Tag Archives: khoi

The Office of the Comptroller of the Currency Just Released its 2018 Bank Supervision Operating Plan – Are Your BSA/AML Compliance Programs Ready?

The Office of the Comptroller of the Currency’s (OCC) Committee on Bank Supervision (CBS) just released its Bank Supervision Operating Plan for 2018 which outlines the OCC’s supervision priorities for individual national banks, federal savings associations, federal branches, and federal agencies and service providers.  For the OCC’s 2018 fiscal year, which begins October 1, 2017 and ends September 30, 2018, the development of supervisory strategies will focus on the following areas:

  •  Cybersecurity and operational resiliency
  •  Commercial and retail credit loan underwriting, concentration risk management, and the allowance for loan and lease losses
  • Business model sustainability and viability and strategy changes
  • Bank Secrecy Act/anti-money laundering (BSA/AML) compliance management
  •  Change management to address new regulatory requirements

Consistent with this supervisory strategy, examiners will be tasked with determining whether banks have designed and implemented effective BSA/AML and Office of Foreign Assets Controls programs and controls to address continued risks from traditional money laundering schemes, evolving vulnerabilities resulting from the rapid pace of technological change, and emerging payment solutions and terrorist financing.  In their examination, examiners will evaluate risk assessment processes, and policies, procedures, and processes to effectively mitigate identified risks and consider the appropriateness of controls for the nature and level of risk present in a banks’ products, services, customers, and geographies and include conducting sufficient customer due diligence and suspicious activity identification and monitoring.

Examiners will also focus on compliance with new regulations and changes to existing regulations, including the Financial Crimes Enforcement Network’s final rule to enhance customer due diligence:  Monitoring banks’ progress in meeting the May 11, 2018, implementation deadline for the customer due diligence and beneficial ownership rules. This rule requires that banks identify and verify the identity of the beneficial owners of all “legal entity customers” (other than those that are excluded) at the time a new account is opened (other than accounts that are exempted). Banks may comply either by obtaining the required information on a standard certification form or by any other means that comply with the substantive requirements of this obligation. Banks may rely on the beneficial ownership information supplied by the customer, provided that it has no knowledge of facts that would reasonably call into question the reliability of the information. The identification and verification procedures for beneficial owners are very similar to those for individual customers under a bank’s customer identification program, except that for beneficial owners, a bank may rely on copies of identity documents. Banks are required to maintain records of the beneficial ownership information they obtain, and may rely on another financial institution for the performance of these requirements, in each case to the same extent as under their customer identification program rule.

Because regulatory issues relative to a bank’s BSA/AML compliance program may prove problematic to the implementation of a bank’s strategic plans and given the OCC’s continued supervisory focus on BSA/AML compliance through 2018, now may be a good time to reexamine your compliance programs as examiners will be sure to focus on the effectiveness of this program relative to your risk profile.

More information can be found here and here.

Is the FDIC’s Shift To De Novo Banking Real?

On May 1, 2017, the FDIC released an update to its guidance on the de novo banking – “Applying for Deposit Insurance – A Handbook for Organizers of De Novo Institutions.” The updated guidance purports to provide organizers with a “clear and transparent explanation of the path to obtaining deposit insurance.” This may be the FDIC’s response to the 2014 joint letter of the American Association of Bank Directors (AABD) and the Independent Community Bankers of America (ICBA) in which the AABD and the ICBA recommended that the FDIC issue a new Financial Institution Letter (FIL) to “to help dispel misconceptions and reaffirm the FDIC’s support for the formation of de novo banks.” These misconceptions relate to the uncertainty in the application process, the second-guessing of business plans for a de novo bank, capital requirements, examination schedules and the degree of regulatory oversight during the first seven years. The FDIC appears to be on a “get-out-the-message” campaign that de novo banking is back and the FDIC is poised to provide guidance on the process.
The banking group at Duane Morris has been involved in de-novo banking for over 40 years. We’ve advised on the de novo process and assisted in the formation of many banks throughout the Western United States and have represented these same banks throughout their life cycle. The recent recession which was sparked by excessive risk-taking by some financial institutions led to a shift in the FDIC’s regulatory philosophy towards more oversight and a period of consolidation. It appears that we are coming out of this period with a possible shift in the regulatory philosophy at the FDIC on de novo banking. To make this point, the FDIC has held industry outreach meetings in San Francisco, New York, Atlanta, and Dallas to inform industry participants about the FDIC’s application process and has planned additional outreach events on May 12, 2017, in Kansas City, Missouri, and May 31, 2017, in Chicago, Illinois.
It appears that we may be entering (finally) the cycle of de novo banks which would add to the health of the community banking industry. Small businesses may finally rejoice in the return of specialized relationship banking.

The FIL/Guidance can be found here:  https://www.fdic.gov/news/news/financial/2017/fil17017.pdf