Commercial Bank Allegedly Violates Bond Redemption Regulations

Case Overview

This case involves US savings bonds worth $500,000 that were cashed at a bank in California without the knowledge or consent of the bond owner. The bank claimed that the owner of the bonds gave verbal permission for a coworker to come in and cash the bonds on her behalf. However, the owner of the bonds claimed she never gave this permission. The bonds were redeemed in the name of the coworker and not the bond owner. Furthermore, information that was allegedly required to be on bonds for redemption was missing. It was alleged that the bank cashed these bonds without proper identification or authority in violation of the US Department of Treasury’s regulations governing the redemption of bonds.

Questions to the Banking expert and their responses

Please describe your experience overseeing compliance at a commercial bank that offers savings bond redemption as a service.

As a former President, CEO, and Director of several successful commercial banks, I was involved in the origination, approval, oversight, and implementation of bank compliance programs.

What regulations must commercial banks follow when redeeming savings bonds?

First and foremost, banks must adhere to specific federal regulations regarding cashing Savings Bonds. A bank must thoroughly follow regulatory requirements for cashing savings bonds as well as to adhering to their own policies and procedures. Failure to do so may result in losses to the bank. A bank may, at its board's discretion, institute additional controls that must be followed by the bank staff.

About the expert

This expert has over 35 years of banking experience, including multiple tenures as Director, President, and CEO of banks in Virginia. During that time, he led the turnaround of two different banks that had been under regulatory agreements upon his appointment. In addition, the expert has dealt with dealer floor plan lending as the Senior Vice President of Riggs National Bank, where he oversaw the $500 million consumer lending division earlier in his career. The expert now runs a consulting business and has worked with the federal government, publicly traded banks, and other entities in this capacity.

E-089288

Specialties:

Banking