# O

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| ## Comptroller of the Currency                                        |
|                                                                       |
| > Administrator of National Banks                                     |
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Washington, DC 20219

###### Interpretive Letter #1023

February 24, 2005 **March 2005**

**12 USC 24(7)**

Subject: Messenger Service

Dear **\[ \]**:

This is in response to your letter of November 15, 2004. You requested a
legal opinion confirming that it would be permissible for **\[ \]**
("Bank") to engage in certain activities in connection with independent
messenger or courier services. As discussed below, I agree that the
proposed activities are legally permissible.

#### Proposal

According to your letter,[^1] certain of the Bank's customers desire to
send their items for deposit to the Bank via third-party couriers that
would be hired by the customer pursuant to a written agreement between
the customer and the courier. You represent that these couriers would be
bona fide independent contractors who would provide similar services to
other customers. In providing these services, the courier would be the
agent of the customer not the Bank, and the customer would have the
ultimate decision-making authority with regard to the relationship.

The Bank proposes to offer the following services in connection with
such couriers:

1.  Manage the request for proposal ("RFP") process when customers need
    to hire a courier, which would help customers obtain needed services
    at competitive prices. The Bank would subsequently issue a report
    that reviews and ranks the RFP responses and provides
    recommendations regarding which courier or couriers might best meet
    the customer's needs.

2.  Assist the customer in setting up the services of both newly hired
    and existing couriers to coordinate the delivery of deposit-related
    materials to the Bank from the customer's location. The Bank will
    assist the customer in best meeting deposit delivery needs by
    recommending service modifications as the customer's circumstances
    change.

3.  Assist the customer in monitoring the continuing performance of the
    third party couriers by ranking performance according to specific
    criteria such as timeliness of pick up and delivery. The Bank will
    issue periodic reports on this to the customer.

4.  Assist the customer in tracking service-related problems and
    establish ongoing communication with the customer and the courier to
    help resolve any service-related issues. The customer will have the
    final decision-making authority on how to resolve any matter.

In short, the Bank would perform administrative services to manage the
relationship with independent couriers on behalf of customers. These
activities will be referred to as the "Proposed Services." The Proposed
Services initially would be offered only in one geographic area but, if
successful, would be expanded to other areas later. The Bank will offer
these services directly rather than through an operating subsidiary, and
will charge a fee for these services.

#### Legal Analysis

The OCC has not previously had occasion to consider the activities that
you propose. However, we find that they are both part of the business of
banking and incidental to banking under 12 U.S.C. § 24(Seventh).

##### 1. Business of Banking Analysis

Under 12 U.S.C. § 24(Seventh), national banks have the power to engage
in certain enumerated powers as well as the general "business of
banking."[^2] Based on the case law, the OCC uses three general tests to
determine whether an activity is within the scope of the business of
banking. They are: 1) whether the activity is functionally equivalent to
or a logical outgrowth of a recognized banking activity; 2) whether the
activity responds to customer needs or otherwise benefits the bank or
its customers; or 3) whether the activity involves risks similar in
nature to those already assumed by banks.[^3] It is not necessary for
all of the tests be satisfied to find that an activity is part of the
business of banking.[^4]

Here, the Proposed Services will be functionally equivalent to or a
logical outgrowth of existing banking activities. National banks are
authorized to operate their own courier or messenger services and may
also contract with independent courier services to transport
banking-related items for customers.[^5] The Bank does both of these
things at various places in which it operates. As a result, it has
acquired a core competency in messenger or courier service operation and
in managing relationships with third party messenger services. It would
be a natural outgrowth of the Bank's own courier service activities to
make this expertise available to customers who contract with courier
services.

The OCC has recognized that advisory and consulting services are an
appropriate way for banks to exercise their core competencies:

> \[W\]e find that where a bank would be permitted as part of the
> business of banking to provide a service and related expertise to an
> entity, the bank should also be permitted, as part of the business of
> banking, to employ that expertise to provide advice to that entity as
> to how the entity can perform the service for itself.[^6]
>
> Thus, national banks are authorized to provide a wide range of
> advisory and consulting services to their customers to take advantage
> of competencies that they have developed for their own use.[^7] The
> Proposed Services are similar to such previously authorized
> activities.
>
> In addition, you represent that various customers have requested the
> Bank to provide the Proposed Services, so this proposal would respond
> to customer needs. It would also benefit customers. Since the Bank
> undoubtedly has greater expertise in courier services than most
> depositors, these customers would benefit from having a knowledgeable
> party provide advice and administrative services on these matters.
>
> As for the third test, the risk exposures of providing advice on an
> activity are somewhat different from providing the actual service but
> would certainly be no greater and can be properly limited and
> controlled.

##### 2. Incidental to Banking Analysis

National banks have the power under 12 U.S.C. § 24(Seventh) to engage
not only in the business of banking, but in activities that are
incidental to banking. While we conclude that the Proposed Services are
permissible because they are part of the business of banking, if not
justified on that basis, they would also be permissible as incidental to
banking.

Incidental powers are those that are "convenient" or "useful" to either
the enumerated powers under 12 U.S.C. § 24(Seventh) or the broader
business of banking.[^8] Similar to the business of banking analysis,
the OCC examines three factors derived from case law when evaluating
whether an activity may be considered incidental to banking. Activities
are incidental to banking if they: 1) facilitate the operations of the
bank as a business enterprise; 2) enhance the efficiency and quality of
the content or delivery of banking services or products; or 3) optimize
the use and value of a bank's facilities and competencies, or enable the
bank to avoid economic waste.[^9] It is not necessary for all tests to
be met in order to find an activity to be incidental to banking.

Here, at least two of the tests are satisfied. The Proposed Services
clearly will enhance the efficiency and quality of the delivery of the
Bank's deposit services. Receiving deposits is one of the express powers
enumerated in section 24(7). The Proposed Services will make it easier
and more convenient for customers to use these services.

In addition, they will optimize the use and value of the Bank's
facilities and competencies. As discussed earlier, the Bank has staff
devoted to managing the Bank's own courier services as well as its
relationships with third party providers of such services. Making the
Proposed Services available to customers will optimize the use of this
staff and enable the Bank to make greater use of the competencies that
it has developed in this area. Therefore, the Proposed Services are
incidental to banking within the meaning of 12 U.S.C. § 24(Seventh).

##### 3. Branching

Although the messenger services would perform core banking functions
(*e.g.,* transporting deposits and withdrawals), the Bank would not be
engaged in branching activities. OCC regulations provide that a
messenger service that picks up and delivers to national banks and their
customers items that relate to branching functions will not be
considered a branch under 12 U.S.C. § 36 provided that the messenger
service is established and operated by a third party. A

messenger service is clearly established by a third party if several
listed factors are satisfied.[^10] These factors are:

> \(i\) A party other than the national bank owns or rents the messenger
> service and its facilities and employs the persons who provide the
> service;

(ii) The messenger service retains the discretion to determine in its
     own business judgment which customers and geographic areas it will
     serve;

(iii) The messenger service maintains ultimate responsibility for
      scheduling, movement, and routing;

(iv) The messenger service does not operate under the name of the bank,
     and the bank and the messenger service do not advertise, or
     otherwise represent, that the bank itself is providing the service
     . . . ;

(v) The messenger service assumes responsibility for the items during
    transit and for maintaining adequate insurance covering thefts,
    employee fidelity, and other in-transit losses; and

(vi) The messenger service acts as the agent for the customer when the
     items are in transit. The bank deems items intended for deposit to
     be deposited when credited to the customer's account at the bank's
     main office, one of its branches, or another permissible facility,
     such as a back office facility that is not a branch. The bank deems
     items representing withdrawals to be paid when the items are given
     to the messenger service.

You represent that all of these factors will be satisfied. You also
represent that the messenger services will be hired by customers, not
the Bank, and that customers will have all decision-making authority
concerning their relationships with the messenger services. Accordingly,
it is clear that the messenger services will be operated by independent
third parties and will not be branches of the Bank. It is also clear
that the Proposed Services, themselves, are not branching
activities.[^11] Accordingly, based upon your representations, your
proposal does not raise any branching issues.

#### Conclusion

For the reasons discussed above, we find that the Proposed Services are
permissible. Therefore, the Bank may provide these services.

As we stated in footnote 17 of Interpretive Letter No. 928, *supra* note
6, an advising bank would potentially be liable if it failed to render
competent advice. Accordingly, we would expect such banks to take
suitable steps to control that risk, such as keeping adequate records of
the advice rendered, obtaining appropriate insurance coverage, and
employing a competent staff. Banks providing advisory services should be
careful to define clearly in their engagement letters or agreements the
scope of advice to be rendered and the bank's liability for that advice.
Finally, when acting in an advisory or consulting capacity, a bank
should not actually engage in a management role or exercise any form of
operating control over the advisee. You have already represented that
the Bank will act in a purely advisory role and that all decisions
regarding courier services will be made by the customers.

Our conclusion is based upon the representations made in your letter and
in telephone conversations with you. A material change in the facts
might require a different conclusion.

I trust that this has been responsive to your inquiry. If you have any
questions, please contact me at (202) 874-5300.

Sincerely,

/s/ Christopher C. Manthey

Christopher C. Manthey

Special Counsel

Bank Activities & Structure Division

[^1]: This opinion also reflects supplemental information that was
    obtained in telephone conversations with you on January 14, 2005,
    and February 1, 2005.

[^2]: *NationsBank of North Carolina, N.A. v. Variable Annuity Life Ins.
    Co.*, 513 U.S. 251 (1995) (*"VALIC"*).

[^3]: *See, e.g., Merchants' Bank v. State Bank*, 77 U.S. 604 (1871);
    *American Insurance Assn. v. Clarke*, 865 F.2d 278 (2d Cir. 1988);
    *M & M Leasing Corp. v. Seattle First National Bank*, 563 F.2d 1377
    (9th Cir. 1977), *cert. denied,* 436 U.S. 956 (1978); Interpretive
    Letter No. 880, Dec. 16, 1999; Corporate Decision No. 99-02, Dec.
    11, 1998; Interpretive Letter No. 845, Oct. 20, 1998.

[^4]: Interpretive Letter No. 953, Dec. 4, 2002.

[^5]: 12 C.F.R. § 7.1012; *cf. National Courier Ass'n v. Board of
    Governors of Federal Reserve System*, 516 F.2d 1229 (D.C. Cir. 1975)
    (finding that operating a courier service for the transportation of
    banking-related items is "closely related to banking" for purposes
    of the Bank Holding Company Act).

[^6]: Interpretive Letter No. 928, Dec. 24, 2001.

[^7]: *See, e.g.,* 12 C.F.R. § 5.34(e)(2)(ii)(I) (serving as investment
    advisor for individuals, businesses, and governmental entities); 12
    C.F.R. § 5.34(e)(2)(ii)(J) (tax planning and preparation services);
    Corporate Decision No. 2002-2, Jan. 9, 2002 (employee compensation,
    benefit, and general human resources advisory and administrative
    services); Interpretive Letter No. 238, Feb. 9, 1982 (financial
    consulting and advisory services, including performing research for
    prospective transactions).

[^8]: *VALIC, supra* note 2; *see Arnold Tours, Inc. v. Camp*, 472 F.2d
    427 (1st Cir. 1972).

[^9]: *See, e.g.,* OCC precedents cited in note 3, *supra*.

[^10]: 12 C.F.R. § 7.1012(c).

[^11]: *See* 12 U.S.C. § 36(j).