safe deposit pitfalls of vault security, disasters & self ... · 11/17/2015 · electrical...

SAFE DEPOSIT

Pitfalls of Vault Security,

Disasters & Self Service Boxes

November 17, 2015

National Association

of Federal Credit Unions

Presented by:

Dave McGuinn

President

Safe Deposit Specialists

Houston, Texas

(713) 937-9929 or sdspec@aol.com

www.sdspec.com

Introduction

Speaker

David P. McGuinn, president of Safe Deposit Specialists, speaks nationwide for numerous financial associations. He is a former Senior Vice President and Cashier with 45 years of financial experience and is often referred to nationwide as the safe deposit GURU. As a consultant he has trained over 250,000 safe deposit personnel since 1969, in programs offered in all 50 states. Dave is past president of the American Institute of Banking and the American, Texas and Houston Safe Deposit Associations. He has written numerous financial articles and has been interviewed by the Wall Street Journal, Money Magazine, New York Magazine, Washington Post, Associated Press, AARP, Bottom Line Financial, National Public Radio (NPR), British Broadcasting Corp (BBC), Court TV, CUNA, FDIC, CNN, CBS, ABC, NBC Nightly News and many other financial publications regarding current safe deposit issues. He was also a featured speaker for the American Bankers Association’s financial TV network and has created numerous training videos, DVDs, policy and procedure manuals and many other unique safe deposit compliance products. His safe deposit resources are often considered the accepted standard for the financial industry..

Copyright www.sdspec.com 2

Polling Question #1

What is your primary position with

your credit union?

1. Management

2. Compliance Officer

3. Security Officer

4. Audit Department

5. Safe Deposit Staff

Overview

1. Largest safe deposit vault burglaries.

2. Offering Self-Service boxes.

3. Avoiding safe deposit vault “lock- Ins”.

4. Worst fire disasters in safe deposit history.

5. Tornado destroys credit union branch office.

6. Heavy rains are flooding vaults nationwide.

7. Hurricanes fill vaults with contaminated water.

8. Insurance coverage.

9. Test your disaster procedures now. (Not later).

10.Question and answer session.. Copyright www.sdspec.com 4

Safe Deposit

VAULT BURGLARIES

On the RISE!

LONDON VAULT

BURGLARY

@ Hatton Garden

Safe Deposit LTD

1. Vault burglary occurred over an Easter holiday weekend (April, 2015).

2. Alarm was activated, but security company did not respond properly.

3. Only 72 boxes (out of 700) were forced open and emptied.

4. Most of the opened safe deposit boxes belonged to jewelers.

5. Estimated $200 to $300 million in gold, jewels & diamonds were stolen.

6. Police believe this could have been an inside job..

The Police

Department

Arrives

London’s metropolitan police arrive looking for

fingerprints, DNA, and any other clues or evidence left behind by the

burglars..

Burglars

Access the

Safe Deposit

Vault Area

Bars were cut and ripped

from the day gate that

secured the safe deposit

area..

Vault Wall

Penetrated

Thieves drilled

through a very

thick vault wall

with an

INCREDIBLY

powerful drill..

Construction Tools Available

72 Boxes Emptied (out of 700)

Cameras Record Burglary

Other Vault Burglaries

Queens, NY Over $400,000 in cash and contents missing from 40 boxes

emptied out of only 100 rented boxes.

Tulsa, OK Safe stolen securing an entire section of safe deposit boxes.

Staten Island, NY Branch closed for a three day Columbus Day holiday and

650 boxes emptied. Chairman of Board tells a reporter:

“We need to upgrade our security system now”

Fayetteville, AR Banks reserve cash and all box contents were stolen.

Brooklyn, NY Only 65 of 2,900 boxes were opened. $250,000 cash and

over $1 million in box contents stolen.

Ontario, CA Over weekend boxes cleaned out. Insurance company

settled with box renters to avoid adverse publicity..

Security Alarms & Procedures (Very Important)

When you experience a

safe deposit vault

burglary your best and

only defense is an

adequate alarm system

and proper internal

security procedures..

Self-Service Vault

Pros and Cons of Offering

Self-Service Boxes

Polling Question #2

Do you currently offer (or plan to offer)

self-service boxes to your members?

1. Yes

Self-Service Boxes (Continued)

What are Self-Service Boxes? o Latest state-of-the-art system available.

o Newest way to offer safe deposit services.

How does the system work? o No employee needed.

o No dual control.

o No signature verification.

o Only one key is needed.

Are there any advantages?

Yes ! o Renters love it.

o Employees love it.

o Management loves it.

o System saves you money ..

Self-Service Boxes (Continued)

Are there any disadvantages?

Your liability is unlimited!

$7 million dollar lawsuit filed. (Unauthorized box access issue)

$3 million dollar lawsuit filed. (Contract liability clause issue)

Don’t use the word “safe”. Use words like:

o Self-service.

o Self-entry.

o Express boxes.

o Collateral boxes.

Offer it safely or get out of the business. You will never save enough money to offset your potential liability.

Review all other available options..

Locking Renters

In the Vault

Various Nationwide Examples

Locked in the Vault Overnight

• 86 year old Doris Willis.

• Locked in vault (11 hours).

• Serious heart problems.

• Family is very worried.

• No lights or telephone.

• Nature calls!

• Slept in a chair all night.

• Something “really” special

planned for Doris Willis!..

Christmas Party in the Vault

81 year old attorney.

Locked in on Christmas Eve.

No lights or telephone.

Wife worried & calls police.

Vault opens 40 hours later.

Bank’s name may change.

Plus other “lock-in” disasters..

Other Vault “Lock-in” Disasters

18 month old baby in Pittsburg, PA.

Chairman of Board’s dog.

85 year old lady at Swiss Bank.

73 year old lady- Laguna Woods, CA.

Bank President in Georgia..

How to Avoid Lock-Ins

1. Renters are never left in the vault alone.

2. Never put viewing rooms inside the vault.

3. Keep “day gate” closed and locked.

4. Turn off vault lights “before” you close

and lock the door. (Listen for screams!)

5. Revise “time clock” log book. Add a new

column: “Vault and viewing room(s)

inspected under dual control”..

Fire Damaged Safe

Deposit Vaults

Nationwide

World Trade

Center Disaster

New York City

Reuters News Service

News article highlights:

Promised box contents return.

Changed mind December 3rd.

Landfill on Staten Island.

Letter sent to an attorney.

Lawsuit quickly filed.

Court hearing follows.

Damaging evidence produced.

Class action lawsuit filed..

The Wall Street Journal

Paper burns @ 451 degrees.

Metals melts @ 1,763 degrees.

The Wall Street Journal

Paper burns @ 451 degrees.

Metals melts @ 1,763 degrees.

Most boxes recovered.

Renters recover property.

Sentimental value.

Insurance concerns..

Other Recent Fires

Nationwide

Nationwide Fires 1. NEW YORK: City Bank branch in Manhattan. Electrical fire burned for 30 hours.

Turned basement vault into an oven. 300 safe deposit boxes effected.

Manhattan Bank Burns

2. CALIFORNIA: Union Bank on El Paseo Drive, Palm Desert, CA. Over 40

firefighters tried to save the building. Building exterior and interior were totaled.

California Bank Burns

3. OREGON: Fire started in ATM room. No building sprinkler system. Building

burned quickly.

Oregon Bank Burns

Oregon Bank Totaled

burned quickly.

4. IOWA: Lighting strikes very old building. Vault located in center of building.

President called for assistance.

Iowa Bank Burns

Iowa Bank Totaled

burned quickly.

4. IOWA: Lighting strikes very old building. Vault located in center of building.

President called for assistance.

5. VIRGINIA: Bank employee discards cigarette. Fire starts in flower bed mulch.

Entire building totaled..

Virginia Bank Totaled

Tornado Damage

Moore, Oklahoma

Tinker FCU - Moore, OK

Tinker Federal Credit Union Moore, Oklahoma

EF 5, 250 MPH Tornado Destroyed Moore,

Oklahoma Branch Facility.

Credit Union Branch closed indefinitely.

Vault Was Used as a Tornado Shelter.

14 Employees and 8 members Took

Shelter Inside Safe Deposit Vault.

All Employees, Members and Safe Deposit

Box contents Were All Found Intact..

Damaged Vaults

Nationwide

Mississippi River Flood

St Louis, Missouri

Flooded Safe Deposit Vault

News article overview:

Renter claimed that the bank “did not exercise ordinary care and diligence”.

1,200 of 4,000 boxes were flooded.

Bank claimed that they took every precaution. They erected sandbag walls around vault, pumped water out and sealed the vault door.

Water filled basement, shut down pumps and entered the vault through electrical and security conduits.

Renter also claimed that bank employees told him that the vault was waterproof.

After three day trial, $315,000 in damages were awarded to the box renter for the loss of a rare violin..

Tropical Storm

Allison

Houston, Texas

Flooded Vaults (continued) News article overview:

Houston experiences significant flooding during

Tropical Storm Allison.

Houston’s entire downtown tunnel system went

under water.

Bank of America’s safe deposit vault was in the

tunnel and completely flooded.

Over 5,000 safe deposit boxes filled with flood water.

Boxes were moved to a remote location to dry out.

Renters must call bank to locate their box and claim

their contents..

Flooded Vaults (continued)

Renter stored 1952 Mickey Mantle rookie

baseball card in his box.

Renter stored 1952 Mickey Mantle rookie

baseball card in his box.

Baseball card was purchased in 1960 for $40.00.

Mint condition card appraised for $40,000.

Wet and mushy baseball card was removed

from renter’s flooded box.

Box renter quickly asked for a FDIC insurance

claim form.

Renter was very upset..

Hurricane

Damaged Vaults

Nationwide

HURRICANE

KATRINA

LOUISIANA & MISSISSIPPI

Over 250 Gulf Coast safe deposit vaults were flooded.

Flood waters contained petroleum waste, sewer

water, snakes, alligators and sludge.

Water contamination was 100 times greater than any

other flood disaster.

Thousands of boxes were affected.

Several bank employees are rushed to the hospital

with breathing problems.

Disaster recovery procedures were needed to handle

this situation.

Renters are very upset..

Incorrect Procedures: Box rent past due and notices mailed.

Box drilled and contents inventoried.

Contents put into a file cabinet in the

lobby.

Hurricane Katrina floods credit union.

File cabinet floats out of credit union and

is lost.

Box contents and original inventory

forms are gone.

Renter comes back and wants her box

contents.

She claims jewelry and coin collection

are missing.

Lawsuit filed and jury trial pending..

Bad Key Envelopes

Snap-Fastener Key Wallets

Any information on a key wallet

is TOO MUCH information.

Key wallets should never be used to

advertise, identify or promote your

financial institution.

If this envelope is lost of stolen, too

much information could lead a

dishonest person to your facility.

Two envelopes should be provided

and you must always tell renters not

to put their extra key inside their

HURRICANE IKE

Galveston, Texas

(See flooded vault pictures)

HURRICANE IKE (one week after)

Galveston, Texas

HURRICANE IKE (one week after)

Galveston, Texas

HURRICANE IKE (two months after)

Galveston, Texas

RUSTED BOND TINS

HURRICANE IKE (two months after)

Galveston, Texas

RUSTED VAULT DOOR

Are You Ready?

Disaster manuals must cover:

(Safe Deposit Vault Fire or Flood Disaster)

Preparations before, during and

after the flood

Writing notification letters.

Arranging for vault security.

How to answer consumer’s

insurance questions.

Granting vault access.

Handling box content removal.

Drying or cleaning box contents.

Addressing health concerns.

Plus many other issues.. Copyright www.sdspec.com 69

Insurance Coverage

on Box Contents

Nationwide Confusion

Biggest Misunderstanding

Surveys indicate that seven out of

ten safe deposit renters think their

box contents are insured by:

or your Institution.

(Insurance disclosure is needed)..

Member’s Confusion

Federal regulations

require that deposit

insurance disclosure

signs be displayed in

your lobby and on all

brochures and forms

disclosing financial

information..

Confusion Can Be Eliminated

Over 50% of your box holders mistakenly believe you or

the NCUA insures their box contents.

You should educate and inform your members.

Most effective solution:

Offer insurance for box contents.

Provide value added benefit and clear disclosure at same time.

Minimizes liability and potential bad press in the event of a loss.

Plus CU can earn revenue.

Insurance is Now Available

Only easy and effective insurance solutions in the market today.

Safe Deposit Box Insurance Coverage, LLC.

(insuremybox.com)

Covers important legal, estate, personal or business property in box;

including $3,000 for damaged papers such as wills, titles, deeds,

photos and digital backups.

Insures against all natural disasters, fire, flood, burglary, robbery and

other catastrophes.

NO Disclosure of contents / NO Appraisals / NO Deductibles

Starting at $5,000 of coverage = $25/year.

Question & Answer Brochure

Consumers are asking the same safe deposit questions nationwide.

Questions relating to death, insurance, legal documents, power of attorneys, lost keys, etc.

If these questions are answered incorrectly, this could create unlimited liability for your institution..

Disaster and

Security Test

Test Your

Current Procedures

Test Your Procedures

1. Does your contract have a very clear statement: “No Insurance” is provided on box contents?

2. Is a “No Insurance Disclosure” form given to all new renters?

3. Is a carefully worded 8x10 “No Insurance” sign displayed?

4. Are statements like “Fireproof, Waterproof and Bombproof” always avoided?

5. Do you have an insurance disclaimer on your “Service Fee Brochure” or “Web Site” if safe deposit information is disclosed?

6. Are all your employees trained to answer consumer’s “safe deposit security & disaster” questions?

7. Do you provide a specific “Question and Answer” brochure to all new box renters?

8. Are you careful when displaying NCUA signs and logos inside or near your safe deposit vault?

9. After a disaster, are your employees properly trained to carefully answer questions when interviewed by the media?

10. Have you developed a written disaster recovery plan to properly handle a safe deposit vault damaged by a disaster?

Number of “Yes” Answers: _____ Grade: _____

Polling Question #3

How many questions did you answer YES?

1. 9 or 10

2. 7 or 8

3. 6 or below?

Question Break

Any questions, comments

or feedback?

Safe Deposit Products and Services

(Visit our web site at www.sdspec.com for information on the following items)

Safe Deposit Manuals

O Policy and Procedures Handbook (Updated 2012)

O Regulatory/Compliance Manual (Updated 2014)

O USA PATRIOT Act & SAR Compliance

O Audit Compliance

O Box Relocation

O Disaster Recovery (Flooded Vault)

O Disaster Recovery (Fire Damaged Vault)

O Self Service Boxes (Pros and Cons)

Safe Deposit Brochures & Forms

O Question and Answer Brochure

O Box Content Inventory Form

O Non-Renter Vault Entry Record

O Forced Box Entry Authorization

O Ultimate Protection (Marketing Booklet)

O No Insurance Disclosure Kit

O Vault “Access Ticket” System

O New Facility “Start-up” Forms Kit

O Tamper Resistant Envelopes

O PATRIOT Act “Identification Required” Notice

O Business Resolution and Authorization

O Box Inventory Affidavit

O Key (snap & locking) Wallets

O Privacy Room Signs

Safe Deposit Training DVDs O Liability and Legal Issues

O Procedures – 10 Keys to Improvement

O Safe Deposit Fundamentals (2 DVD set)

O Video/DVD Discount Packages – (Save 10% to 50%)

Other Products and Services O In-house Audit & Contract Review

O In-house Training Programs

O Safe Deposit Question and Answer Hotline

O Community Meeting Presentations

O Double Your Safe Deposit Income Program

O Expert Witness Litigation Services

O Opening a Private Safe Deposit Facility

O Software and Consultation

O Vault Equipment, Forms, Supplies and Service

Contact Information:

David P. McGuinn, President

Safe Deposit Specialists

P.O. Box 40026

Houston, TX 77240-0026

Phone: (713) 937-9929

E-mail: sdspec@aol.com

Web site: www.sdspec.com

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