Thread by @patio11

In this thread you have a crypto firm doing a soft freeze of a crypto VC’s account, an executive escalation, CEO involvement, and a swift rescinding of the freeze.

Pointing to it because a) all of this happens in the non-crypto side of finance b) unusually publicly documented.

https://twitter.com/mdudas/status/1877435508457906225

And now for some commentary, which I will make broader than this particular firm/incident:

“Why don’t financial institutions flag certain accounts as belonging to responsible adults?”

In fact, they frequently do so, either implicitly or explicitly.

For Seeing like a Bank reasons, this flagging is not available to all processes of the institution 100% of the time.

A thing firms generally *do not* do is allow users to simply opt into “high risk” mode. Many people profess to want this.

The second order effect of making “high risk” mode available through clicking a few buttons in the app is scammers will adjust their scripts to have marks opt into high risk mode.

I apologize for making that fairly obvious point explicitly, because some people need to read it.

A somewhat counterintuitive thing about finance: many people believe that financial institutions Don’t Care About The Little People (TM) and therefore rich and sophisticated users get systematically better service. However, those users will frequently see more friction like this.

Why is that? Because the institution’s norms and ML models are heavily weighted to the majority of their user base by count. Things those users don’t really do register as “weird”, and rich and sophisticated users will have lots of “weirdness” going on pretty constantly.

(People ask me why I have so many Japanese regional bank wire transfer compliance influencer stories to tell, occasionally accusing me of making them up, and being “weird” is a good way to get more relatable AML/KYC/etc content.)

Financial institutions are not unaware that sophisticated users have diverse needs which are not common among their retail user bases. This is one reason those institutions have specialized groups who attempt to service those users. (And they charge for this, explicitly or not.)

As I’ve previously remarked, there are a few buttons under the desk of a bank teller to push in case of emergency. One summons the police in the event you realize you are talking to a bank robber. Another you push if you’re talking to Serious Money.

That is a joke, but built-out processes to bucket customers during account opening are absolutely not a joke. Those are not solely for compliance reasons. Sometimes they want to detect someone inadvertently being in inappropriate products/etc to head off future unpleasantness.

Some users of the financial system consider it annoying or improbable that there *could be* inappropriate products for them. After all, the product is available to substantially everyone, and they are rich and sophisticated, and they want it.

And here financial institutions and their sales and servicing professionals learn to delicately explain how the world works to rich and sophisticated people who may not have worked in a financial institution before and/or not have encountered this specifically in their career.

One way that dance occasionally goes is you give the customer something which might physically look like or feel like the broadly available service, where under the hood, it is actually not the same technical artifact.

For example, if one hypothetically banks with some of the largest financial institutions in the world, one might choose to have a credit card or one might choose to work with their private wealth management division.

There might, or might not, be a physically distinguishable credit card issued to customers of that division. The credit card might feel extremely similar, in most respects, to the credit card that is broadly available to the bank’s customer base, subject to credit approval.

But, if one were to call the number on the back of the card and attempt to do routine credit card things, the call center employee might say (perhaps confusedly) “My computer says that I cannot do that and that you need to talk to your banker.”

Some well-off and busy people, having heard a call center employee tell them this, will be furious. Their banker will talk them down. Part of the job.

Not part of the job: explaining why the bank doesn’t trust call center employees to do that thing for them.

The skill and sophistication of *financial institutions* with regards to bucketing and servicing customers appropriately varies wildly between institutions, and is one axis of competition between them, including for rich and sophisticated users.

Some institutions are aware of their own limitations here, and will attempt to exit the relationship of a customer if their needs change as a result of e.g. the IPO happening.

Crypto VCs sometimes call that “debanking.”

It is, of course, frequently not directly incentive compatible for institutions to lose the custom of rich and sophisticated people, and so some institutions will continue offering services to people that they will then underserve due to lacking institutional competence.

This is one reason why so many weirdos end up with the same small set of institutions banking them.

I’ve previously written, including in Seeing like a Bank, about so-called escalation processes, which sometimes include executive escalation teams.

The linked thread includes a classic executive escalation.

Briefly, in parallel with the designed pathway of Tier 1 to Tier 2 to product specialist to … hierarchy of customer servicing and/or operations staff within a company, there is a designed emergency ripcord. Contact info is widely internally available.

If you are, for example, in the PR department of a bank, and a local newspaper calls and asks why you are foreclosing on Ms. Mildred, you do not call Tier 1 CS and ask them to teach you about mortgages, a subject you understand poorly because you work in PR.

No, you call the internal extension for escalations. A very expensive institutionally trusted polymath (one urgently hopes) then swings into action, on behalf of Ms. Mildred, the PR department, and the broader institution.

Some people wonder why financial institutions don’t just Get Good.

One of the ways they Got Good was by hiring someone to staff the executive escalations extension.

This is (very much!) news you can use, as a consumer of financial services.

The degree to which executives are involved in executive escalations varies. Most financial institutions would prefer if the CEO spends relatively little time dealing with routine customer service inquiries.

However, many CEOs will actually spend fairly substantial amounts of time dealing with routine customer service inquiries, in part because that helps remind Ops that the CEO does understand they exist, appreciates their efforts, and wants them to succeed when customers call in.

One could imagine financial institutions which have spreadsheets of all escalations to the executive escalations team, where those spreadsheets are recapped in a monthly or quarterly presentation to executives, to make them feel confident that the process is working as designed.

(I think many people who have never answered telephones for a living underestimate how many times today someone will call a bank and say “I apparently have a mortgage with you?! What is a mortgage. Is it a loan? Do I have to pay it back?”)

(I think many people who have never operated call centers of a living underestimate how many call center employees would say “No, you don’t have to pay a mortgage back.” on a recorded phone line. This fact informs why you probably won’t let Tier 1 answer that question.)