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The Bank Bribery Act

By Blair Rugh 1 Jun 2016

Sometimes, it seems like Congress and the regulators take all of the fun out of everything. A gift from a customer every now and then is just one of the perks of doing business. Not for bankers. The Bank Bribery Act makes it illegal (a felony) to solicit or accept anything of value from anyone relating to the business of the financial institution. Anything of value means just that, anything of value.

Fortunately, there are a few exceptions. One is that a banker may accept a gift of reasonable value at normal gift giving time. Therefore, if a customer wants to give a banker a bottle of wine at Christmas time or a wedding gift, that is fine. Reasonable value has historically been thought to be $25; with inflation, a gift of an amount marginally greater than that probably would not be criticized. A second exception is gifts of advertising materials. Accordingly, if a customer gives a banker a dozen golf balls with the customer’s logo on them that is permissible.

The exception most frequently used is meals, travel and entertainment in connection with a business meeting provided that the financial institution would have paid for it if the customer had not. Customers want to solidify their relationship with their financial institution. It is not unusual for a customer to invite a banker for a meal or some other social event. On the other side of the coin, bankers want to cement their relationships with good customers and often invite them to similar functions. Let’s say that a customer invites his or her banker to a sporting event where the ticket price is $25 and a soda and a box of popcorn is an additional $5. No one would criticize that. On the other hand, assume the same customer invites his or her banker to the Super Bowl where the cost of a ticket is $1000 and the travel and lodging is an additional $1000. I have turned in some pretty aggressive expense accounts in my time, but I don’t think I would have ever tried that.

Our recommendation is that every financial institution have a Bank Bribery Act officer. Whenever a banker is offered or given a gift by a customer, the banker must advise the Bank Bribery Act officer. The officer makes a record of the gift and advises the banker whether or not he or she may keep the gift or must return it or not accept it. That way no one gets criticized. The problem with gifts to bankers is that they are always viewed in retrospect. The gift seemed fine at the time, but then the borrower’s loan went south and the relationship is a little more questionable.

One other prohibition of the Bank Bribery Act is making loans to the personnel of other financial institutions on a preferential basis. When I first got into banking, my bank had an unwritten understanding with another bank in our town. The other bank’s employees would come to our bank and get loans on preferential terms and the employees of my bank would get similar loans from the other bank. Seemed like a reasonable deal at the time and everyone was happy. Now, that practice is forbidden.

Bankers need to be aware of the restrictions of the Bank Bribery Act. They need to have a code of conduct that is head and shoulders above the public in general. They need to know that someone is constantly looking over their shoulders and that everything that they do will be reviewed in hindsight, which can sometimes be cruel.

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