Financial impropriety-A A +A
An Independent View
Sunday, August 19, 2012
LAST Thursday, we commemorated the 35th death anniversary of Elvis Presley. During his 30th anniversary, at 10.30.36, a BDO hound dog using internal terminal number 6654 hacked our BDO electronic banking account and withdrew P50,000. We were all shook up, particularly since the system hitherto never allowed us to withdraw more than P20,000 in a day. The hacker did not know our PIN number. [Except for us, nobody did]. Naturally, we were very concerned but assumed that the bank would soon realize its error and reverse the transaction. Not so.
A few days later, we visited the bank but were treated coldly by BDO's local manager Glenn Ong, who seemed to be more concerned about our possible lack of probity than whether the bank's systems were defective. In fact, at that time, we had banked at Hilado branch for 11 years and never had encountered any problems [It was an Equitable-PCI Branch until the hostile BDO takeover in 2007].
Eventually, without explanation, BDO deigned to return our money that had been fraudulently taken from us. At this point, Bangko Sentral ng Pilipinas (BSP), to whom we reported the incident, lost interest in our case. We would have thought that BSP would be concerned about the bank's demonstrably flimsy systems being hacked to the disadvantage of its customers. Apparently not.
Eventually, a senior BDO manager, Ismael Estela, spoke to us reassuringly about the “firewalls” that protected BDO's systems. We were not reassured. We explained that in the world of computing, a firewall is part of a system that is designed to block unauthorized access while permitting outward communications. So a firewall was an attribute that BDO's system demonstrably did not have.
A few weeks ago "Russian swindler" Ogil Ogilov managed to use a bogus plastic card for a P20, 000 purchase. If his plastic was approved by the system, this shows that the firewalls are still not in place. It also shows that Ogilov has partners-in-crime. Ogilov is now out on bail, having been charged with offenses under R.A. 8484 but I wonder if the case will ever come to court.
Banks tend to be shy about cases which illustrate weakness of their systems and their employees' conduct.
In 1977, I assisted the planning, design, development, and implementation of the ATM system of The Royal Bank of Scotland (RBS). This was the first 24 hour on-line ATM banking system in the world.
(Ignore Citibank's recent advertisements about being first). From inception until now, RBS has never had a hacked ATM transaction that we suffered from BDO.
In August 2008, Philamlife advertised a product in which an investment of US $10, 000 would yield US $12, 500 in five years. We decided to invest in this product and on 29 August went to our BDO Hilado branch to make the purchase.
At 13:59:57 on 29 August, US $10, 000 was electronically debited from our BDO account number 3040046890. Where did our money go? We don't know. Neither BDO nor Philamlife is prepared to tell us. The Philamlife rep who was based in the branch [BDO inherited the Bancassurance relationship with Philamlife when it took over Equitable bank] stated that we would receive that policy documents on 8/9 September].
We then heard nothing. No receipt from Philamlife. No policy documents. Nothing! By 17 September we were concerned and made representations to Philamlife and BDO. All we received was palusot. "We're too busy," "difficulty in communicating with the provinces," "the FSE was pregnant" were the feeble excuses we received. These are not the responses we expect from financial institutions that claim probity.
Eventually, many weeks later, without explanation, Philamlife deigned to return US $9,000, thereby high-handedly retaining US $1,000. A thousand dollars for doing nothing except causing mental anguish is impertinent.
We took Philamlife to Barangay 17 which dealt with the situation professionally. After the first meeting, the local Philamlife Area Manager Taton emailed head office manager Cabognason to explain that we never received the policy. His email timed at 1410 hrs on 7 April 2009 had no demonstrable effect.
We also emailed Teresita Sy, BDO honcho, to express our disapproval. She asked BDO Legal to investigate. Philamlife's response to BDO's Atty. Cortez's sensible inquiry about the transaction timeline was evasive. [Philamlife, throughout, has never been able to answer a straight question with a straight answer].
Eventually, after 14 months of our expressions of concern, Philamlife deigned to offer to return the money. [We suspect that BDO had a hand in this decision since it terminated its poisonous (to BDO) Bancassurance relationship with Philamlife a few weeks later]. But Philamlife insisted, in an arrogant missive from Jose Teves, that we should have to go to Iloilo to obtain our money. 14 months was too long to wait and we sought, vainly as it turns out, to know the truth of what happened so that others would not suffer as we have.
More recently, Philamlife deceitfully stated that the policy was issued "with an effective date of 12 September." This misled, as it was intended to, local Philamlife manager Ms Lizares who erroneously thinks that the policy was issued on 12 September. Untrue! Philamlife knows perfectly well that we never saw 'hide nor hair' ((c)Atty Andres Hagad) of the policy for a failed transaction which went on until mid-October.
Philamlife, by obscuring the truth, causes Philamlife's senior management not to know what is going on, and also reinforces our belief that Philamlife is not a financial institution with which we should do business.
It would help financial institutions, if when confronted by a problem of their own making, they realize that it does not help their reputation if their reflex is to adopt an adversarial relationship with their wronged clients. Senior management would learn much about what goes on in their organizations if they got involved in the nitty-gritty of cases in which customers have been badly treated.
Senior management should understand that too many imperfections of their organization's operations are shielded from them. Senior management should learn to ask the uncomfortable but necessary follow-up questions when subordinates tell them that it is already "problem solved." During our saga with Philamlife, three CEOs (Cuisia, Bull, Mendoza) have failed to get to grips with the problem. BDO's Teresita Sy made progress via BDO Legal. Micromanagement gets a bad press but it is a necessary component for much effective leadership. Margaret Thatcher was an excellent example.
Is it only grocers' daughters who have the energy to devote sufficient attention to detail and who are not fobbed off by manipulative subordinates?
It is not for CEOs to turn a blind eye to their organization's imperfections. Understanding and solving problems where clients have been cheated, immensely improves their organizations' standing in the community. It is not too late, Rex.
The insurance Commissioner, Emmanuel Dooc, wants the insurance industry to grow by 25 percent in the next two years. I have explained to the Insurance Commission that Philamlife's conduct reduces the chances of this happening. I also invited the Commission to take an interest in our case and, who knows, perhaps it will.
The Nation's insurance sector, relying as it does on commission-based salesmen, needs to ensure that it provides adequate training, management, supervision and auditing. Philamlife demonstrably fails in this regard.
Commission-based selling means that short to medium term insurance products, such as the one we tried but failed to buy, are unviable because commissions gouge an excessive proportion of the premium, particularly if there is a Bancassurance overlay. The pre-need industry has always been a disaster, partly due to commissions and partly because the industry, being inadequately controlled by the relevant government agencies, and aided and abetted by a corrupt Judicial Branch, attracts the crooks.
“National compulsory insurance for all cases for all purposes from cradle to the grave.” -Winston Churchill (1874-1965)
Radio Broadcast 21 March 1943.
Published in the Sun.Star Bacolod newspaper on August 20, 2012.