Silicon Valley Bank & Vendor Banking in the Vendor Master File

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According to this press release, On Friday, May 10, 2023, the California Department of Financial Protection and Innovation closed Silicon Valley Bank, Santa Clara, California.?They appointed Federal Deposit Insurance Corporation (FCIC) as Receiver. Silicon Valley Bank had 17 branches in California and Massachusetts.

What This Means for Your Vendors' Banking with Silicon Valley Bank

The electronic payments you make are direct deposits to your vendors.?According to the FDIC’s web page “When a Bank Fails – Facts for Depositors, Creditor, and Borrowers”, when a bank fails and they step in, direct deposits are automatically re-directed to the deposit accounts of the acquiring bank. ?In this case, the FDIC created the Deposit Insurance National Bank of Santa Clara (DINB) and immediately transferred to the DINB all insured deposits of Silicon Valley Bank.?Depositors will have access to their funds on the morning of Monday, March 13, 2023.??It appears that based on the FDIC’s explanation, any electronic deposits sent to the prior vendors' banking information will be forwarded to the new bank.?

FDIC Update from 3/13/23: The FDIC created Silicon Valley Bridge Bank, N.A., where all direct deposits will continue as usual with the routing number and bank account number remaining the same until depositors are notified in writing. Check out the FAQ just for Silicon Valley Bank from FDIC.

What This Means for the Vendor Team

At some point, your vendors’ banking information will change. Until the vendor banking information is updated, your vendor team will experience an increase in activity:

• Failed Electronic Payments – Reach out to the vendor with the required information to update their banking. ?Place the vendor on payment hold or change their payment method to check (verify the remittance address is valid).
• Notice of Change (NOC) - These are notices from your bank that the routing number and/or bank account number were changed in order for the payment to be successful. Banks will not continue to make this change, so when these NOCs are received, reach out to the vendor to update their banking. Place the vendor on payment hold or change their payment method to check (verify the remittance address is valid).
• You Contact the Vendor (or the Vendor Contacts You) to Update their Banking – Send them the required instructions and documents to update vendor banking. ?Place the vendor on payment hold or change to check payment method (verify the remittance address is valid).?

You may decide to change the payment for all affected vendors to check the payment method. If you do, verify that the address is valid and mailable, so you don't have to deal with returned or lost checks. Many vendors with an electronic payment method don't always submit an address update when they move. Get a free Vendor Validation Reference List with Resource Links that include a resource for bulk uploads of addresses and more including resources to validate vendor bank branch details and bank account ownership.

Have a Fraud Prevention Process in Place

Fraudsters listen to the news and are quick to respond to events that are susceptible to fraud.?They know about this event, and that it will result in an increase in requests to change vendor banking – a perfect time to submit fraudulent requests.

To combat business email compromise (BEC, where fraudsters will pretend to the vendor or an internal team member to get the vendor team to update banking details, you need to put into place immediately:

• Add Authentication Techniques - To confirm you are dealing with your vendor, internal employee, and not a fraudster. Vendor Process Training Center Training Session:?Build An Authentication Matrix So Your Vendor Team And Help Desk Do Not Communicate With A Fraudster. Watch On-Demand. Free. Includes Authentication Reference Template.
• Add Internal Controls – To surround that confirmation phone call when a vendor changes their banking, with additional internal controls to ensure that fraudulent banking details are not entered into the vendor master file - including requiring the existing banking on file. Vendor Process Training Center Training Session:?The BANK Of AP: An Internal Control System To Combat Business Email Compromise. Watch On-Demand and/or attend live on April 5, 2023. Paid. Includes Templates to Implement including Vendor Banking Form. Sign-up for a free account to get 25% off in the welcome email.

This process will work whether you initiate the bank change with the vendor or whether the vendor initiates the bank change with the Vendor Team.

Keep Your Vendors' Banking Updated For Mergers and Acquisitions Too

Banks have frequent merger and acquisition activity - that does not result in the coverage experienced by the closing of Silicon Valley Bank. Most only result in a change of a routing number.

A best practice is to be proactive and check your vendors' bank branch information on a regular basis, as part of the clean-up of the vendor master file. Validate that the routing numbers and bank addresses (if on file) are still valid. This activity should not require your vendor banking update process, however, you can send a notification to the vendor to let them know you updated the branch details of their bank.

More Vendor Setup & Maintenance Resources

Want more tools and resources on the vendor setup and maintenance process?

1. Check out https://debrarrichardson.com or https://training.debrarrichardson.com for 107 training sessions and 149 hours of annual vendor process training.

• Need Vendor Validations? Check out this free 30 Min Webinar: 20 Tips in 20 Minutes:?Vendor Validations & Sanctions Lists When Onboarding US Vendors