We often focus too heavily on the individual changes that occur during the daily life of compliance functions within a business line. However, we invite regulatory risk if we don’t consider the bigger picture and the interconnectivity of events across an institution. Omissions or errors can be costly in terms of regulatory risk, consumer risk, and operational risk.
The beginning of a new year is a great time to reevaluate certain areas to maximize efficiencies and effectiveness, ensuring that we’re spending time looking at compliance from a holistic perspective. Below is a breakdown of areas worth examining when considering how to refresh or update compliance functions, ranging from risk assessments to training, and beyond.
Risk Assessments and Audit Programs
Regulators will evaluate the institution’s overall Compliance Management System and its functionality to determine its comprehensiveness and accuracy. Criticisms arise when risk assessments or audit programs do not reflect the current regulatory environment applicable to the institution. In addition, mistakes in risk assessments or audit programs may lead to greater exposure and inefficiencies. Review your compliance risk assessments and audit programs to determine that they incorporate:
- New laws and regulations.
- New products and services.
- Internal changes to processes and controls.
- Recently revised regulatory examination procedures, opinions, and interpretations.
- Reaffirmed non-applicability of excluded areas due to your current status.
Analysis
Compliance audits and risk assessments are valuable because they provide accurate information about past or current performance, allowing the institution to make better-informed future business decisions that are appropriately aligned with risks. Leveraging the information you’ve already gathered provides a deeper understanding of the institution’s functions and controls. Make sure the analyses you’re performing include:
- CRA PE, Assessment Area, and REMA determinations.
- Reviews of HMDA LAR reporting exceptions for root causes.
Disclosures/Documents
Compliance disclosures and documents establish the core of the consumer relationship. Beyond the technical requirements, this material is instrumental regarding the terms and conditions of the various products and services. Errors or omissions in this information quickly creates liability. Ensure that you are reviewing:
- Loan Estimate and Closing Disclosure loan settlement service pricing.
- ARM Loan Program Disclosure information.
- Changes in retail or operational fees for deposit accounts.
- Changes to regulatory and reporting thresholds (i.e., Home Mortgage Disclosure Act [HMDA], Truth in Lending Act [TILA]).
- Updates to the CRA Public File.
- Insider loan-related interest surveys.
Training
Educating personnel is just as important as establishing the correct governance regarding compliance for the institution’s products and services. Proper communication about and overall instruction on the various compliance requirements are both essential. A strong compliance training program not only fulfills a crucial element of the institution’s Compliance Management System but also provides a layer of liability protection should issues arise. Review your training materials to ensure they incorporate:
- New laws and regulations.
- Internal changes to processes and controls.
Taking the time to understand your compliance landscape across your organization and mapping out interconnected areas of concern will ensure that you’re setting yourself up for success in 2023. Regardless of the size of your organization, Wolf is available to help you in the ever-changing federal and state compliance environment. Reach out today to learn how.
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