Another object lesson in institutional responsibility
Credit to Author: BEN KRITZ, TMT| Date: Wed, 03 Jul 2019 16:17:07 +0000
THE odd case of Unionbank vs. Philand Property Corp., in which the latter is trying to hold the bank responsible for allowing Philand’s former finance manager to fraudulently open a checking account in the company’s name, is something that could have and should have been resolved long ago. It was not, for reasons that do not become any clearer the longer they are analyzed, and so supplies a dubious kind of added value to our understanding of management perspectives in this country.
To quickly recap the case, in July 2009 the former finance manager of Philand and her partner opened a checking account in the company’s name at Unionbank. Several normal verification protocols were bypassed by the bank in opening the account, which the pair used to steal more than P7 million from the company over the next 15 months.
Philand eventually caught on to what was happening and the account was closed, but the money was never recovered. With interest and penalties, Philand said in a recent complaint filed with the BSP’s Financial Consumer Protection Department, the total loss has ballooned to more than P14 million.
Much to Philand’s frustration, which is evident in the company’s complaint to the FCPD, the case has dragged on interminably. As there is very little obvious uncertainty about what happened and who is to blame, one would naturally assume the reason for that is adroit lawyering on Unionbank’s part, although that is an accusation the bank has hotly denied. In an angry response to a brief report on the case by this paper in March of last year, Unionbank implicitly accused Philand of stalling, since “being the plaintiff, it [Philand] should have ensured the case proceed[ed] expeditiously.”
Anyone with even a limited familiarity of the Philippine judicial system would recognize that as a uniquely impossible perspective, but at least Unionbank was being consistent. From the bank’s point of view, whatever the woes of Philand, it was ultimately its disgraced employee who carried out the crime, and that Philand’s insistence that Unionbank take responsibility for appropriate reparations is misguided.
Unionbank is correct to point out that the most culpable party in all of this is the former finance manager of Philand, who actually carried out the crime. But Philand’s contention that the bank bears some responsibility for the crime being successfully carried out is also correct. Had Unionbank followed normal rules and procedures, the crime would have been prevented, or at least detected and stopped quickly. Put another way, negligence on Unionbank’s part enabled the crime of fraud to be carried out against Philand, thus Philand was materially harmed by the bank’s actions, or lack thereof.
The inability to acknowledge institutional responsibility is a blind spot we have seen before in the banking sector here. RCBC has taken much the same tack against the Bangladeshi government in the larger and better known cyber theft case involving Bangladesh Bank. Even though RCBC did not carry out the actual crime, it was the breakdown of normal procedures that allowed most of the stolen money to pass through the bank. The government of Bangladesh would not have suffered a loss had RCBC acted as expected. Nevertheless, the bank overlooked that and pleaded non-culpabity for the same erroneous reason.
Just as Unionbank has made an example of itself for the wrong reasons in the Philand matter, it could change that image and become a model of corporate responsibility by resolving the problem on its own. Since that is unlikely to happen, the government might consider ways to more clearly define responsibilities of companies. For banks that objective might be easier because the BSP has broader regulatory powers, but the SEC could do something as well, perhaps in cooperation with the PSE, which has a great deal of influence over corporate behavior.
Ideally, however, it shouldn’t come to that; one might hope that the specter of additional regulation and unfavorable public attention would encourage companies to be more responsible. After all, nobody wants to do business with a bank that might allow one to fall victim to unsophisticated fraud. Even if there is a cost involved, taking action to quell that perception would be a huge investment in the bank’s reputation.
ben.kritz@manilatimes.net
The post Another object lesson in institutional responsibility appeared first on The Manila Times Online.