Building an Effective and Efficient Compliance Program – May 2022

Building an Effective and Efficient Compliance Program

A well designed and implemented compliance program will protect your financial institution and is identified by the first five (5) basic factors;

• All employees are aware of and responsible for compliance
• All stakeholders are aligned with the steps to protect your financial institution, laws, rules, and regulations
• Both Business and Compliance continually collaborate and understand their roles
• Active and independent Audit will assist in protecting your financial institution
• Regulators will come to understand that your financial institution obeys compliance laws, rules, and regulations

Behind these first five (5) steps needs to be your Second Line of Defense and Protection. These three (3) areas provide a pivotal role in providing additional strength to your program.

1. Competency – As both the Business and Compliance areas of your financial institution show consistent collaboration both guidance and knowledge become self-evident in your results.
2. Credibility – Your financial institution must provide understanding and knowledge of your products and services in a thoughtful and practical manner. Through this your financial institution will continue to be strengthened in the execution of the laws, rules, and regulations of compliance.
3. Connection – The most successful compliance programs must obtain and maintain full cooperation from all business lines within the financial institution. Consistent training and education programs are essential to maintain this priority and connection with compliance. Consistent education will also maintain the high level of knowledge needed.

Reference: ABA Bank Compliance / March-April 2022 / Make Your Regulator Smile / Ellen Rose & Lynn Woosley

FinCEN – Beneficial Ownership Information Reporting

In December 2021 FinCEN published a proposed rule that would require certain entities to repost information to FinCEN about the following:

• Beneficial Owners – the individual natural person who ultimately own or control the entity, and
• Company Applicants – the individuals who have filed an application with specified governmental authorities to form the entity or register it to do business.

This would implement the “Reporting Requirements” in Section 6403 of the Corporate Transparency Act (CTA) – enacted as Title LXIV of the National Defense Authorization Act for Fiscal Year 2021.

Full review of this proposed rule refer to: General Provisions of FinCEN’s regulations (31 CFR Part 1010, specifically Section 1010.380)

Question: A customer applied for a loan, but the credit report showed the customer as deceased. The customer insists they are very much alive. What should my bank do?

Answer

The bank should direct the customer to contact the credit bureau directly. For example, with Equifax: https://www.equifax.com/person/help/mistakenly-reported-as-deceased/

The customer could be a victim of identity theft, or it could be a credit report merged in error. Whatever the cause, the customer needs to have updated and corrected.