NYCH's Neubert to Industry: We're Not In the Clear When It Comes To Terrorism

New York Clearing House president and CEO Jeffrey Neubert believes it will take an "unrelenting" effort from banks to ensure the financial system remains free of terrorist infiltration.

As the president and CEO of the New York Clearing House (NYCH), Jeffrey Neubert runs an organization with a proud 150-year history in the financial community. After another 150 years, he may well be remembered for his leadership during these trying times.

Since the September 11 attacks, the NYCH has taken a lead role in organizing the industry response to terror. Starting that morning through September 13, NYCH initiated hourly conference calls with its members to ensure that the payments systems were operating and to address ongoing issues.

"Self-interest was put aside immediately and the interest of the industry was paramount in everybody's minds," Neubert explained at the March 12 Executive Technology Forum in New York, sponsored by Bank Systems & Technology, BAFT and BITS.

One month later, a group of over 80 top executives of financial institutions, associations, and other private sector organizations met with high-ranking public sector officials to form the Intercept Forum. "At that meeting, the agreement was to put forth a group of people who would work to determine ways to identify and intercept the flow of funds to and from terrorists and their organizations, and thereby deter and ultimately eliminate those fund flows," said Neubert.

At a subsequent October meeting, the Intercept Forum created five task forces, each co-chaired by a private sector and public sector executive and populated by experienced executives from industry and government. The task forces will establish standards and best practices for managing control lists, information-sharing databases, account and transaction monitoring systems, pattern recognition systems and for obtaining global cooperation.

Ultimately, success requires leadership, teamwork and vigilance. "Leadership is the starting point and the ending point," said Neubert. "Senior, knowledgeable, committed leaders must be at the forefront of these efforts."

Furthermore, leaders must be prepared to delegate their existing tasks. "This isn't a part-time job," said Neubert. "In order for us to win the financial war on terrorism requires full-time commitment."

"This means the people who have been doing other tasks, who have other duties with their institutions, simply have to give up those duties if we're going to win the war," Neubert added.

Teamwork, particularly between the public and private sectors, also holds the key to success--as long as clear boundaries remain between the two. "The Intercept Forum agreed very early on that financial institutions are not in the business of law enforcement," said Neubert. "We clearly don't want to see tellers stopping people at the teller line and asking them to stand aside while they call the FBI."

Finally, Neubert warns against complacency. "We simply cannot be complacent," he said. "This is going to require an unrelenting effort to fight terrorism, I think throughout most of our lifetimes."

Neubert described the five task forces of the Intercept Forum as follows:

(1) CONTROL LIST: To review and confirm that the existing and new policies and processes for gathering and reporting information to government agencies are in place and working properly.

(2) DATABASE: To develop a real-time electronic capability for regulatory and law enforcement agencies to send the identities of suspected terrorists and terrorist organizations to financial institutions. Account and/or transaction 'hits' would, in turn, be sent back to FinCEN for further action.

Accordingly, the term 'database' is a slight misnomer. "This is a bigger challenge than just a secure database because many institutions are not equipped to handle a straight, secure-network download and upload," said Neubert. "FinCEN will use other methods to communicate with these institutions."

The process is already underway. "We have worked with FinCEN to line up 24 financial institutions to do a proof-of-concept," said Neubert. "A vendor has been chosen by FinCEN for the proof-of concept that will lead to a full pilot in May."

(3) ACCOUNT AND TRANSACTION MONITORING: To identify and monitor transactions and account openings related to terrorist activity.

By necessity, securing the process of account openings leads to difficult choices. Although certain to face strong opposition on the matter, Neubert advocates a national identity program. "Ultimately, we must have a way of verifying who we are without invading privacy," said Neubert. "We can have both of those and do so quite effectively."

(4) PATTERNS OF BEHAVIOR: "It's not just identifying the activity after the fact," said Neubert. 'We need proactive, preemptive and preventative measures."

(5) GLOBAL COOPERATION AND BEST PRACTICES: To globally remove obstacles to the flow of information and to export best practices to cooperating countries.

The New York Clearing House is owned by affiliates of ABN AMRO, Bank of America, The Bank of New York, Bank One, Citigroup, Deutsche Bank, FleetBoston, HSBC, J.P. Morgan Chase, Wachovia and Wells Fargo.