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 [email protected]
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
Copyright www.sdspec.com 3
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!
Copyright www.sdspec.com 5
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..
Copyright www.sdspec.com 6
The Police
Department
Arrives
London’s metropolitan police arrive looking for
fingerprints, DNA, and any other clues or evidence left behind by the
burglars..
Copyright www.sdspec.com 7
Burglars
Access the
Safe Deposit
Vault Area
Bars were cut and ripped
from the day gate that
secured the safe deposit
area..
Copyright www.sdspec.com 8
Vault Wall
Penetrated
Thieves drilled
through a very
thick vault wall
with an
INCREDIBLY
powerful drill..
Copyright www.sdspec.com 9
Construction Tools Available
Copyright www.sdspec.com 10
72 Boxes Emptied (out of 700)
Copyright www.sdspec.com 11
Cameras Record Burglary
Copyright www.sdspec.com 12
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..
Copyright www.sdspec.com 13
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..
Copyright www.sdspec.com 14
Self-Service Vault
Pros and Cons of Offering
Self-Service Boxes
Copyright www.sdspec.com 15
Polling Question #2
Do you currently offer (or plan to offer)
self-service boxes to your members?
1. Yes
2. No
Copyright www.sdspec.com 16
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 ..
Copyright www.sdspec.com 17
Self-Service Boxes (Continued)
Are there any disadvantages?
Yes!
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..
Copyright www.sdspec.com 18
Locking Renters
In the Vault
Various Nationwide Examples
Copyright www.sdspec.com 19
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!..
Copyright www.sdspec.com 20
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..
Copyright www.sdspec.com 21
Other Vault “Lock-in” Disasters
18 month old baby in Pittsburg, PA.
Copyright www.sdspec.com 22
Other Vault “Lock-in” Disasters
18 month old baby in Pittsburg, PA.
Chairman of Board’s dog.
Copyright www.sdspec.com 23
Other Vault “Lock-in” Disasters
18 month old baby in Pittsburg, PA.
Chairman of Board’s dog.
85 year old lady at Swiss Bank.
Copyright www.sdspec.com 24
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.
Copyright www.sdspec.com 25
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..
Copyright www.sdspec.com 26
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”..
Copyright www.sdspec.com 27
Fire Damaged Safe
Deposit Vaults
Nationwide
Copyright www.sdspec.com 28
World Trade
Center Disaster
New York City
Copyright www.sdspec.com 29
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..
Copyright www.sdspec.com 30
The Wall Street Journal
News article highlights:
Paper burns @ 451 degrees.
Metals melts @ 1,763 degrees.
Copyright www.sdspec.com 31
The Wall Street Journal
News article highlights:
Paper burns @ 451 degrees.
Metals melts @ 1,763 degrees.
Most boxes recovered.
Renters recover property.
Sentimental value.
Insurance concerns..
Copyright www.sdspec.com 32
Other Recent Fires
Nationwide
Copyright www.sdspec.com 33
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.
Copyright www.sdspec.com 34
Manhattan Bank Burns
Copyright www.sdspec.com 35
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.
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.
Copyright www.sdspec.com 36
California Bank Burns
Copyright www.sdspec.com 37
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.
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.
3. OREGON: Fire started in ATM room. No building sprinkler system. Building
burned quickly.
Copyright www.sdspec.com 38
Oregon Bank Burns
Copyright www.sdspec.com 39
Oregon Bank Totaled
Copyright www.sdspec.com 40
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.
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.
3. OREGON: Fire started in ATM room. No building sprinkler system. Building
burned quickly.
4. IOWA: Lighting strikes very old building. Vault located in center of building.
President called for assistance.
Copyright www.sdspec.com 41
Iowa Bank Burns
Copyright www.sdspec.com 42
Iowa Bank Totaled
Copyright www.sdspec.com 43
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.
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.
3. OREGON: Fire started in ATM room. No building sprinkler system. Building
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..
Copyright www.sdspec.com 44
Virginia Bank Totaled
Copyright www.sdspec.com 45
Tornado Damage
Moore, Oklahoma
Copyright www.sdspec.com 46
Tinker FCU - Moore, OK
Copyright www.sdspec.com 47
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..
Copyright www.sdspec.com 48
Flood
Damaged Vaults
Nationwide
Copyright www.sdspec.com 49
Mississippi River Flood
St Louis, Missouri
Copyright www.sdspec.com 50
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..
Copyright www.sdspec.com 51
Tropical Storm
Allison
Houston, Texas
Copyright www.sdspec.com 52
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..
Copyright www.sdspec.com 53
Flooded Vaults (continued)
News article overview:
Renter stored 1952 Mickey Mantle rookie
baseball card in his box.
Copyright www.sdspec.com 54
Flooded Vaults (continued)
News article overview:
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..
Copyright www.sdspec.com 55
Hurricane
Damaged Vaults
Nationwide
Copyright www.sdspec.com 56
HURRICANE
KATRINA
LOUISIANA & MISSISSIPPI
Copyright www.sdspec.com 57
Flooded Vaults (continued)
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..
Copyright www.sdspec.com 58
Flooded Vaults (continued)
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..
Copyright www.sdspec.com 59
Bad Key Envelopes
Why?
Copyright www.sdspec.com 60
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
box..
Copyright www.sdspec.com 61
HURRICANE IKE
Galveston, Texas
(See flooded vault pictures)
Copyright www.sdspec.com 62
HURRICANE IKE (one week after)
Galveston, Texas
Copyright www.sdspec.com 63
HURRICANE IKE (one week after)
Galveston, Texas
Copyright www.sdspec.com 64
HURRICANE IKE (two months after)
Galveston, Texas
Copyright www.sdspec.com 65
RUSTED BOND TINS
Copyright www.sdspec.com 66
HURRICANE IKE (two months after)
Galveston, Texas
Copyright www.sdspec.com 67
RUSTED VAULT DOOR
Copyright www.sdspec.com 68
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
Copyright www.sdspec.com 70
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)..
Copyright www.sdspec.com 71
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..
Copyright www.sdspec.com 72
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.
Copyright www.sdspec.com 73
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.
Copyright www.sdspec.com 74
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..
Copyright www.sdspec.com 75
Disaster and
Security Test
Test Your
Current Procedures
Copyright www.sdspec.com 76
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: _____
Copyright www.sdspec.com 77
Polling Question #3
How many questions did you answer YES?
1. 9 or 10
2. 7 or 8
3. 6 or below?
Copyright www.sdspec.com 78
Question Break
Any questions, comments
or feedback?
Copyright www.sdspec.com 79
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: [email protected]
Web site: www.sdspec.com
Copyright www.sdspec.com 80