How ZOMBIE CEOs enabled a CFPB takedown of Early Warning Services, LLC, JPMorgan Chase, Bank of America, and Wells Fargo
William M. Le Roy, J.D., LL.M.
Founder & Principal at PHOENIX Consulting, LLC.
A ZOMBIE Leader?
A ZOMBIE is a dead body reanimated through various methods. Zombie Executives operate as living metaphors, distant, insulated by mid-level managers, and exhibiting continuously reanimated exteriors, yet all the while, an apathetic body remains hidden inside.
In order to become a truly successful C-Suite leader in today's ever changing industry environment, you must be willing to learn, understand, and then embrace your organization as a living whole. A living whole that can never operate effectively within an arm's length, siloed company structure.
Background
On December 20th, the Consumer Financial Protection Bureau (CFPB) sued the operator of Zelle and three of the nation’s largest banks for failing to protect consumers from widespread fraud on America’s most widely available peer-to-peer payment network. Early Warning Services, which operates Zelle, along with three of its owner banks—Bank of America, JPMorgan Chase, and Wells Fargo—rushed the network to market to compete against growing payment apps such as Venmo and CashApp, without implementing effective consumer safeguards. Customers of the three banks named in today’s lawsuit have lost more than $870 million over the network’s seven-year existence due to these failures. The CFPB’s lawsuit describes how hundreds of thousands of consumers filed fraud complaints and were largely denied assistance, with some being told to contact the fraudsters directly to recover their money. Bank of America, JPMorgan Chase, and Wells Fargo also allegedly failed to properly investigate complaints or provide consumers with legally required reimbursement for fraud and errors. The CFPB is seeking to stop the alleged unlawful practices, secure redress and penalties, and obtain other relief.
In order to get a glimpse of how serious this action is, please take a moment to read CFPB Director Rohit Chopra's remarks, and in particular, the italicized sections:
“The nation’s largest banks felt threatened by competing payment apps, so they rushed to put out Zelle,” said CFPB Director Rohit Chopra. “By their failing to put in place proper safeguards, Zelle became a gold mine for fraudsters, while often leaving victims to fend for themselves.”
Over the past seven years, countless American families have fallen victim to fraud on Zelle, the payment network owned and operated by the nation's largest banks. At just three banks, Americans have lost over $800 million. Behind that number are real people who trusted their banks to protect their money and instead were left fending for themselves when criminals struck.
Today, the Consumer Financial Protection Bureau is suing Bank of America, JPMorgan Chase, and Wells Fargo for their role in enabling systemic fraud and then playing dumb when consumers were exploited. We’re also suing a company called Early Warning Services, which operates Zelle, and is controlled by the nation’s largest banks.
After a lengthy investigation launched in 2021, the CFPB’s lawsuit details how these institutions rushed to launch a payment system without implementing basic protections for their customers.
Nearly a decade ago, banks realized that their lack of investment in customer service and consumer-friendly technologies was coming back to bite them. New digital payment apps like Venmo, CashApp and PayPal, offered something new: free, instant transfers between users, with interfaces that appealed especially to younger consumers. These apps were also harvesting valuable data about consumers’ spending patterns and social connections. By 2015, Venmo alone was processing over $7 billion in annual payments.
This competitive threat triggered fear in the boardrooms of big banks. In response, they created Zelle, a digital payment service embedded directly in banking apps and websites. Because big banks dominate consumer deposit accounts, they knew smaller banks and credit unions would feel they had no choice but to sign up to join the platform. Zelle was marketed as “safe” and “secure” to customers who naturally trusted their banks, but the banks failed to fix glaring flaws in their systems even as hundreds of thousands of customers filed complaints about fraud. The banks knew their customers were having their money stolen, but since they weren’t bearing the cost of these losses themselves, they dragged their feet on fixing the problems.
Our investigation revealed that the banks’ chaotic rush to market led to serious failures in fraud prevention and customer protection. What they built became a goldmine for criminals: a system that made it easy for fraudsters to move money quickly, while making it nearly impossible for victims to get their money back. They didn't track or stop suspicious activity across banks, so when one bank detected fraud and closed an account, nothing stopped the criminal from hopping to another bank and starting fresh.
When fraud occurred – and it did, on a massive scale – the banks systematically failed their customers. For example, our investigation uncovered two major patterns of account takeover fraud that banks failed to address. Some criminals would obtain one-time passcodes, then use these to take over accounts and drain funds. Others would physically steal phones or devices with banking apps installed, then immediately make unauthorized transfers.
This is not just about convenience or technological innovation. This is about financial institutions fulfilling their basic obligations to protect customers’ money and help fraud victims recover their losses. These banks broke the law by running a payment system that made fraud easy and then refusing to help the victims. Consumers couldn't protect themselves - they couldn't control how the banks ran Zelle, couldn't reverse unauthorized transfers once they were sent, and had nowhere to turn when the banks denied their fraud claims.
Since 2021, the CFPB has been carefully assessing consumer payment networks. As more money is moved through different payment rails, banks have urged the CFPB to ensure that large technology companies offering payment services are living up to their obligations. We’ve put into place new rules to enhance oversight of these nonbank companies, and we’ve issued nationwide consumer advisories about how funds stored in certain apps may not be covered by deposit insurance. We’ve highlighted how Apple’s regulations have blocked banks from offering tap-to-pay functionalities. But we haven’t been giving banks a free pass.
Americans deserve payment systems that are fast and secure. Some of America’s largest banks promised Zelle would be both, but it wasn’t. The CFPB’s lawsuit seeks to hold these banks accountable and ensure that American families can trust their money is protected when they send payments.
Before we go on, let's stop and examine this assertion: "The banks knew their customers were having their money stolen, but since they weren’t bearing the cost of these losses themselves, they dragged their feet on fixing the problems."
This claim forces each one of us to consider the enduring ramifications attached to the old saying, "The Buck Stops Here."
So where should the Buck Stop? No matter where within these company frameworks the errors occurred, at the end of the day, technical planning was haphazard, and the monetary, IT and human resources were either not allocated, or misused and wasted due to inept middle management, and absent CEO oversight.
The "Buck" stops with the CEO.
One might think that the three CEOs with these yearly salaries: JP Morgan - $36 million per year, Bank of America - $29 million, per year, Wells Fargo $24.5 million, per year, could have figured out how to fix these concerns?
So, while we cannot fix the mega institutional CEO mindsets or their myopic, zombie leadership world views, we can still have a discussion about the constructs that breed the failures detailed within the CFBP's investigation and subsequent Complaint.
Siloed vs. Learning Organization Company Constructs
For the purposes of this discussion, we will limit ourselves to contrasting the differences between two very different structural and operational management constructs. The first being the Siloed Company construct, and the second being a Learning Organization approach.
The following in its entirety is taken from an article penned by Hannah Taylor in the September edition of Forecast: See: Working in Silos Negatively Impacts Projects: Here’s How to Break Them Down by Forecast
It’s no secret that collaboration and clear communication are key to great teamwork. Yet many businesses are made up of teams and individuals struggling to work together and communicate effectively. If this sounds like your business, your teams may be feeling the impact of silo mentality.
What is Silo Mentality?
What Silos in the Workplace Look Like
Are There Any Positives to Silo Mentality?
How to Break Down Silos
How Collaborative Working Will Benefit Your Project
How Forecast Supports Collaboration
What is Silo Mentality?
Silo mentality is when teams working within the same business withhold information from others, which amounts to information hoarding. This can impact workflows throughout the business, stop projects in their tracks and cause issues with consistency between the work produced by different teams.
So, why does this happen? There are a few reasons. Firstly, personal feelings can get in the way of efficient working. Pride and ego can lead to individuals withholding information from others, as can anxiety around important information falling into the wrong hands.
Another common reason for information not being shared properly is poor organization. Without the right systems in place to support information sharing, documents can get lost in desktop folders, email threads, or hard copies may even gather dust in long-forgotten filing cabinets.
Silo mentality can also impact ways of working. If teams do not frequently meet to discuss their plans and current workloads, two teams may end up doubling up on a project, wasting time and resource, or one department may move forward with a project that negatively affects the work of another.
What Silos in the Workplace Look Like
Imagine you work for a computer manufacturer. You are part of the team responsible for the company’s marketing, which can cover everything from press releases to printing brochures. Much of your work depends on other teams sharing information with you, such as up-to-date product pricing, dates for product launches, project timelines, and other assets. When your colleagues fail to keep you in the loop or are cagey with information, your work comes to a standstill. That means no new marketing collateral, no new leads, and no new clients for the business.
Are There Any Positives to Silo Mentality?
The short story is that while silos are impossible to eradicate completely, there are more benefits to breaking them down than encouraging employees to continue to work in a way that doesn’t foster collaboration. Some may argue that withholding information ensures security or helps protect delicate organizational power balances; however, this is short-sighted.
Siloed working places constraints on the business at every turn. Complacency is normalized, meaning the business will never improve. It prevents informed decision-making, blocks certain teams from functioning effectively, and ultimately breaks down the efficiency of the entire supply chain, from market research to sales. When teams don’t collaborate, everyone suffers, including the end consumer.
How to Break Down Silos
Now that we’re clear on why silo mentality is bad let’s talk about how to remedy it. By making the below improvements within an organization, data-driven decisions are championed, company goals become more attainable, collaboration is the norm, and the business presents as a united front.
Set Shared Goals
A common reason teams retreat into silos is because they want to protect their department and its members. While that is noble, it leaves other teams out in the cold and can end up negatively impacting the bottom line.
When businesses set top-level goals that trickle down to the department and the individual level, teams are provided with shared objectives, or OKRs. This encourages unity and collaborative working, removing the idea that teams only need to focus on their success. Instead, all employees are encouraged to work towards the company's success as a united force.
To make sure this sticks, top-level management needs to repeat these shared goals regularly and ensure that all teams are aware of them. When team-level goals are set, these should feed into the top-level goals and be reviewed holistically with the objectives set by other teams. This ensures that each team’s goals are complementary, not incompatible.
Always Champion ‘Boundaryless’ Collaboration
Breaking down silos at work requires company culture to change. This is a challenging task that begins with consistency. Collaboration should be encouraged whenever possible, ensuring that teams communicate and work together to achieve their goals.
This can be as simple as setting up weekly get-togethers to discuss what each team is working on or monthly town hall meetings. Once everyone has more visibility on what other areas of the business are doing, collaboration at a project level can be introduced. Every project can benefit from outside input; representatives from each department can act as a liaison between teams or can support in an advisory capacity. This encourages employees to get involved in projects throughout the organization, not just those managed within their team.
Use Collaborative Tools That Make Working Towards a Shared Goal Easy
One issue that can lead to silo mentality is individuals struggling to adapt to changes introduced by modern working environments. Previously, it was much easier to work in silos because today's technology didn’t exist.
The wide range of tools and technologies available to businesses today makes collaboration easier than ever before. That removes many excuses for siloed working, including lack of access to information or an inability to share information.
For example, many companies use CRM software to track sales. These systems can also be used to provide oversight of the company's progress toward its goals. Giving everyone access to this information helps develop transparency between teams and encourages understanding each other's work. It can also help individuals spot opportunities to help colleagues in other teams.
Other tools such as messaging software like Slack or Microsoft Teams and cloud-based storage platforms such as OneDrive or SharePoint allow teams to share files and information in seconds. If the company's best practice is to upload all documents to a central database, employees can search these databases to find what they need rather than waiting for files or data to be shared directly.
Even when certain documents cannot be shared so widely due to security reasons, employees can control who has access to confidential documents while making it easy to share information.
Encourage Team Building Activities for Breaking Down Silos
Teams often struggle to collaborate because they don’t know each other well enough or have a limited understanding of what other teams do. They can’t be blamed for not reaching out to each other if they don’t have the information available to do so.
Group training can include cross-departmental exercises, workshops, and away days that encourage socializing and learning.
Facilitate Open Communication
As mentioned, siloed working can never be completely eradicated in any organization that sees its employees broken up into teams or departments. However, this should not lead to breakdowns in communication.
Establishing opportunities for open communication between departments will help lower the walls between teams without destroying their structure completely. One idea is to set up recurring meetings that allow plans and information to be shared.
Remember, Collaboration Begins at the Top
As with anything relating to workplace culture, breaking down silo mentality begins and ends with those at the top. Great managers lead by example, which means being the first to take steps in the right direction.
If managers continue to work in a way that blocks collaboration or prevents the information from being shared outside their team, without considering the business's overall health, their team will likely do the same.
Conversely, if they are open to working more collaboratively with other teams, sharing documents and files in ways that align with best practices, and providing frequent updates on what they’re working on with the wider business, their team will be encouraged to follow suit.
Former GE CEO Jack Welch hated silos and advocated for ‘Boundaryless Organizations’ that saw colleagues from across the organization working together to solve problems. The reason this worked at GE is because the movement started at the top.
Silo mentality can also impact the vision managers have for their team. It can be tempting to focus solely on your team's success, but the business will suffer if you are setting goals that conflict with those of another department. It may be wise to consider a unified vision and set team goals alongside the leaders of other departments.
How Collaborative Working Will Benefit Your Projects
At a project level, collaborative working has many benefits. When teams work together, projects run more smoothly, customers receive better care, and services improve. A better workplace culture is fostered with a wider circle of colleagues to build relationships with less frustration building up between departments and more opportunities for collaboration.
The bottom line is that open communication between departments means employees get the right information to make the best decisions for their projects. Although there will always be some barriers between teams, the advice above can help limit the negative impact at the project level. This helps create a happier working environment and leads to better work, which ultimately benefits the business in the long term.
The following is taken in its entirety for an article penned by Taylor Morgan, in the October 16th, 2024, edition of System Thinking - What is a Learning Organization? Peter Senge's 5 Key Principles Explained
Peter Senge and Learning Organizations: A Path to Growth and Success
In today’s fast-changing world, organizations need to adapt quickly to stay successful. Many businesses struggle with innovation, problem-solving, and keeping up with new technologies. However, one concept has provided a pathway for continuous growth and adaptability—the learning organization. This idea was introduced by Peter Senge, a systems scientist and professor at MIT, in his groundbreaking book, The Fifth Discipline, published in 1990. Through the concept of learning organizations, Senge emphasized that businesses should foster a culture where continuous learning and collaboration are core values.
In this article, we’ll explore what a learning organization is, the five disciplines that form its foundation, and why it’s important for the future success of any organization.
What is a Learning Organization?
A learning organization is an organization where employees at all levels are constantly learning and improving their skills. The goal is to create an environment where people are encouraged to explore new ideas, question old practices, and work together to solve problems. This is not just about formal education or training sessions. Instead, it’s about fostering a culture of curiosity, innovation, and teamwork across the entire organization.
According to Peter Senge, learning organizations are designed to:
Continuously transform themselves in response to internal and external changes.
Encourage open communication and knowledge sharing.
Foster an environment where individuals and teams can develop their talents and grow together.
Senge identified five key principles, also called disciplines, that help create and sustain a learning organization. Let’s take a closer look at these disciplines.
The Five Disciplines of a Learning Organization
1. Systems Thinking
At the heart of Senge’s idea is systems thinking, which means seeing the organization as a whole rather than just focusing on individual parts. Organizations often face complex problems, and systems thinking helps people understand how different parts of the organization are interconnected.
For example, consider a company experiencing declining sales. Instead of blaming the sales department, a systems thinker would look at the entire system: Is there a problem with the product? Are customers dissatisfied with the service? Is there a gap in communication between departments? Systems thinking helps leaders see the bigger picture and understand how decisions in one area affect the whole organization.
By applying systems thinking, organizations can avoid “quick fixes” that may cause more problems in the long run. Instead, they focus on long-term solutions that benefit the entire system.
2. Personal Mastery
The second discipline is personal mastery, which involves individuals continually developing their personal skills, goals, and abilities. It encourages employees to be proactive in their own growth, striving for excellence in everything they do. This goes beyond just technical skills—it includes emotional intelligence, creativity, and leadership abilities.
In a learning organization, people are motivated to take ownership of their personal development. For instance, an employee who is interested in learning new marketing techniques might be supported by the company through training programs, mentorship, or hands-on projects. The organization benefits as these employees bring new ideas and innovations that help the company grow.
Personal mastery is essential because it helps individuals reach their full potential while contributing to the overall success of the organization. A learning organization provides opportunities for employees to continue learning, which ultimately strengthens the entire company.
3. Mental Models
Mental models are deeply ingrained beliefs, assumptions, and attitudes that influence how people think and act. These mental models shape the way individuals see problems and make decisions. However, sometimes these models are outdated or limit creativity.
In a learning organization, employees are encouraged to challenge their mental models. This requires individuals to reflect on their thinking patterns and consider alternative perspectives. For example, an employee might assume that a particular task can only be done one way because “it’s always been done that way.” A learning organization encourages them to question that assumption and explore new, possibly better approaches.
Breaking free from old mental models allows organizations to be more adaptable, flexible, and open to new possibilities.
4. Shared Vision
A shared vision is a clear, compelling picture of what the organization aims to achieve. It’s not just the vision of the top leadership; it’s developed collaboratively with input from all levels of the organization. When everyone shares the same vision, they are more motivated to work toward common goals.
Having a shared vision helps unify the organization and gives employees a sense of purpose. For example, in a company that values sustainability, the shared vision might be to reduce the company’s environmental impact while maintaining profitability. If everyone, from the CEO to the newest hire, understands and believes in this vision, they will work together to make it happen.
A strong shared vision fosters commitment, energy, and alignment, making it easier to navigate challenges and stay focused on long-term goals.
5. Team Learning
The final discipline is team learning, which involves learning together as a group. In a learning organization, teamwork and collaboration are highly valued. People don’t just work in isolation—they share knowledge, exchange ideas, and solve problems together.
For example, when a team faces a challenge, they gather to discuss possible solutions, listen to each other’s ideas, and come up with the best course of action. This not only helps solve immediate problems but also builds trust and improves communication within the team.
Through team learning, organizations can harness the collective intelligence of their employees. This leads to more innovative solutions, improved decision-making, and a stronger, more cohesive workforce.
Why Learning Organizations Matter
Learning organizations are essential in today’s rapidly changing world because they are flexible, adaptable, and resilient. Here are a few reasons why learning organizations are important:
Adaptability: Organizations that embrace continuous learning can respond quickly to new challenges, technologies, and market conditions.
Innovation: By encouraging creativity and the exchange of ideas, learning organizations are more likely to develop innovative products and services.
Employee Engagement: Employees who are given opportunities to learn and grow are more motivated and satisfied in their roles. This can lead to higher retention rates and a more positive workplace culture.
Long-term Success: Learning organizations are better positioned for long-term success because they are constantly evolving and improving.
Conclusion
Peter Senge’s concept of learning organizations provides a powerful framework for companies looking to thrive in a complex and fast-moving world. By focusing on systems thinking, personal mastery, mental models, shared vision, and team learning, organizations can create a culture that values growth, collaboration, and innovation.
In a learning organization, the emphasis is not just on solving problems today, but on building the skills, knowledge, and teamwork needed to solve problems in the future. As the world continues to change, learning organizations are better equipped to adapt and succeed, making them a model for others to follow.
Key Takeaways
A learning organization is one that continuously improves by encouraging learning, collaboration, and innovation across all levels.
Systems thinking helps organizations understand how different parts are connected, leading to better decision-making.
Personal mastery encourages individuals to keep learning and developing their skills, contributing to personal and organizational growth.
Mental models are deeply held beliefs that need to be challenged to allow for creativity and flexibility.
A shared vision unites everyone in the organization around common goals, increasing motivation and commitment.
Team learning fosters collaboration, leading to better solutions and stronger teams.
So, what have we learned? Bottom-line: Learning organizations are more adaptable, innovative, and positioned for long-term success.
Note - When I was approached and asked if I would like to assist with the creation of and become the founding CEO of the AFN, (which I later evolved into the ALFN,) I endeavored to build the company's structure based entirely upon these learning organization principals. The organization flourished, and we had just under 10 good years of unprecedented growth, national impact, educational development, and member collaboration. I have had personal experience with the application of these principals, and I have firsthand experience regarding their efficacy.
The following is a very brief outline of the concepts contained within the book entitled, "The Fifth Discipline: The Art and Practice of the Learning Organization," by Peter Senge.
The Five Disciplines
The five disciplines of what the book refers to as a "learning organization" discussed in the book are:
"Personal mastery is a discipline of continually clarifying and deepening our personal vision, of focusing our energies, of developing patience, and of seeing reality objectively."
"Mental models are deeply ingrained assumptions, generalizations, or even pictures of images that influence how we understand the world and how we take action."
"Building shared vision - a practice of unearthing shared pictures of the future that foster genuine commitment and enrollment rather than compliance."
"Team learning starts with 'dialogue', the capacity of members of a team to suspend assumptions and enter into genuine 'thinking together'."
"Systems thinking - The Fifth Discipline that integrates the other four."
Senge describes extensively the role of what he refers to as "mental models," which he says are integral in order to "focus on the openness needed to unearth shortcomings" in perceptions. The book also focuses on "team learning" with the goal of developing "the skills of groups of people to look for the larger picture beyond individual perspectives." In addition to these principles, the author stresses the importance of "personal mastery" to foster "the personal motivation to continually learn how actions affect the world."
The Learning Disabilities
Note - In addition to "disciplines," which Senge suggests are beneficial to what he describes as a "learning organization," Senge also posits several perceived deleterious habits or mindsets, which he refers to as "learning disabilities."
"I am my position."
"The enemy is out there."
"The Illusion of Taking Charge"
"The Fixation on Events"
"The Parable of the Boiling frog"
The Delusion of Learning from Experience
"The Myth of the Management Team"
The 11 Laws of the Fifth Discipline
Today's problems come from yesterday's "solutions."
The harder you push, the harder the system pushes back.
Behavior grows better before it grows worse.
The easy way out usually leads back in.
The cure can be worse than the disease.
Faster is slower.
Cause and effect are not closely related in time and space.
Small changes can produce big results...but the areas of highest leverage are often the least obvious.
You can have your cake and eat it too ---but not all at once.
Dividing an elephant in half does not produce two small elephants.
There is no blame.
The Architecture of a Learning Organization
How do we learn to create learning organizations? How do you know what to do first, second, or third in thinking strategically about building learning organizations?
At its core, learning organizations build great teams – the trust, the relationships, the acceptance, the synergy, and the results that they achieve. It has a strong ability to learn, adjust and change in response to new realities. It can alter functions and departments when demanded by changes in the work environment or by poor performance. The distinguishing characteristics of a learning organization include a learning culture, a spirit of flexibility and experimentation, people orientation, continuous system-level learning, knowledge generation and sharing, and critical, systemic thinking.
When we look more closely at the development of such teams, we see that people are changed, often profoundly. There is a deep learning cycle.
Team members develop new skills, and capabilities which alter what they can do and understand. As new capabilities develop, so too do new awareness and sensibilities. Over time, as people start to see and experience the world differently, new beliefs and assumptions begin to form, which enables further development of skills and capabilities.
This deep learning cycle constitutes the essence of a learning organization – the development not just of new capacities, but of fundamental shifts of mind, individually and collectively. The five basic learning disciplines are the means by which this deep learning cycle is activated. Sustained commitment to the disciplines keeps the cycle going. When this cycle begins to operate, the resulting changes are significant and enduring.
The real work of building learning organizations occurs within a "shell" architecture. What makes up the architecture?
Guiding Ideas. - Theory, Methods, & Tools. - Innovations in infrastructure.
Without guiding ideas, there is no passion, no overarching sense of direction or purpose.
Without theory, methods, and tools, people cannot develop the new skills and capabilities required for deep learning.
Without innovations in infrastructure, inspiring ideas and powerful tools lack credibility because people have neither the opportunity nor resources to pursue their visions or apply the tools.
CEOs intent on developing learning organizations must focus on all three of the architectural design elements. Without all three, the triangle collapses.
Our industry's ongoing success and development is dependent upon a new generation of leaders who will study, grasp and then apply these principals.
The CFPB's Notice of Action can be found here:
The CFPB's Press Release can be found here:
The CFPB's Complaint can be found here: