:00] got in trouble for AML, anti money laundering.

Restrictions not following the law. And if you know, anti money laundering laws, they're written. They're pretty specific. They say you need to have a program. So. Somewhere, along the line, someone decided we just want to make more money, we don't have time to worry about compliance. Well, in this case it resulted in a fine.

, this was a 30 million dollar fine, not the last fine that Robinhood has gotten. No, no, no, , no shade to, to Robinhood. But, you know, the, the, the line here that stuck with me, and we, we've just launched Nichiyuu with, , , the New England Law Automated Clearinghouse, and this is one of our courses, and, and I've required this course to be in a couple of different programs.

, let's see. , where the, the New York Department of Finance, serv Financial Services [00:06:00] DFS has entered a crypto a ML enforcement fray, issuing a $30 million fine to Robinhood Crypto LLC, the crypto trading unit of the larger parent firm for a ML program. Deficiencies and failure to maintain a culture. of compliance.

I encourage our members to have a culture, embrace a culture of compliance. You, as a financial institution, you can look at it as work and, oh, I gotta do that compliance thing again. Or you can embrace it and say, we're really good at this. And we should be good at this across the board. They faced a 30 million fine because they did not have a culture of compliance.

And was it a mystery? Was it a secret? Did they not know what they didn't know? No. It's super clear. Do your work. Do a risk assessment. Develop programs to, to be compliant with the law. This is, this is not, this is [00:07:00] not, you know, I always look for in new things like in AI or in, you know, back in the day it was e learning.

I always look for the secret. This is the answer. It's going to solve everything. It's the killer app. There's, there's, there's no killer app. This is, follow the rules. They're written. It's not a, it's not a mystery. Um, and just to continue that, that was, that was some time ago. I think that was in 2022. Let's, let's go to this week.

This week, the CFBP, , ordered Cash App to pay a 170 million fine to fix its failure in fraud. And I think if you work down here, it's gonna show that they, , Cash App created the conditions for fraud to proliferate. On its popular payment platform, when things went wrong, Cash App flouted its responsibility and even burdened local banks with problems that the company caused.

This is from the CFPB, it's a press [00:08:00] release. So they did not do what they were supposed to do. Was it a secret? It was not a secret. These, they, they should have had a plan to say, Oh, we had a fraud on our, our platform. , let's take care of that fraud. But what they did, and here's the problem, you know, I'm going to get a little deep here, and I, , I apologize if you're not a payment professional, but here's the deal.

Someone will say, I had a fraud under my account, someone, someone scammed me, or, or, duped me into sending them money, and I never got the puppies, or the kittens, or the, or the tickets. So, they go into their financial institution, And the financial institution says, Okay, what was the transaction? Oh, it was a transaction from Cash App.

Do you have a valid authorization with Cash App? Yes, I do. They're stuck. For an ACH debit, they're stuck. There is a proper authorization with Cash App. [00:09:00] The financial institution can take a loss and pay for the kittens, or the tickets that the bank or the credit union never got. Or they can say, You need to go back to Cash App.

Because Cash App is where the fraud took place. And Cash App would say, Oh yeah, you need to work that out with your bank. I think. Allegedly. This is for educational purposes only. Every disclosure I could throw out there. Please don't sue me. But that's what, that's what's happening. The financial institution's stuck.

When that happens with a PayPal transaction, or a Cash App transaction, or even a Zelle transaction. The transaction was authorized. It wasn't, you know, Cash App has an authorization that says, I, I need, when I make a purchase, take it out of my account. That's authorized. So the problem is with those vendors, those third parties, that you need to work it out with as a consumer.

But in this case, CFPP [00:10:00] fined Cash App 175 million for saying, Eh, call the financial institution, allegedly. for educational purposes only. What else we got? Oh, that's the second, again, it's the, the, the Cash App article. Here's another one. So, , let me, let me get to the article here. You know, we talk about Not following, you know, spinning that plate, keeping everything running at the right process, you know, sometimes you're going to have to redo the work, you're going to have to go back to the beginning and say, let's do a, um, we, we've had a new technology change.

Let's do a risk assessment on this process and see where our risks are. Let's address those risks, mitigate those risks, make sure we have controls in place for those risks, um, to be compliant with all the regulations. This is a case, an unfortunate case, again for educational purposes only, and this is going to be a short episode.

I don't think, , I, I think it's going to be less than 15 minutes, so we're almost done. But in this case, [00:11:00] we have Creighton. I hope I'm saying that right, FCU. They just recently, , , entered into a merger after suffering a 13. 5 million loss. And hopefully this never happens at your institution, but this was because, and, and, , this is, this is a, this is behind a paywall at AML, , credit union times, but we don't need to go and see the whole article to put it together.

It takes an act of Congress in this article to get anything done in Washington, but it took the act of only one congressman to get the answer from the N. C. U. A. Office of Inspector General on why Nebraska's Creighton Federal Credit Union was merged last year after posting a 13. 5 million loss. The OIG determined that the loss accumulated over two and a half decades because of the financial statement fraud perpetrated by the former [00:12:00] CFO, not for his personal gain, but to make the credit union appear that it was thriving.

So, What controls were not in place to be able to say these financial institutions accurately represent the, the position of the financial institution? Two decades, two, two and a half decades, 25 years of not having that plate spin and having a crash down and not be at your efficient and peak. It doesn't have to be spinning super fast.

It just has to be spinning enough to keep in compliance, to keep in the risk management, to keep the financials, right, at where they're supposed to be, what controls are in place for financial, you know, financial, , solvency. Were there auditors? What happened? Two and a half [00:13:00] decades. , that's, that's no small feat.

Um, I don't know the details beyond that for this. I don't know if the, the person passed. And then everything came tumbling down, or they were caught. But, , I'm sure you can find more information on that someplace else. But, you know, this goes back to, you know, one of the cores on the channel is, , Training, education, being knowledgeable.

Let's talk about these things. Let's, let me share something controversial like spinning plates to see if, you know, that, that gives you a different perspective on how things need to be in order to, to avoid, you know, at all points we want to avoid fines. We want to avoid failures. We want to avoid all of these things.

And one of the ways to do that is through training and education. We don't have an official sponsor for this, this, , series yet. And we, welcome to my first episode of, of Season 3. , I'm told that if we get [00:14:00] 10 or 15 more, , more episodes in the, , can, we are at the top 95 percent of podcasters, cause they don't last.

So stay with me. Click, blink, look, , do all the things you're supposed to do, share, , the podcast, send in questions. Maybe you disagree with my whole plate analogy. Love to, love to talk about it. Love to have you on the show. So, , thanks for tuning in. Welcome to our new season. , have a good day.