AMALGAMATED FINANCIA

AMAL
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Transcript : Amalgamated Financial Corp. Presents at Deal Book Summit, Nov-30-2022

30/11/2022 | 00:00

Presentation Operator Message
Operator (Operator)

Please welcome back Andrew Ross Sorkin and his guest, the President and CEO of Amalgamated Bank, Priscilla Sims Brown.

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Andrew Sorkin (Attendees)

Come on, Priscilla. Wasn't Scarlet amazing? Thank you so much for being here.

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Priscilla Sims Brown (Executives)

Thank you.

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Andrew Sorkin (Attendees)

I want to thank all of you for engaging in this discussion, and I was so happy to have Scarlet here. And this is an emotional topic for me in many ways, and it's why I wanted to do this with everybody because back in 2018, after the Parkland shooting, I started writing about the role of guns in our society, but more importantly, the role of business as it relates to guns and the role of the credit card companies and banks in financing mass shootings, to put it in the most stark terms.

And a lot of people didn't believe that the credit card industry or the banking industry had anything to do with the gun issue in the country. And I went on a little bit of a journey for about 6 months [ foyering ] this Freedom of Information Act. All the financial records of the major mass shootings over the last 1.5 decades. And what we discovered was that most of these guns are being bought legally and were being bought simply just prior to the shootings and that the transactions were so unusual they should have been spotted.

We all get calls on the phone when you're at a restaurant or a gas station and someone says is this your card or we're checking to make sure. Nobody ever made those calls, and it was obvious. And in the case of the pulse shooting in Orlando, the shooter had actually gone on to Google up 3 days earlier and say, actually written into Google and said, "Is my credit -- is unusual credit card activity related to guns being tracked." And that came out in one of the [ foyers ] and I was leading the story.

I wrote that story and nothing happened, to be honest with you, and I was kind of sad about it. And then I discovered, I think 2001, that there was a bank, which I have to be honest with you, I did not know too much about that it actually taken up this whole issue in a remarkable way. This is Priscilla Sims Brown, Amalgamated Bank, President and CEO. And I'm going to let you take the story from here because a lot has happened over the last 12 months as a result of you.

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Priscilla Sims Brown (Executives)

Can I go back a little bit further?

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Andrew Sorkin (Attendees)

Please.

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Priscilla Sims Brown (Executives)

But first, before I say anything, can we just acknowledge that Scarlet Lewis was amazing.

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Andrew Sorkin (Attendees)

Absolutely.

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Priscilla Sims Brown (Executives)

If we all take seriously your words. If we all have the courage that Jesse had in whatever we're doing and wherever we are, we can address this and we can stop this and I'm very grateful and honored to come up after you. Thank you. And then I wanted to just go back a little bit and tell people about Amalgamated Bank because there are a lot of people like you who have never heard of Amalgamated.

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Andrew Sorkin (Attendees)

I didn't.

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Priscilla Sims Brown (Executives)

We're a medium-sized bank, and we're in 4 cities. But many of you may not have heard of us. It's an interesting story, one that really excited me 1.5 years ago when I joined. And that is this bank was started by immigrant textile workers. They were part of the Amalgamated Clothing Workers Union. They came here mostly from Eastern Europe to New York and they couldn't be banked, there's no way to be banked. And so they've decided to start their own bank.

And its history over 100 years has been really about that. It's been about workers' rights, it's been about ESG, it's been about really advancing the causes and the financial security of people who could be banked. So the reason I gave you that context was not to give an Amalgamated commercial, but to say that it was then, for us, a very natural thing when we've heard about this. And thanks to you, we heard about it.

And so here's the story. As you said, everybody gets these little dings on your phone when you use your credit card or someone else has used your credit card inappropriately. And we all know that banks are in an obligation to address financial crimes that occur in our systems, right? So things like human trafficking, money laundering, all of these things. And we do that by collecting a lot of data. And that data includes a merchant category code. So a little identifier, a 4-digit number that's associated with every single retailer all over the world.

And what you helped us to understand was that there was no merchant category code for gun stores. So that then made it very difficult to address some of the crimes you just mentioned. And Amalgamated took it upon itself as an institution to apply for a code. We applied 3 times and we finally got it.

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Andrew Sorkin (Attendees)

Well, let's talk about the applying 3 times because that suggests the first time and the second time didn't work. And it also suggests that there were some powerful forces at play to prevent that from happening and that included the major credit card companies.

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Priscilla Sims Brown (Executives)

Look, I mean, this goes back to something that Scarlet said earlier, there's lots of misinformation in the world, right? And so for various reasons, some of which predated me, we apply to this international standards organization and for various reasons, we were turned down twice. Good news is, this past fall, it was finally approved.

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Andrew Sorkin (Attendees)

And so Visa, Mastercard and American Express are implementing this now?

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Priscilla Sims Brown (Executives)

That's right. 24 hours after the application was approved, each of those credit card companies came out and said they would be implementing it. So this means they will be applying this distinct code to gun retailers, whether that be a small or large gun retailer, they'll do that.

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Andrew Sorkin (Attendees)

And so let's just take -- just spin this forward. Once this code is there -- and very interestingly, I don't know if people can appreciate this. When you buy a product, even if you go to a restaurant, you see all the food you bought on your own receipt but the bank doesn't get that information?

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Priscilla Sims Brown (Executives)

No.

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Andrew Sorkin (Attendees)

The bank only gets the information that it was a restaurant.

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Priscilla Sims Brown (Executives)

That's right.

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Andrew Sorkin (Attendees)

So now they're still not going to know, you're not going to know exactly what was purchased?

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Priscilla Sims Brown (Executives)

That's right.

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Andrew Sorkin (Attendees)

But you're going to know where it was purchased from?

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Priscilla Sims Brown (Executives)

That's right.

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Andrew Sorkin (Attendees)

You get that information and what happens next?

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Priscilla Sims Brown (Executives)

So to your point, there are patterns that some of this criminal activity follows, right? And whether, again, that's another kind of crime or it's a gun-related crime, there are patterns. And so what we will do as an industry is when we observe those patterns, we will file what's called a suspicious activity report. We file it with a regulator called FinCEN.

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Andrew Sorkin (Attendees)

And you do that already. And I think everybody should understand, this is what the banks are doing every single day, thousands of times a day. After 9/11, we put this in place. to protect us against domestic terrorism.

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Priscilla Sims Brown (Executives)

That's right. That's right.

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Andrew Sorkin (Attendees)

But let's also talk about the flip side of this because there are a lot of people who are angry. I get it, I imagine you've gotten it. There are typically red states that have gone after some of those credit card companies that are doing this to say, "We don't want you doing this." Going to the bank saying, "Please don't do this."

There's a real worry, there's a law in this country that you can't keep a full index of gun owners. And there's some people who believe that this will allow the creation of a phantom list, if you will. What do you say to that?

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Priscilla Sims Brown (Executives)

I say that not only is that illegal and inappropriate, but it is not at all what we as banks are trying to accomplish here. So we wouldn't do it if we could, but we aren't doing it. We can't do it.

What we are really doing is we are identifying suspicious behavior. This has nothing to do with legal gun activity. This has to do with known patterns that, as you opened with, we know are potentially illegal. And we don't make the final decision, but we pass that suspicious activity information.

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Andrew Sorkin (Attendees)

So those folks who say that you're going to block the transaction, right, that is the concern that folks have out there that are legal gun owners. And they say, well, this doesn't seem like something that they want. And you tell them, you can buy a gun using a credit card.

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Priscilla Sims Brown (Executives)

That's right.

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Andrew Sorkin (Attendees)

But I think if you buy 2 or 3 guns from 2 or 3 different stores because you can actually do that without having to report it, and then you start buying ammunition online and other things all in a period of time, that gets flagged? How does that work?

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Priscilla Sims Brown (Executives)

So there are detection scenarios, and we're at the very early stages of this. It just got this particular code just got approved in October. So those detection scenarios are still being brought together. But as this is implemented, those scenarios will be used. And again, what we do with that is what we do when you -- your credit card is used in Spain and you're sitting in New York. You get a flag, you get to see something, say something. That's what we will do. We will pass on that information, except not to you, it would go to FinCEN. And then FinCEN will determine which appropriate authority to move it on to.

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Andrew Sorkin (Attendees)

Let me ask you this. I used to get a lot of e-mails about this when I first started writing about it. They said, "Look, the lawmakers should be making laws. Businesses shouldn't be in the position to be making their own rules in this regard." What do you think of that? You wouldn't need this or you wouldn't need to have taken the initiative to do it yourself because maybe they would have either imposed it if that was the will of the people.

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Priscilla Sims Brown (Executives)

I go back to the start with it. We all have a part to play. So it's true. There are new laws that protect us. But if they're not enforceable because we have this activity happening and we're not doing anything about it, then that's a problem. And keep in mind that we also have a legal obligation to deter crime happening on our system. And the way we do that is we alert authorities of suspicious activity.

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Andrew Sorkin (Attendees)

Let me ask you this. The other piece of this that's so interesting to me is a political split in this regard. It was -- for a very long time, the blue states were considered those that were trying to use the business or ownership of shares to influence things on one side. And on the Republican side, typically, the view was we're a free market, we're not going to do that. A lot of the tactics that the blue states have used for many years are now being used by the red states. So you have state of Louisiana, Texas and others that have actually made it very difficult for banks that are doing business in their states, for example, to issue municipal bonds, if, for example, they have policies that relate to things like guns or crime. What do you think of that?

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Priscilla Sims Brown (Executives)

Look, this is not political to me. Like all of the positions we take, we look at what we -- part of what we do is listen to what our customers and society tell us. And I think if you took a survey of the audience today and those listening online, you'll find that almost everyone agrees that illegal gun activity should happen.

So for me, this is common sense. It's the right thing to do, and it's our obligation as a financial services firm. This is -- I'm not going to walk outside of those parameters or outside of that lane on any other issue. But on this particular one, where there's crime potentially happening on our rails, I think we have an obligation to act.

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Andrew Sorkin (Attendees)

What do the other bank CEOs tell you?

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Priscilla Sims Brown (Executives)

Look, I think what I am seeing from other banks is that they have been honoring this process and this system, filing suspicious activity reports across a myriad of industries to stop a myriad of crimes, or at least to alert authorities of them, right? And I have every confidence that banks are going to do the same thing here. It's noteworthy to me that credit card companies responded within 24 hours of getting this approved by saying they will implement the codes.

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Andrew Sorkin (Attendees)

Priscilla Sims Brown, thank you for being with us.

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Priscilla Sims Brown (Executives)

Thank you.

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Andrew Sorkin (Attendees)

Thank you for sharing the story.

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Priscilla Sims Brown (Executives)

Thank you. Appreciate it.

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