The first quarter of 2024 saw seven alarming consent orders affecting Blue Ridge, Choice, City National, Evolve, First Federal, Piermont Bank, and Sutton Bank. This surge highlights the regulators’ focus areas and critical compliance issues banks need to address. These recent orders follow nearly 30 orders in 2023, underscoring the OCC, Federal Reserve, and FDIC’s demand for a proactive, comprehensive approach to compliance, especially in Anti-Money Laundering (AML) and Countering the Financing of Terrorism (CFT).
Michael Hsu, Acting Comptroller of the Currency, emphasized the importance of maintaining high standards: “We will not lower our standards, create a special regime, or take an overly expansive view of banking to entice new entrants or in the hope of bringing a particular activity into the bank regulatory perimeter.”
From the recent consent orders, eight common themes have emerged. Here’s how banks and fintechs can prepare for exams or audits:
Improving Board Supervision: Regulators are mandating that Boards take an active role in overseeing AML/CFT programs, including approving and monitoring sound policies and procedures.
Strengthening Regulatory Compliance: This committee must present detailed reports on adherence to consent orders, the Bank Secrecy Act Officer, and the AML/CFT program at every board meeting.
Effective Strategies:
Enhancing and reviewing the AML/CFT Program is a pivotal theme in ensuring compliance with regulatory standards. Banks are required to revise their AML/CFT policies and procedures within specified timelines, incorporating comprehensive risk assessments to accurately reflect the bank’s risk profile.
Adhering to regulatory requirements and fostering a culture of compliance involves a multifaceted approach, encapsulated by the following strategies:
Effective internal controls are the cornerstone of a bank's comprehensive compliance framework, ensuring adherence to the stringent requirements set forth by regulatory bodies. These controls, including Customer Identification Programs (CIP), Customer Due Diligence (CDD), and Suspicious Activity Reporting (SAR), are designed to enable banks to identify, monitor, and report suspicious activities adeptly. By aligning these controls with the outcomes of detailed risk assessments, banks can ensure their compliance efforts are both targeted and effective, thereby safeguarding against financial crimes and regulatory breaches.
The requirement for a Lookback Review highlights the regulatory expectation for banks to retrospectively ensure compliance with CIP, CDD, and SAR requirements. This involves a detailed examination of customers onboarded through third-party relationships and their transactional activities, emphasizing the need for banks to address any historical oversights.
To align with regulatory expectations and effectively conduct Lookback Reviews, banks should incorporate the following practices within their compliance strategies:
Document Findings and Actions: By maintaining detailed records, banks can also provide regulatory bodies with evidence of their proactive stance toward compliance and their dedication to maintaining the integrity of their operations.
Validation underscores the critical need for banks to periodically review and validate the systems and models they utilize for monitoring, detecting, and reporting suspicious activities. This not only involves assessing the effectiveness of these systems but also ensuring they are updated to address any identified deficiencies or changes in the risk landscape.
To adhere to regulatory standards and bolster the robustness of their compliance frameworks, banks are encouraged to adopt the following validation practices:
Adequate staffing and resources are foundational to the effective implementation and management of a bank's AML and CFT program. Regulatory bodies emphasize the need for banks to ensure that individuals tasked with these responsibilities, such as the BSA Officer, are well-equipped with the necessary authority, resources, and support staff to efficiently administer the AML/CFT Program.
To align with regulatory expectations and bolster the effectiveness of their AML/CFT frameworks, banks should focus on the following areas:
Finally, an independent testing (audit) program must encompass all of the bank’s business activities, including those conducted through third parties. Such a program is essential for not only identifying and addressing compliance gaps but also for validating the effectiveness of the bank’s AML/CFT measures.
Adherence to regulatory expectations can be achieved through the following audit program enhancements:
While exploring the landscape of regulatory violations, it becomes evident that not all compliance issues can be resolved through internal measures alone. Integrating independent, third-party solutions is pivotal in achieving full regulatory compliance in 2024 and beyond. This external approach is not just a supplementary measure; it's often necessary to meet the rigorous standards set forth by regulatory bodies, and is almost always easier than building internal solutions that are hard and expensive to maintain.
When considering a third-party solution, you must ensure it addresses current needs and is flexible enough to adapt to the evolving regulatory landscape. Cable serves clients across the Banking, Crypto, and Fintech sectors and addresses a significant number of the regulators recent areas of concern. Get in touch if you’d like to learn more.
How Grasshopper Bank Saved 50+ Hours per Fintech Partner with Cable’s Automated Compliance Testing.png)
Why Fintechs Need 24/7 Automated Compliance Testing.png)
Expanding Compliance Testing: New Modules for Reg E, Reg B, and Reg ZThe first quarter of 2024 saw seven alarming consent orders affecting Blue Ridge, Choice, City National, Evolve, First Federal, Piermont Bank, and Sutton Bank. This surge highlights the regulators’ focus areas and critical compliance issues banks need to address. These recent orders follow nearly 30 orders in 2023, underscoring the OCC, Federal Reserve, and FDIC’s demand for a proactive, comprehensive approach to compliance, especially in Anti-Money Laundering (AML) and Countering the Financing of Terrorism (CFT).
Michael Hsu, Acting Comptroller of the Currency, emphasized the importance of maintaining high standards: “We will not lower our standards, create a special regime, or take an overly expansive view of banking to entice new entrants or in the hope of bringing a particular activity into the bank regulatory perimeter.”
From the recent consent orders, eight common themes have emerged. Here’s how banks and fintechs can prepare for exams or audits:
Improving Board Supervision: Regulators are mandating that Boards take an active role in overseeing AML/CFT programs, including approving and monitoring sound policies and procedures.
Strengthening Regulatory Compliance: This committee must present detailed reports on adherence to consent orders, the Bank Secrecy Act Officer, and the AML/CFT program at every board meeting.
Effective Strategies:
Enhancing and reviewing the AML/CFT Program is a pivotal theme in ensuring compliance with regulatory standards. Banks are required to revise their AML/CFT policies and procedures within specified timelines, incorporating comprehensive risk assessments to accurately reflect the bank’s risk profile.
Adhering to regulatory requirements and fostering a culture of compliance involves a multifaceted approach, encapsulated by the following strategies:
Effective internal controls are the cornerstone of a bank's comprehensive compliance framework, ensuring adherence to the stringent requirements set forth by regulatory bodies. These controls, including Customer Identification Programs (CIP), Customer Due Diligence (CDD), and Suspicious Activity Reporting (SAR), are designed to enable banks to identify, monitor, and report suspicious activities adeptly. By aligning these controls with the outcomes of detailed risk assessments, banks can ensure their compliance efforts are both targeted and effective, thereby safeguarding against financial crimes and regulatory breaches.
The requirement for a Lookback Review highlights the regulatory expectation for banks to retrospectively ensure compliance with CIP, CDD, and SAR requirements. This involves a detailed examination of customers onboarded through third-party relationships and their transactional activities, emphasizing the need for banks to address any historical oversights.
To align with regulatory expectations and effectively conduct Lookback Reviews, banks should incorporate the following practices within their compliance strategies:
Document Findings and Actions: By maintaining detailed records, banks can also provide regulatory bodies with evidence of their proactive stance toward compliance and their dedication to maintaining the integrity of their operations.
Validation underscores the critical need for banks to periodically review and validate the systems and models they utilize for monitoring, detecting, and reporting suspicious activities. This not only involves assessing the effectiveness of these systems but also ensuring they are updated to address any identified deficiencies or changes in the risk landscape.
To adhere to regulatory standards and bolster the robustness of their compliance frameworks, banks are encouraged to adopt the following validation practices:
Adequate staffing and resources are foundational to the effective implementation and management of a bank's AML and CFT program. Regulatory bodies emphasize the need for banks to ensure that individuals tasked with these responsibilities, such as the BSA Officer, are well-equipped with the necessary authority, resources, and support staff to efficiently administer the AML/CFT Program.
To align with regulatory expectations and bolster the effectiveness of their AML/CFT frameworks, banks should focus on the following areas:
Finally, an independent testing (audit) program must encompass all of the bank’s business activities, including those conducted through third parties. Such a program is essential for not only identifying and addressing compliance gaps but also for validating the effectiveness of the bank’s AML/CFT measures.
Adherence to regulatory expectations can be achieved through the following audit program enhancements:
While exploring the landscape of regulatory violations, it becomes evident that not all compliance issues can be resolved through internal measures alone. Integrating independent, third-party solutions is pivotal in achieving full regulatory compliance in 2024 and beyond. This external approach is not just a supplementary measure; it's often necessary to meet the rigorous standards set forth by regulatory bodies, and is almost always easier than building internal solutions that are hard and expensive to maintain.
When considering a third-party solution, you must ensure it addresses current needs and is flexible enough to adapt to the evolving regulatory landscape. Cable serves clients across the Banking, Crypto, and Fintech sectors and addresses a significant number of the regulators recent areas of concern. Get in touch if you’d like to learn more.
