Employers Must Use Revised Form I-9, Employment Eligibility Verification

-USCIS will no longer accept previous versions of Form I-9

WASHINGTON—U.S. Citizenship and Immigration Services (USCIS) reminds employers that beginning today they must use the revised Form I-9, Employment Eligibility Verification (Revision 03/08/13)N for all new hires and reverifications. All employers are required to complete and retain a Form I-9 for each employee hired to work in the United States.

The revision date of the new Form I-9 is printed on the lower left corner of the form. Employers should not complete a new Form I-9 for existing employees, however, if a properly completed Form I-9 is already on file.

A Spanish version of Form I-9 (revision 03/08/13)N is available on the USCIS website for use in Puerto Rico only. Spanish-speaking employers and employees in the 50 states, Washington, D.C., and other U.S. territories may use the Spanish version for reference, but must complete and retain the English version of the form.

The revised forms are available online at www.uscis.gov/I-9. For more information, please call 888-464-4218. Representatives are available Monday through Friday, from 8 a.m. to 5 p.m. USCIS maintains a website, I-9 Central, to support Form I-9 users. USCIS has also scheduled free webinars to help employers learn about the new form.

To order forms, call USCIS toll-free at 1-800-870-3676. For free downloadable forms and information on USCIS programs, immigration laws, regulations, and procedures, please visitwww.uscis.gov. Follow us on Facebook, Twitter (@uscis), YouTube (/uscis) and the USCIS blogThe Beacon.

Pawnshop Unit Joins World’s Richest Man With Sale: Mexico Credit

By Brendan Case and Boris Korby

April 2 (Bloomberg) — Payroll lender Prestaciones Finmart SAPI is joining Carlos Slim, the world’s richest man, in selling bonds internationally that allow investors to profit from the world’s best-performing major currency.

Prestaciones Finmart, majority-owned by Austin, Texas-based pawnshop operator EZCORP Inc., plans to sell 750 million peso-linked ($60.7 million) three-year bonds, according to a person familiar with the sale. In the past two years, only Slim’s America Movil SAB and state-owned Petroleos Mexicanos, rated as many as eight levels higher than Finmart’s B+ grade from Fitch Ratings, have sold similar securities. Yields on America Movil’s notes due in 2022 have fallen 0.73 percentage point since they
were issued in December to 5.72 percent.

The peso has gained 4 percent against the dollar this year, the most among the world’s 16 major currencies, on speculation President Enrique Pena Nieto will overhaul tax and energy policies to propel growth in Latin America’s second-biggest economy. Demand for peso bonds issued overseas is likely to grow as declining yields on dollar-denominated debt prompt foreign investors to take on more risk, according to Silva Capital Management LLC. Average yields on emerging-market corporate bonds have tumbled 0.7 percentage point in the past year to 4.93 percent.

“There could be investors who are interested because it gives them currency exposure and lets them participate in the Mexico growth story,” Alejandro Urbina, who helps oversee about $800 million in emerging-market assets at Silva Capital, said in a telephone interview from Chicago. “What it does for the corporates is it expands the universe of potential investors for them and therefore increases the availability of capital.”

Payroll Loans

Javier Creel Moreno, chairman and executive president of Mexico City-based Prestaciones Finmart, and EZCORP spokesman Rick Bluntzer declined to comment on their financing plans.

Espirito Santo Investment Bank is arranging the transaction, said the person, who asked not to be identified because terms aren’t set.

Prestaciones Finmart provides payroll loans primarily to employees of Mexican government agencies, payable in installments that are deducted from customers’ wages. Loan
amounts range from 2,000 pesos to 100,000 pesos and average 16,000 pesos. Former U.S. Ambassador to Mexico Antonio Garza and Luis Tellez, chief executive officer of the Mexican stock exchange, sit on the lender’s board.

State Employees

Prestaciones Finmart’s Crediamigo operation has agreements covering 170 employers and 3.5 million employees, according to EZCORP. The Mexican Social Security Institute for State Workers, known as the ISSSTE, handles withholding on about 25 percent of its business while the Public Education Ministry accounts for 20 percent, according to an offering circular for the Finmart bond sale obtained by Bloomberg.

The company had a credit portfolio of 1.28 billion pesos as of Dec. 31, up 78 percent from two years earlier. Net income was 72.9 million pesos last year, compared with a loss of 90 million pesos in 2011.

Investors are turning to higher-yielding local-currency debt from emerging-market companies to bolster returns amid near-zero rates in the U.S., according to Eduardo Cortes, who helps manage $1.4 billion in debt at GIA Partners LLC.

“This all falls into a broader category of investors going to emerging markets, where you can pick up higher interest rates than are available in Japan, Europe, the U.S.,” Cortes said in a telephone interview from New York. “You can get exposure outside of the dollar as well, which is what a lot of investors
are looking for.”

‘Reputational Risks’

Fitch Ratings assigned a B+ ranking to Prestaciones Finmart on March 11, four levels below investment grade and eight steps less than America Movil’s A rating.

The rating reflects “its favorable business model granting loans to stable public sector employees with direct debit to their payrolls,” Alejandro Garcia, a Fitch analyst, said in the report. It takes into account “relatively high operational, political and reputational risks associated with this sector, as well as the exposure to fierce competition and the potential for rapidly changing market dynamics.”

While past-due loans almost tripled last year to 56.9 million pesos, the increase came off an “exceptionally” low level and was partly due to attempts to be more proactive in
measuring bad credit, Garcia said in a telephone interview from Monterrey, Mexico.

Teachers in the state of Puebla filed complaints last year with state prosecutors alleging that money was deducted from their pay by Crediamigo without having asked for a loan, according to La Jornada de Oriente newspaper and Diario Como newspaper. The company denied the allegations in a statement.

Prestaciones Finmart’s Creel Moreno declined to comment on the complaints.

Market ‘Froth’

On Jan. 19, 2012, EZCORP announced an agreement to buy a 60 percent stake in Prestaciones Finmart for $38.7 million in cash and possible additional amounts if the company achieves certain performance targets. Under the terms of the deal, EZCORP also agreed to inject an additional $12 million into the company alongside $8 million from minority shareholders. EZCORP also owns the Empeno Facil chain of Mexican pawnshops.

While America Movil’s notes are denominated and payable in pesos, Prestaciones Finmart’a bond payments will be determined in the local currency and converted by a foreign-exchange agent into dollars two days before payment and settled in U.S. currency.

Marco Aurelio de Sa, the head of fixed-income trading at Credit Agricole’s Miami brokerage, says Prestaciones Finmart’s offering may be a sign of “froth” in the market and that more peso gains will be limited after the Mexican central bank cut its benchmark interest rate by 0.5 percentage point to a record-low 4 percent on March 8.

Yield Spread

“The Mexican peso is still an attractive play but it’s kind of a crowded trade at this point,” he said. “Mexico recently cut rates, so it’s less attractive.”

The extra yield investors demand to own Mexican government dollar bonds instead of Treasuries climbed one basis point, or 0.01 percentage point, to 183 basis points yesterday, according to JPMorgan.

The cost to protect Mexican debt against non-payment for five years with credit-default swaps rose one basis point to 98 basis points, according to data compiled by Bloomberg.
Yields on Mexican interbank rate futures contracts due in December, known as TIIE, were unchanged at 4.38 percent yesterday.

The peso weakened 0.3 percent to 12.3642 per dollar.

Pemex Sale

Prestaciones Finmart is selling bonds 16 months after Pemex, as the state-controlled oil producer is known, sold 10 billion of notes linked to the peso to yield 7.65 percent. The
securities now yield 5.68 percent.

“As often happens, these markets are blazed by the big guys,” GIA Partners’ Cortes said. “A lot of these non-U.S. capital markets, pesos and other countries that are not traditional in the investment community, are going to expand over time. There’s plenty of demand.”

Hoping For the Best, Preparing For the Worst


After Hurricane Sandy ripped along the east coast last fall, many businesses found themselves scrambling to restore the power — and the income — they lost. Electricity was out for weeks in some areas. Normal transportation routes were inaccessible. Supply line schedules were disrupted. Some businesses survived, others shut down.

In Atlantic City, debris littered streets, from downed tree limbs to pieces of the iconic boardwalk. Tens of thousands of residents were without electricity. The barrier islands took the brunt of the storm.

For Charles Place, chief financial officer for Atlantic City Check Cashing, the key is to be flexible.

“You must know how to adapt,” he said. One of his stores is located on the barrier island. The store’s staff prepared for Sandy by setting merchandise up off of the floor but did not seal the backdoor to the store. Water damage resulted.

“We definitely learned that we must seal the door,” he says. “And make sure everything is up and away from the water. Water may kill rugs but it doesn’t have to kill our machines.”
“I’ve lived here 25 years. You learn how to prepare and you keep a generator handy.”

More People Affected

Natural disasters such as Hurricane Sandy, and more recently, the winter storm that dumped two to three feet of snow throughout the Northeast, can shut down businesses for days and even weeks. The loss of income can be crippling and some businesses may never recover.

Forecasting such events has improved significantly in recent years but it is still difficult for forecasters to project where a hurricane may make landfall or when a tornado may strike.

It is estimated more than half — 53 percent — of Americans live within 50 miles of a coast. As more people migrate to the Gulf and Atlantic coastlines, and more businesses follow, the probability of hurricanes and other natural disasters striking densely-populated areas will increase.

AIR Worldwide put the insured property of coastal property from Texas to Maine at $8.9 trillion in 2007. This is up sharply from $7.2 trillion just three years before.

Pat Ballis with Mesirow Insurance Services said planning for disasters requires looking at your business and thinking about what services you need to provide your customers. If your records aren’t on computers, you need to make sure they’re backed up and off premises, he says.

Ballis also cautions that where your backup system is located can be important. “If the vendor who provides your backup service is located in same area where the storm hits, both you and your vendor could be hurt. You should seriously consider having your backup services located elsewhere geographically,” he says.

But if a check casher isn’t on computer, there’s not much they can do for off-premise backup.” If you’re working with a ledger and you put it in a safe, you’re still at risk because a flood can destroy anything in a safe,” Ballis says.

Interruption Insurance

Planning for disasters includes having a business interruption insurance policy in place. Small businesses face the greatest risk because they many lack such insurance and are unable to survive lengthy periods without income.

Companies that own policies typically have insurance to cover losses caused by physical damage. Business interruption insurance covers claims for loss of sales.

Claims for business interruption insurance soared after Hurricane Sandy. But terms of each policy affects a claim, as Place explained. “Yes, we have business interruption insurance but we didn’t qualify because we weren’t so interrupted to make a claim.”

Still, such insurance is critical. “We do have business interruption insurance, but we’ve never had a fire,” Harry Newman, manager and owner of B & I Check Cashing in Lakewood, Wash., said. His store is located inside a mall that is still susceptible to the elements.

“Bad weather can still close us down. Not long ago, we had a really bad storm that ripped off part of the mall and the roof of a store, too. Who knows when that may happen? You need insurance.”

Ballis acknowledges flood insurance is unavailable to many businesses, though water damage from flooding is a common issue for locations near locations near rivers, lakes and oceans. “A business owner may be able to buy flood insurance through the federal government,” he suggests.

Employee Communications

Communications with employees is also a critical consideration when planning for a disaster. Kenny Luquis helps run his family’s check cashing stores in the Bronx. Before the February 8 snow fell, they were ready. “We watch the latest news updates on TVs in all five of our stores so we stay on top of the weather,” he said.

The morning after the snowstorm dropped more than two feet of snow throughout the Northeast, he felt relatively lucky. “We opened an hour late,” he said. “There were problems with frozen locks at one or two stores but otherwise, we were okay. Everyone is on email and we have fax. We fax stores to let them know.”

Luquis has also been fortunate with power outages. “One time, we lost power in our store and we couldn’t plug in anything, but I had an electrician in and we were back up and running by the middle of the day,” he says.

Some businesses have backup generators available in case of an outage, but Luquis said they’re not practical for his stores.

“Generators are expensive and besides, you have to have them outside because of the fumes. Having a store in the city makes it kind of tough — you don’t know when you’ll go outside and the generator’s stolen.”

His stores use backup drives to store their data. “We don’t have a central server,” he says. “With services such as direct deposit, it’s important to be on computers. We’re backed up on a hard drive, which we lock in a safe every night. This has worked for us. We have backup drives, plug in our modem and we’re ready to go.”

Store Cut Off

Place had disaster plans ready for ACCC when Hurricane Sandy hit Atlantic City, but still suffered temporary setbacks because one store is located on the barrier island. “Nobody could get to the islands,” he says. But they quickly adapted.

FiSCA Attacks Treasury Election Benefit Move


The United States Treasury decree that all recipients of federal government benefits must select a form of electronic means of payment — either direct deposit or debit card — for their benefits by March 1, 2013, or be in violation of Federal law has drawn harsh criticism from the Financial Service Centers of America.

According to FiSCA, the Treasury’s position is inconsistent with testimony offered to Congress last fall which clearly stated that beneficiaries would continue to receive their payments via paper check

if they had not signed up for an electronic form of payment.

As a result, FiSCA has launched a campaign to raise awareness that customers can still receive their federal benefits via paper checks after March 1.

Can It or Can’t It

There have been conflicting reports on whether the Treasury can force such a mandate. Walt Henderson, director of the Go Direct campaign for the U.S. Treasury, has stated in various press reports that Treasury cannot force recipients to accept electronic delivery methods.

In a New York Times article dated January 10, Henderson was quoted as saying, “We don’t have the authority to change their payment method without their permission.”

FiSCA is providing in-store, digital and online materials to help its members communicate with their customers about the options they have for receiving their federal benefits.
“The reality is that recipients who have not signed up for electronic payments will still receive a paper check,” says Joseph M. Doyle, chairman of FiSCA.

“Nevertheless, there is a great deal of confusion among our customers as to what is going to happen after March 1. A significant segment of our customers have told us they don’t want to receive their federal payments electronically. For them, paper checks work best, and they are looking to us for solutions. They need to know they do not have to select one of Treasury’s preferred options. Checks will still be mailed. In addition, financial service centers have an array of options that can better meet customers’ needs.”

“We view this awareness campaign as an essential customer service initiative,” Doyle continues. “Our customers have questions when it comes to receiving federal payments, and we have the answers.”

Treasury Testimony

On Sept. 12, 2012, the House Committee on Ways and Means, Subcommittee on Social Security, held a hearing on the rule requiring electronic payment of federal benefits by March, 2013.

Decoding the R&D Tax Credit for Lead Generators


In 1981, in the wake of a recession, Congress enacted a tax credit designed to reverse the accelerated trends of a diminishing domestic ability to compete with foreign markets. Thus began the American investment in research and development.

The Credit for Increasing Research Activities, more commonly known as The Research and Development Tax Credit, has broad bipartisan support in Congress, as illustrated through 30 years of progressive expansion, refinement, and more than a dozen renewals.

Today, the United States assigns nearly $9 billion a year in federal R&D Tax Credits, making it one of the most lucrative tax incentives available in this country.

In addition, more than 30 states offer their own version of the credit. In some states there are fewer limiting factors and a wider scope for which the credits may be applied, thus doubling and tripling the overall benefit and impact when captured in conjunction with the federal credit.

The concept of R&D usually conjures up visions of white lab coats and microscopes. As a result, many software companies are unaware that the government offers incentives for engaging in activities that are often misclassified by programmers as “just another day in the office.”

Additionally, those who are aware of the R&D credit often lack the proper expertise and guidance, and consequently fail to capture and/or support all eligible expenses.

Based on Past

The myth that the R&D credit is only propagated in laboratories where groundbreaking innovations or patentable products are the focus comes from the fact that for the large majority of its existence, that was a relatively accurate depiction. The traditional definitions and the tax definitions of R&D were nearly synonymous.

Congress recently recognized, however, that restrictions such as the Discovery Test had been limiting the credit’s ability to fulfill its purpose for small and medium-sized businesses.

Navigating through another recession, it was again determined that investing in R&D would expedite our recovery, so the Discovery Test was thrown out along with a documentation requirement in an effort to stimulate economic growth.

Today, for software developers, one simply needs to develop new or improved software features or functionality and go through a development process (agile, waterfall, prototyping, spiral, RAD, etc.) to qualify.

For illustrative purposes, we turn to a lead generation firm that claimed the R&D credit for a six-figure refund. LeadGenCo employs teams of programmers who develop lead generation software and perform quality assurance tests. It also employs analysts, project managers, and executives who engage in the conceptualization process and/or the supervision of the programming teams.

Its development stage using the waterfall development methodology began with a requirements definition, then moved onto specification, system and software design, implementation and unit testing, integration and systems testing, acceptance testing, and eventually settled into operations and maintenance.

Passing the Test

As with any benefit offered by the government, there are requirements that every business must meet in order to qualify.

For the R&D Tax Credit, there is a four-part test:
1. There must be an attempt to develop a new or improved business component (e.g. software).
2. It must be technological in nature.
3. There must be a degree of uncertainty.
4. There must be a process of experimentation.

New or Improved Business Components

The U.S. Tax Code describes six elements that qualify as Business Components: products, processes, techniques, inventions, formulae, and computer software.

To qualify, the goal in the development of the software must be to create new or improve existing functionality, performance, reliability, or qualities (a “permitted purpose”).

The most obvious qualifying projects are the newer ones, and with some companies, it is apparent that the tests easily will be met. If the software programming and development supports the creation of new business components, it is a simple case to support the notion that a project containing a new software module would qualify.

And while the development of new programs is worthy of focus when capturing the R&D credit, one should not overlook the development of improved software. When a new software module is ready for its intended use, by no means is the development complete. In fact, it may never be.

Companies take small steps, improving a product or process gradually. Think about how many updates a single iPhone or Android app goes through. The developers are fixing bugs, improving performance and processes, adding new features, and refining the way it communicates with the hardware and other apps.

As long as there is an improvement of the software program or a creation of something entirely new, and if the work is aimed at a permitted purpose, it will satisfy the New or Improved Business Component test.

Permitted Purpose

LeadGenCo enhanced existing software to improve its processing ability. It also expanded the types of data that the system could handle. These improvements were for a permitted purpose — to improve the functionality and performance of the software.

Not everything it did was ultimately considered qualified for R&D, such as cosmetic changes to an interface and syntax error corrections (activities which related primarily to style or taste were not eligible for the credit ), so the wages tied to those hours were not applied.

However, there were significant hours left to capture because of the type of programming in which the company was engaged.

Technological in Nature

The goal of the R&D credit is meant to incentivize technical, scientific, and engineering-based activities. Programming naturally relies on principles of computer science, making this an easy test for software companies to pass.

Examples of developmental activities eligible for R&D tax incentives:
• Developing new or improved technologies
• Developing requirements, domain, software elements, or scope analysis for a new functional software enhancement
• Evaluating and establishing functional specifications
• Designing and developing the structural software architecture
• Establishing electronic interfaces and functional relationships between various software modules
• Programming software source code
• Compiling and testing source code
• Conducting unit, integration, functional, performance, and regression testing


Defining the uncertainty faced within a project can be complex. Under current regulations, the uncertainties faced should be identified at the outset of a research project.

It will be determined that “uncertainty exists if the information available to the taxpayer does not establish the capability or method of developing or improving the business component, or the appropriate design of the business component.”

In software development, there are a wide variety of situations where uncertainty may occur. Though there may not always be significant uncertainty regarding the capability or method of developing a new or improved software program, there is typically uncertainty as to the most efficient design. The key is that all three types of uncertainty need not exist; any one area will qualify on its own.

Forecast 2013


Overcast with clearing skies. That’s the economic forecast as businesses enter a new year. Drizzly conditions will remain at least for the first half of 2013, as consumers hold tight to their pocketbooks. Light should break through the clouds in summer and fall, though, as the resolution of critical uncertainties encourage corporate hiring, capital investment and consumer spending.

The coming year as a whole is not expected to bring significant relief over 2012. “We expect the recovery to remain lackluster,” says Sophia Koropeckyj, managing director of industry economics at Moody’s Analytics, a research firm based in West Chester, Pa. (www.economy. com). “The pace of growth will be too slow to meaningfully bring the unemployment rate below eight percent.”

The numbers tell the tale. The most common measure of the nation’s economic health is growth in gross domestic product, the annual total of all goods and services produced in the United States. Moody’s expects GDP to increase by 2.4 percent in 2013. That’s not much of an improvement over the 2.3 percent anticipated for 2012 when figures are finally tallied.

Moody’s forecast might not seem all that bad, given that the GDP increase for an economy in average growth mode is 2.5 percent. But there’s a problem: A nation recovering from a recession needs more robust expansion. “By most measures, this recovery is among the weakest in the past 50 years,” says Koropeckyj.

What’s holding things back? Koropeckyj points to a number of areas. “Fiscal restraint on the local and national level, weaker global demand, a housing market that has hit bottom but has a long way to go to become healthy, and weak income growth are all constraining a stronger pickup in employment.” Other factors are the weakening economies of China and Europe—both important export markets.

All those factors are coming together to subdue the public mood. “Consumer confidence is still at a level consistent with a recession,” says Scott Hoyt, Moody’s senior director of consumer economics.

“Consumers remain concerned about economic conditions. There is still high unemployment, weak growth in wages, volatile stocks and high gasoline prices. There are a lot of things to keep consumers on edge.”

Retail Sales

Retailers will suffer as concerned consumers hold onto their purse strings. “We expect the retail environment to be difficult in 2013, growing at some 2.3 percent,” says Hoyt. That pace represents a de-escalation from the 3.2 percent anticipated when 2012 figures are finally tallied. To put those figures in context, average annual core retail sales grew at 4.6 percent prior to the 2008 financial crisis. Core retail sales exclude volatile revenues from auto sales and gas stations.

Moody’s expects pressure on retailers early in the year because of the major weight of a constraining federal fiscal policy. While consumer confidence spiked upward a little in early fall, consumers will continue to be impacted by the anticipated terminations of two initiatives: the Social Security payroll tax holiday and extended unemployment insurance benefits. Reduced federal spending, by eliminating some jobs, will also have an indirect but significant effect on consumers.

“Retailers are most concerned about jobs and income,” says Hoyt. “The economy is not adding jobs fast enough to lower unemployment. Wage growth remains weak, and it is not putting the cash in the pockets of consumers that retailers would like to see.”

Good News

If the economy remains troubled, corporations have managed to thrive. By piling up mountains of cash they have positioned themselves for a fresh round of capital and labor investment when the time is right. “Businesses are in excellent financial health; their costs are down and they have become highly competitive and profitable,” says Koropeckyj. “Employers have little slack in their labor forces so layoffs have declined dramatically.”

Other sectors of the economy also show improvement. “Banks have never been as well-capitalized or as liquid,” says Koropeckyj. “Households have aggressively worked down their debt burdens and are meeting their obligations more diligently.”

And how about housing, that all-important driver of economic health? While still far from robust, it’s on the mend. “Residential construction and home sales have been trending up since mid-2011,” says Koropeckyj. “Residential construction-related jobs are also slowly creeping up. The months of inventory of new homes are low, having fallen below five months, and existing-home inventories have stabilized around 6.5 months, not far from the normal rate.”

Thanks to tightening inventories, housing prices are showing signs of a rebound after a dismal few years, says Koropeckyj. “Other signs of a healthier housing market include a rapid decline in the rental vacancy rate, stabilization in homeowners’ equity, and low early-stage mortgage delinquency rates.”

Additionally, says Koropeckyj, record low mortgage interest rates and the expansion of the Home Affordable Refinance Program are boosting mortgage refinancing. “That will help to free up household cash to spend on other consumer goods as well as prevent some additional foreclosures.”

Check Casher Claims Arbitrator Went Too Far


Arbitration can cut two ways. It is clear that one of the purposes of arbitration is to make economic disputes more efficient to resolve. Although that may be true, no check casher wants to be on the losing end of a sizable arbitration award. Recently, a check casher discovered just how hard it is to overturn an arbitrator’s decision.

A building maintenance company filed a lawsuit against a New Jersey check casher in connection with its cashing of various payroll checks.

The company sought, among other things, lost profits and other damages on theories of conversion, wrongful interference with business relationships, wrongful interference with prospective economic advantage, and the like.

The company alleged that the check casher failed to comply with the New Jersey Check Cashers Regulatory Act of 1993 as well as its own internal policies and procedures, all of which contributed to the claimed harm.

The maintenance company and the check casher agreed to submit to binding arbitration, which resulted in a March 26, 2007, order dismissing the pending litigation and, ultimately, an arbitration award for the company totaling $335,346.40, including interest.

The arbitrator found that the company’s trusted operation manager over several years conducted a shadow janitorial business of his own, using the maintenance company’s employees, supplies, and equipment.

The manager also cashed payroll checks for phantom employees, for payment of fictitious overtime, and for work that was not performed.

Finds Conduct Intentional

The arbitrator determined that although the maintenance company “was negligent,” the conduct of the check casher was, unfortunately, intentional. The arbitrator found the following:
• The maintenance company did not receive any cancelled checks with its monthly statements. The statement only contained names and amounts. Accordingly, there was no way for the company owners or staff to see the documents.
• The manager created the payroll by submitting a list of names, hours, and amounts to a payroll service, which in turn computed and deducted taxes and sent net checks to the maintenance company. When checks were received from the payroll service, they were given to the manager to distribute.

No testimony was offered showing that the maintenance company compared names on checks with employee applications or conducted random audits of employees’ pay or questioned them about where they worked, how many hours they worked, or how much they received.

The operations manager had the authority to use the company’s principal signature stamp, which was used to sign checks. In certain instances, the manager physically signed the company’s name rather than using the stamp.
No employee ever complained about receiving insufficient funds in their pay.

Matter of Convenience

Some employees authorized the manager or his subordinate to endorse their payroll checks and others cashed their own checks. Employees found the practice of the operations manager’s endorsement, cashing checks, and delivering their money to them a convenient way to receive their pay.

There was some evidence that certain checks were issued that exceeded the amounts employees normally earned, that is the hours they actually worked did not justify the amount of the check.

People appeared on the payroll while the manager was employed by the maintenance company who never appeared on the payroll after he was terminated and were apparently fictitious.

The maintenance company’s vice president identified persons for whom there were no applications for employment on file or who never worked for the company and were also apparently fictitious. The vice president further identified individuals who got paid by the company when they worked at various locations while these were shadow janitorial service accounts.

Checks were identified that were deposited into the manager’s own bank account that were funds to which he was not entitled or were made out to presumed fictitious employees.

No Follow Up

The maintenance company knew that payroll checks were being cashed at the check casher because when they were cashed and bounced and the check casher contacted the company to make good for the sums paid to employees plus expenses incurred, it sent the amounts requested to the check casher.

The maintenance company never requested that the check casher send it the bounced checks. Had this been done, noted the arbitrator, the alleged forgeries could have been discovered.

In his initial decision, the arbitrator created three categories of additional potential damages resulting specifically from the improper check cashing practices. He directed that the maintenance company resubmit some specified proofs reorganized in line with these categories.

The arbitrator also stated the check casher might be entitled to a credit on its counterclaim, conditioned upon the maintenance company being unable to “prove that one or more of the 27 checks that was subject to a stop payment order fell into one of the three categories…”

After reviewing the submissions, the arbitrator ultimately granted the maintenance company $9,190.50 of additional damages in a supplemental decision.

The check casher appealed the arbitrator’s decision to the Appellate Division of the Superior Court of New Jersey.

FinCEN: Batch e-Filing of CTRs and SARs


We get a lot of requests from our customers, many of which end up in development projects and new software releases.
The most we have had in a long time relate to mandatory e-Filing of CTRs and SARs with FinCEN. When it comes to e-Filing, one request has come up way more often than others: “Batch Filing.”
By now, you are trying to adjust to FinCEN’s July 1, 2012 mandate for electronic filing of CTRs and SARs.
By now, having used e-Filing, you have discovered that just because the process incorporates “Adobe forms,” it does not mean that you can scan in a form and send it off to FinCEN — you cannot.
By now, you may have found that filling out forms one-at-a-time on-line is time-consuming and tedious, and can create errors. By now, you may want to switch to “Batch Filing.”

Discrete Filing

Back in late June (and since), many folks called our support center asking about the FinCEN registration process, followed by asking about how to use FinCEN e-Filing once they registered. Most check cashers have had only one choice (is one choice really a choice?): something called Discrete Filing.
What is Discrete Filing? It is the one-at-a-time, manual, on-line creation of a CTR or SAR filing on the FinCEN Website.
It is the process of going to the FinCEN site, logging in and selecting the Discrete Filing option. Under that option, you can choose between using the “legacy form” or the “new form.”
By the way, you can continue to use the “legacy form” until March 31, 2013, after which you will have to use the “new form” (http://goo.gl/r5FCB).
Once you log in, you fill in the form on the FinCEN site with the transaction and customer information. You can store certain recurring administrative entries for use on future forms, such as your company’s name, address, etc.
If you rarely file a CTR or SAR, Discrete Filing may be fine for you, but be very careful about making errors during the entry process, since the data has to be typed in by hand. If you file CTRs and SARs regularly, you’ll probably find yourself muttering “B-atch” fairly soon.
And don’t forget: If your state regulator requires that a copy of the form be filed with it, you still need to print out the form from your system and send it to the state.

Do You Want to Batch?

For those of you who have had enough of filling in forms one-at-a-time on-line, FinCEN has a next level of filing, called Batch Filing.
Last year, when FinCEN was seeking comments on the proposed implementation of both e-Filing and the new CTR and SAR forms, Scott K. McClain, regulatory counsel to FiSCA, provided comprehensive comments. One of the issues that he addressed was called “Technical Issues with Batch Filing Function.”
In his letter, McClain explained:
“FinCEN’s BSA E-Filing system supports discrete, computer to computer and batch filing functions. Based on our discussions with industry consultants and systems programmers, it appears that there are technical challenges in adapting existing point-of-sale systems to FinCEN’s batch filing function.
“More specifically, although FinCEN offered a recent Webinar to instruct financial institutions on the process to register for and utilize the electronic filing system, the final specifications for the batch filing function have not yet been made available to industry.
“We have been informed that FinCEN will make the new specifications available in December, 2011. Systems programmers and consultants, however, have indicated that due to the relative complexity of the programming specifications provided by FinCEN, and the fact that the final specifications have not yet been completed or made available to industry, additional time beyond the proposed June 30, 2012 date may be required to modify existing systems with respect to the batch filing function.
“Finally, in this regard, industry consultants and systems programmers have expressed concerns that it has been difficult to obtain technical information and get answers from FinCEN with respect to systems problems. In order to facilitate the industry’s transition to mandatory electronic filing, we would request that appropriately knowledgeable personnel at FinCEN be made available to provide timely technicalinformation to industry.”
While e-Filing became mandatory on July 1, 2012, submissions such as FiSCA’s resulted in the required use of the “new form” being pushed back to March 31, 2013, to allow for systems development.

Development to Reality

The development of the software behind integrated batch filing was complex and time-consuming.
The idea was to allow a user to generate CTRs and SARs in their POS system, and aggregate them in batches for automated electronic filing with FinCEN without having to enter, by hand, the information for each and every transaction and customer on the FinCEN “Discrete” e-Filing website.
We completed our development of the product, but in some ways, that was just the beginning.

What’s Involved in Going “Batch”?

After the software is installed, each MSB has to be separately approved by FinCEN for batch filing. This process involves the MSB’s registering for FinCEN’s batch filing test site, obtaining a “test” login from FinCEN, and sending sufficient successful batch test submissions for FinCEN to grant a “live” user batch login.
The good news is that by working with our customers, we figured out how to make the process relatively painless.
First, we realized how important it would be to guide each customer step-by-step through the test registration and test batch creation/submission process.
This would include both helping them to create and submit multiple test batches, and to understand the messages returned by the FinCEN system as well as the process of correcting submissions, until a “live” batch user login is granted.
Second, we created a user manual and trained our trainers on preparing and submitting “live” batches of CTRs and SARs, how to read and understand certain FinCEN communications, how to handle certain FinCEN requests for correction, how to handle corrected filings, and more.
These major steps took implementation of integrated Batch Filing from concept to reality.

I’d Choose to Batch

If you ask me, “Discrete or Batch?” my answer is clear and unequivocal: Integrated Batch Filing is a must-have. First and foremost, the time involved is substantially reduced. And since the data moves internally, there’s less chance of entry errors. You do all of your work off-line — on one or several CTRs or SARs — and add them to a CTR or SAR Batch.
When you are ready to send them in, you log on to the FinCEN Batch filing site, and send the file, then check your mailbox for confirmations of receipt and validation. Any detected errors can be corrected and the filing resubmitted.
Perhaps more important, my answer is based on customer comments.
Being in compliance is very important. Spending valuable hours typing on-line to get there is just a waste of your time. So today, if anyone asks you “Discrete or Batch?” there really is a choice.

Richard Kelsky is president of TellerMetrix, a provider of POS transaction, compliance, interface, electronic deposit and marketing software to check cashers, payday lenders and retail banks. He is also a New York and Connecticut Bar member, a Polytechnic Institute of New York University and New York Law School grad, a Certified Anti-Money Laundering Specialist and a frequent lecturer on business, legal, compliance and technology issues. He can be reached at rkelsky@tellermetrix.com.

How Safe is Your Safe (Part 4)



If an alarm goes off and nobody hears it, does it make any sound?
Once your alarm system has been activated, you need to let the world know a burglary may be in progress.
For many years, the standard method of acknowledging a breach in a security system was the audible alarm bell or siren. The loud noise was intended to alert the surrounding neighbors and any law enforcement within ear’s reach, as well as to scare away the burglar.
The trend in security systems lately has been the silent alarm where an alarm company, a monitoring facility or the police are alerted the intrusion. These alarm signals are usually transmitted in four ways: telephone lines (sometimes, dedicated), the Internet, radio waves or cellular telephones.
Many alarm systems will use telephone lines or Internet connections as their primary form of communication with the alarm provider, and may use a radio or cellular connection as a secondary contact method in case the primary method is disabled.
Today’s alarm systems are really specialized computers that monitor all functions of the alarm system and its detection methods, phone lines, Internet connection and backup transmission on a regular basis. They look for someone or something attempting to tamper with the overall system.
If the alarm system doesn’t report that everything is working properly, this may be taken to represent a breach in the system. The monitoring station may take the same actions as if an alarm was reported or the owner was contacted to make the decision about what actions to take.
Ideally, your alarm system should have Internet monitoring capabilities with cellular backup for more line security. The Internet allows the monitoring station to communicate with the alarm system on a continual basis every one to five minutes. This is better and cheaper than having a dedicated telephone line and still provides redundancy.
Modern alarm systems have changed. Everything and everyone is synched by computer. All computers are on the Web. Do you have Wi-Fi in your store? Can I, or the bad guys, get access to your computers, video surveillance system or alarm system from a notebook computer in your parking lot? How secure is your secured network?

Cut Lines and Jammers

Mobile jammers are one of the tools the bad guys may use when breaking into your business and cutting into your safe. Your telephone and Internet lines have been cut and your cellular backup can’t make the call for help because it is being jammed.

The fact that cellular telephone jammers are against the law in the United States won’t stand in the way of a criminal. They are quite common in other parts of the world, available online and will be shipped to a U.S. address in a plain brown box.

Most portable, handheld cellular telephone jammers resemble a handheld police scanner with multiple antennas. However, larger, more powerful models are available.

Interactive Audio, Video Service

If you have the latest in security hardware, you (or your alarm monitoring facility) may be able to get online on your computer or smart phone and check things out yourself. Chances are your digital video surveillance system is capable of being connected to the Internet.
If this is the case, you can monitor your store from home and see and/or listen to what may have activated your alarm system without leaving the comfort of your home. Or, for that matter, if you aren’t at home, you may do so from almost anywhere in the world. Your monitoring station may also have access to your video surveillance system and may verify if an actual alarm condition exists.
However, don’t expect to be able to recognize a professional burglar from your video surveillance system recordings (if he didn’t find and destroy it). If he’s not wearing a mask to conceal his identity, he may don a set of head-worn, high-intensity lights which will help him maneuver in the dark while also emitting enough light to make video recognition impossible.
And just to make you feel safe and secure, I have found information on the Web on ways to defeat all of the above detection methods. If I can find it, anyone can. And for those with experience in the security/alarm/electronics fields, it should be even easier.

Path Integrity Vital

Chip Shiver, president, Shiver Security Systems, a Sonitrol franchisee serving Ohio and Northern Kentucky, says the most important thing to maintain with an effective alarm system is the integrity of the communication path from the alarm panel to the central station.
Shriver, an expert in the electronic security industry, says this is key to preventing an alarm system from being defeated. Obviously, early detection video monitoring or audio monitoring is the first step of prevention.
Shiver believes if intruders are able to get to the alarm panel and cell unit thus disabling communication, the alarm panel becomes useless.
You need solid protection around the alarm panel and dual paths of transmission to the central station (IP, telephone, cellular or all three).

Alarm System Comes First

Gary Wasserman of Wexler Insurance, Coral Gables, Fla., prefers clients to have a TL-30 rated safe or better. But that is not where it all begins.
First and foremost, he says, is the need for a UL-approved burglar alarm system. The current UL burglar alarm system certificate uses a modular format in which the service that the alarm customer has is specifically described for various categories.
Such a system requires a central station from which the alarm company monitors the premises, dispatches guards and may request the police to respond. Trained operators monitor the alarm system to determine if a signal is an unauthorized entry or any other kind of breach to the system.
Each certificate will describe such things as the various systems located at the protected property, the extent of protection, all physical hardware installed, whether the safe or vault protection is complete or partial, if there is an alarm sounding device, type of remote monitoring, who should be notified in the event of an alarm, the type of signal transmission for the primary and secondary system, and issues of line security.
Alarm response time is specified with options for having runners respond, with or without keys and with or without local police accompaniment.
The biggest fault Wasserman finds is that some alarm companies are not keeping up with the times and UL requirements. Your alarm system needs to have constant contact with its monitoring station. This is done by what the industry terms a “heartbeat.”
Typically, a signal is sent every 200 seconds from the alarm system to the monitoring station. In reality, every 3 to 5 minutes is probably adequate.
But in fact, the heartbeat may be programmed anywhere from 1 minute to once every 12 days. And there are some monitoring stations that chose to reduce costs by not sending so many signals.
You need to be certain that your alarm system is sending its signal at an adequate frequency. Many store owners report that their systems aren’t sending the signal as often as the alarm company had promised.
Another problem Wasserman sees is that the monitoring station’s line security may not be set up properly. Alarm systems are primarily defeated by cut telephone lines, cut Internet lines, broken cellular antennas and finally, the destruction of alarm panels.
In one instance, he recalls, a throw-away cellular telephone was clipped into an alarm system to dial a false number.
If your telephone, Internet or cellular connection to your monitoring station is disrupted and the monitoring station doesn’t know this because line security is only checked every few hours (or days), the thieves will have plenty of time to go about their trade.
To further complicate matters, owners don’t always take alarm calls seriously. Don’t be complacent, Wasserman says. Add a digital CCTV system to monitor your business. Have cameras cover the entire property. Use technology to remove some personal threat of entering an unknown situation.

Imminent Threat

This is not an all-encompassing article on security systems and safes; it is just the tip of the iceberg. I recommend a security analysis by your security service provider every other year. New products become available on the market because of new methods of burglaries.
You might even call a competing security service provider to go over your system, telling them you are interested in adding a second system or considering changing providers and get their recommendations. Quite often, your local police department will also provide a free security analysis.
For years I have preached redundant alarm systems with at least one that includes audio detection. Then again, even the best alarms have been compromised.
Don’t ignore your first line of defense — your burglar alarm. Treat every alarm as it is were an actual attempted entry. If you don’t have confidence in your alarm system, replace it. Nonchalance to an alarm signal is one of the things thieves are looking for.
Verify all alarm calls with your monitoring station before responding. You don’t want to meet a robber when you show up or leave your business when your guard is down.
Responding to an alarm must include a check of the interior of the premises.
Don’t enter your business without the police or a guard escort.
Most serious break-ins take place over the weekend. They are well planned and you won’t notice they have occurred from casual observation. They will enter from the roof, HVAC units and ductwork, adjacent structures, floors, ceilings, crawl spaces and walls — not your front door!
The building ventilation system must be alarmed and protected with a physical barrier to prevent easy access to the interior of the building.
Your alarm control unit must be in the direct field of a motion detector.
Phone lines and broadband connections should be buried or come from a discrete location. Furthermore, your telephone and all network interface boxes should be located inside your business.
Also, consider the possibility of a home invasion scenario. Have a distress alarm code set up with your alarm provider for this type of situation.
I don’t need to tell you to have your safe combinations and alarm codes changed when an employee with access to either leaves your employment. Of course, this does no good if a current employee goes astray or shares this information.
Another consideration might be to split your inventory between multiple safes. I feel that one safe is never a good gamble, unless contents are lower value. It is much more difficult to open two safes than one.
Securely fasten the safe shelves to the interior of the safe.
TL-30 safes are obsolete and should be replaced with the minimum of a TRTL-30X6. The TL-30 rating only applies to the door of the safe. The walls of the safe will not stop an attack from common hand tools. If your safes don’t even rate TL-30, you have serious security issues!
On the face of it, it looks like the TRTL-30X6 is about twice as tough as the TL-30X6 safe. That just isn’t so. If you really haven’t tried cutting any of these materials then look up the test results of UL labs and see what they do to test the safes.
The reality is the TRTL-30X6 safe is about 8 to 12 times as tough as the TL-30X6 safes in almost all cases and many times tougher than that if you are looking at a straight TL-30 safe.
When you look at the actual work it takes to cut a significant hole into a TRTL-30X6 safe compared to cutting into a TL- 30X6 safe, you will find that 98 percent of the criminals don’t have the patience, nerve, skills and determination to open the TRTL-30X6.
With proper safe placement, redundant alarms with overlapping coverage, TRTL-60X6 safes and luck, you might survive a professional break-in. Your primary goal is to make your business the least desirable or to appear un-penetrable to the bad guys. If your place of business appears to be Fort Knox, they will look elsewhere.
Given enough time, anything is possible. All alarm systems can be defeated. The fact that all safes are rated in minutes should tell you something right there. If someone wants in bad †enough, they will get into your store. Once in, they have alarms and safes to contend with.
And finally, don’t forget to hang a horseshoe over your safe (with proper positioning — which I leave up to you) and tie a lucky rabbit’s foot to your safe door handle. Then again, the rabbit had four feet and it doesn’t appear they were any luckier for him.

Ric Blum is a vice president of Ohio Loan Co.in Dayton, Ohio. He has served as president of the Ohio Pawnbrokers Association, secretary/treasurer of the National Pawnbrokers Association and as a member of the board of directors and the board of governors of the National Pawnbrokers Association. Please feel free to e-mail your comments to RicBlum@att.net or mail them to Ric Blum, Ohio Loan Co., 3028 Salem Ave., Dayton, OH

How to Think Outside the Box


It’s a popular exhortation — “think outside the box.” But finding a solution to a problem by looking in a different direction often is easier said than done.
Perhaps that’s why those who make that leap are so admired. Take Joseph Gallieni, a French general during the First World War. In 1914, the Germans were pressing close to Paris in the First Battle of the Marne, and more French troops were badly needed at the front. Railways were clogged and other transport non-existent –- until Gallieni thought of the Paris taxis. Over a couple of days, hundreds of elegant taxis made numerous trips to the battleground, transporting some 4,000 soldiers. Paris was saved.
Thinking outside the box won’t always involve something so dramatic or historic. But it can make your operation more responsive and more successful. And it can help you find ways to stop concentrating on why something can’t be done and instead figure out how it can be accomplished.
In today’s complicated world, the best way to do this often is in a group; there’s a reason that “two heads are better than one” became a popular adage. In the business world, that group usually is the board of directors. Privately held company without a board? Consider setting up an advisory board of either outside specialists or staff members.
Whether the group comprises directors or advisors, experts advise that they spend 50 percent to 75 percent of each meeting on strategy and trends. That allows board members to change how they think and makes it more likely they’ll see innovative ways to address trends.
You might also hold an annual retreat with outside speakers, or do so two to three times a year. Unlike staff members, outsiders have permission to challenge you and your advisors without offending them.
Speakers from within the industry can talk about what one expert calls “scary things that innovators are doing.” But you should also look outside the industry, at what companies from big international banks to technology giants such as Google are doing. That can generate paradigm-shifting thoughts.
Secondarily, you need to address your tactics. Here, questions can facilitate thinking outside the box. Some you might pose include:
“If money were no object, what would you do to serve customers?”
“If younger customers members could redesign your operation, what would they do?”
Answering these what-ifs give you and your advisors permission to think outside the box, because you’re not actually making decisions.
Another approach would be for all members of your advisory board to read a book and discuss it. “What Would Google Do?” by Jeff Jarvis presents modern-day rules to manage and live by.
“A Whack on the Side of the Head” by Roger van Oech is another possibility. The author has turned it into a deck of cards, he adds, that ask such questions as, “How would a child solve this problem?” or issue orders such as “Slay this sacred cow.” These are ways to change your mid-set.
Questions generally work well to help you open up to new ways of thinking. A good one is what you would do differently if you were able to start your business all over again.
Would you have it focus more on technology? On customer loyalty? Or hire A-players only, even if that slowed staff growth?
Then ask what you have learned that is useful for the future. Take a good look at your mission statement, and try to tease out three, four or five driving elements, and ask further questions about each one.
This analysis is needed because there is no one-size-fits-all approach for the industry as a whole; each operation is unique.
It all leads to the critical question: What do you want your company to be? What matters most?
That answer must be scutinized, too. For example, if you want your company to be high in public perception, what does that mean to you?
Avoid questions that focus on strengths, weaknesses, opportunities and threats. You may address those issues at another time, but don’t force yourself into the traditional four quadrants.
The series of questions and answers helps you and your advisors identify what you want accomplished in big-picture results. That could be to go deeper into areas where you excel to garner more profits, for example. Once that’s determined, it’s time to ask, “How?”
When a plan is formulated, the board of advisors should ask a final question: “Does this plan moving forward seem reasonable and sound?”
No plan will mature instantly. It takes about three years to move a company to a new track, and an operating plan is needed for each of those years.
Most important: while a board of directors or advisors may determine the why or what, management is responsible for the how.

‘Creativity of Thought’

Today, with changes in the financial environment coming fast and furious, only the fittest in the industry will survive, and it will help to view things differently. Too many executives still keep clinging to “We’ve always done it this way.”
To survive, you must be market-driven. And that can’t be done in a few hours or days. There’s no magic bullet.
Start with a rigorous market analysis. It doesn’t matter what other lenders or check cashers do. What matters is the experience customers have become used to from all types of merchants and service providers.
To produce that kind of experience, you need to establish a marketplace of ideas and opinions, engaging staff members down to the lowest level. A particularly effective way to do that is with a research team put together from within your company.
The team must include people from all levels in the company, not just those with titles. What’s most important is that there are no shrinking violets –- all staffers must be willing and able to speak up, even if someone above them says their idea won’t work.
The team’s job is to formulate strategy to answer the big question: How do we stay relevant?
At the end, the research team culls down to the most important ideas that could drive the company into the future, then develops a whole business plan based on critical success factors, risks and potential threats. They identify four or five key strategic ideas.
At a retreat, those four or five ideas are put to teams, Oliver says. Each team debates the ideas; other groups try to shout them down.
Everyone is forced to get very involved. The goal is customer experience management.
It’s a tough process. Everyone would love for there to be an easy answer, but there isn’t. It’s a lot of hard work, facing the good, the bad and the ugly about your company.
But doing it means survival and growth in an equally tough environment.