2-3.1 Compliance Management System

The auditor is well-versed in compliance, and that the audit program is based on current laws and regulations, as well as being comprehensive in scope.

A bank that outsources the audit should make certain of what?

All the information needed to perform a business transaction.

A bank's policies and procedures should provide what kind of information to bank personnel?

1. Policies and procedures 2. Training 3. Monitoring and/or audit 4. Consumer complaint response

A compliance program includes what four components?

To focus resources where they are needed based upon risks to the bank.

A compliance program is not static. Why must it be be dynamic and constantly amended?

Vigorous transaction testing.

A strong compliance audit incorporates this.

Expansion or turnover of staff.

A written compliance program becomes more important during these periods.

Establish follow-up procedures to verify, at a later date, that the corrective actions were lasting and effective.

After corrective actions have been implemented, what should bank management do?

Internal controls, operations, and compliance risk management framework.

An audit is an independent assessment and validation of a bank's system of what?

1. Board and management oversight. 2. Compliance program.

An effective CMS is commonly comprised or what two independent elements?

Current complete and accurate information on products, services and business operations of the bank, consumer protection laws and regulations, internal policies and procedures, and emerging issues in the public domain.

An effective compliance training program should be frequently updated with what?

1. Disclosures and calculations for various product offerings. 2. Document filing and retention procedures. 3. Posted notices, marketing literature and advertising. 4. Various state usury and consumer protection laws and regulations. 5. Third-party service provider operations. 6. Internal compliance communication systems that update and revise laws and regulations to management and staff.

An effective monitoring system includes regularly scheduled reviews of six components. Name three of them.

prompt

Board and management response to the audit report should be _____________.

Bank personnel and the general public.

Board and management should include compliance matters in their communications to whom?

Federal consumer protection laws and regulations.

Compliance policies and procedures are the means to ensure consistent operating guidelines that support the bank in complying with what?

As the bank's business and regulatory environment changes.

Compliance policies and procedures should be described in a document and reviewed and updated how often?

Compliance weakness in a particular function or department.

Consumer complaints may be indicative of what?

Daily

How often should compliance be a part of the bank's management and employees routine?

The compliance officer.

In addition to the Board, who else should receive a copy of all compliance audit reports?

1. Cross departmental lines. 2. Have access to all areas of the bank's operations. 3. Effect corrective action.

In developing the organizational structure of the compliance program, Board and management must grant a compliance officer sufficient authority and independence to do what three things?

Its compliance monitoring function.

Is a bank includes a compliance officer in the planning, development, and implementation of business propositions increase the likelihood of success of what?

Helps establish management and staff accountability and identifies potential problems in a timely manner.

Monitoring at the transaction level accomplishes what?

Regulatory violations.

Monitoring is a proactive approach by the bank to identify procedural or training weaknesses in an effort to preclude what?

The normal, daily activities of employees in every operating unit of the bank.

Monitoring should include reviews at the transaction level during when and where?

Contributes to the efficient and successful operation of the bank.

Much as a business plan, why is a sound compliance program essential?

1. Demonstrate clear and unequivocal expectations for compliance within the bank and third-party providers. 2. Adopt clear policy statements. 3. Appoint a compliance officer with authority and accountability. 4. Allocate resources to compliance functions commensurate with the level and complexity of the bank's operations. 5. Anticipate and evaluate changes in the bank's operating environment and implement responses across impacted lines of business. 6.Identify compliance risk in the bank's products, services and other activities and respond to deficiencies and violations. 7. Conduct periodic compliance audits. 8. Provide for recurrent reports by the compliance officer to the board.

Name three key actions that Board and management may take to demonstrate their commitment to maintaining an effective CMS and to set a positive climate for compliance?

1. Learns about it's compliance responsibilities. 2. Ensures that employees understand these responsibilities. 3. Ensures that requirements are incorporated into it's business processes. 4. Reviews operations to ensure responsibilities are carried out and requirements are met. 5. Takes corrective action and updates materials when necessary.

Name three things that a CMS does for a bank.

1. Prevent or reduce regulatory violations. 2. Provide cost efficiencies. 3. Is a good business step.

Name three things that a well planned, implemented and maintained compliance program do for a bank.

Appropriate procedures.

Policies should be established that includes goals and objectives and what else for meeting those goals and objectives?

1. Developing compliance policies and procedures. 2. Training management and employees in consumer protection laws and regulations. 3. Review policies and procedures for compliance with applicable laws and regulations and the bank's stated policies and procedures. 4. Assess emerging issues or potential liabilities. 5. Coordinate responses to consumer complaints. 6. Report compliance activities and audit/review findings to the Board. 7. Ensure corrective actions are implemented in a timely fashion and are effective at preventing recurrence.

Regardless of the size or complexity of the bank's operations, name five general responsibilities of the compliance officer.

Designation of a compliance officer.

Regardless of the size or complexity of the bank, what is the first step Board and management should take in providing for the administration of the compliance program?

A strong monitoring function.

Risks are appropriately mitigated is the bank has this in place?

1. Bank's size, number of branches, and organizational structure. 2. Business strategy of the bank. 3. Complexity of the products and services offered. 4. Staff experience and training. 5. Type and extent of third-party relationships. 6. Location of the bank. 7. Other influences, such as whether the bank is involved in interstate or international banking.

The formality of a compliance program will be dictated by numerous considerations. Name at least five.

Its effectiveness.

The formality of the compliance program is not as important as what?

The Board and management of the bank.

The responsibility for ensuring that a bank and its third-party providers are in compliance rests with who?

1. Expertise and experience of various bank personnel. 2. Organization and staffing of the compliance function. 3. Volume of transactions. 4. Complexity of products offered. 5. Number and type of consumer complaints received. 6. Number and type of branches. 7. Acquisition or opening of additional branches. 8. Size of the bank. 9. Organizational structure of the bank. 10. Outsourcing of functions to third-party service providers, including a review of agreements made between the bank and vendors. 11. Degree to which policies and procedures are defined and detailed in writing. 12. Magnitude and frequency of changes to any of the above.

The scope and frequency of audits should consider up to twelve factors. Name five of them.

A sound CMS that is integrated into the overall risk management strategy of the bank.

To address inherent risk, what must a bank develop and maintain?

Ongoing training, sufficient time and adequate resources to perform the job.

To be effective at overseeing compliance and maintaining a strong compliance posture, the CO must be provided with what?

Act to address noted deficiencies and required changes to ensure full compliance with consumer protections laws.

Upon receipt and review of any compliance audit reports, what should the compliance officer do?

1. Provide a planned and organized effort to guide the bank's compliance activities. 2. Represents an essential source document that will serve as a training and reference tool for all employees.

What are two reasons the bank should establish a formal, written compliance program?

An audit.

What complements the bank's monitoring system?

1. Scope of the audit. 2. Deficiencies or modifications identified. 3. Number of transactions sampled by category of product type. 4. Descriptions of, or suggestions for, corrective actions and time frames for correction.

What four components should a written compliance audit report include?

Education of the bank's Board, management and staff.

What is essential to maintaining an effective compliance program?

Utilize third-party providers or consultants.

What may the compliance officer do to help administer the compliance program or audit function?

Policy statements on compliance topics.

What provides a framework for the bank's procedures and provides clear communication to management and employees of the Board's intentions toward compliance?

Changes to regulations or changes to business operations, products, or services.

What should trigger a review of established compliance procedures?

Compliance

What topic should the Board and management discuss during their meetings?

1. Banks continuously assess and modify their products, services, and operations in the context of their business strategy. 2. At the same time, new legislation may be enacted to address developments in the marketplace.

What two forces combine to create inherent risk for banks?

All consumer protection laws and regulations that apply to the business operations of the bank.

What will a qualified compliance officer have a knowledge and understanding of?

After problems have been noted during past audits or examinations, regulation changes, new products are introduced, mergers occur, ow when new branches are opened.

When are reviews especially critical?

The compliance officer.

Who is responsible for compliance training and should establish a regular training schedule for Directors, management and staff?

The Board.

Who is ultimately responsible for developing and administering a CMS that ensures compliance with federal consumer protection laws and regulations?

Leadership by the Board and management.

Who sets the tone on compliance within the bank?

The Board or a committee of the Board.

Who should audit finding be directly reported to?

The Board

Who should determine the scope and frequency of audits?

So that they may act to ensure a timely resolution.

Why should a compliance officer be made aware of complaints received?

So that they can take action to improve the bank's business practices.

Why should a compliance officer determine the cause of a complaint?

Consumer inquiries may highlight areas with increased risk of consumer harm and/or regulatory compliance concerns.

Why should examiners discuss with management how complaints are identified and defined?

To minimize compliance risk and all affected business operating units should be advised of the changes.

Why should modifications that are necessary be done expeditiously and who should be advised of the changes?

To keep abreast of changes in products, services, business practices, or personnel turnover that may require action to manage perceived risk.

Why should the compliance officer interact with all the departments and branches of the bank?

To ensure that they are following established internal compliance policies and procedures.

Why should the compliance officer monitor employee performance?