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  • FFIEC issues revised Business Continuity Management booklet

    Agency Rule-Making & Guidance

    On November 14, the Federal Financial Institutions Examination Council (FFIEC) issued a revised Business Continuity Management booklet, one of a series of booklets that make up the FFIEC Information Technology Examination Handbook. The revised booklet replaces the 2015 version, and provides enterprise-wise guidance for examiners on the principles of business continuity management and approaches toward business continuity planning and resilience, including those designed to “achieve safety and soundness, consumer financial protection, and compliance with applicable laws, regulations, and rules.” It also provides examination procedures intended to help examiners assess the effectiveness of business continuity and resilience frameworks for entities including depository financial institutions, nonbank financial institutions, bank holding companies, and third-party service providers.

    The same day, the OCC also issued Bulletin 2019-57 to note that the revised booklet rescinds Bulletin 2015-9, “FFIEC Information Technology Examination Handbook: Strengthening the Resilience of Outsourced Technology Services, New Appendix for Business Continuity Planning Booklet.”

    Agency Rule-Making & Guidance FFIEC Examination OCC

  • California DBO issues cannabis banking guidance

    State Issues

    On October 3, the California Department of Business Oversight (DBO) issued guidance for state-chartered financial institutions that serve cannabis-related businesses. The guidance, which is intended to help financial institutions manage risks appropriately, addresses cannabis program governance and compliance with the Bank Secrecy Act (BSA), as well as cannabis banking guidance issued in 2014 by the Financial Crimes Enforcement Network (FinCEN). As previously covered by InfoBytes, FinCEN’s guidance—which includes federal law enforcement priorities still in effect that were taken from a now-rescinded DOJ memo—details the necessary elements of a customer due diligence program, ongoing monitoring and suspicious activity report filing requirements, and priorities and potential red flags. Notably, the DBO states that while it will not bring regulatory actions against state-chartered financial institutions “solely for establishing a banking relationship with licensed cannabis businesses,” it expects all financial institutions to comply with FinCEN’s BSA expectations and guidance to make appropriate risk assessments. The DBO also referred bank examiners to its September Cannabis Job Aid, which is intended to assist with the examination of financial institutions that may be banking cannabis-related businesses.

    State Issues Cannabis Banking CDBO FinCEN Bank Secrecy Act Examination

  • OCC updates four booklets in Comptroller’s Handbook

    Agency Rule-Making & Guidance

    On September 30, the OCC issued updates to four booklets of the Comptroller’s Handbook: Bank Supervision Process, Community Bank Supervision, Federal Branches and Agencies Supervision, and Large Bank Supervision. Among other things, the updates include (i) the interim final rule for the expanded 18-month supervisory cycle for certain institutions (covered by InfoBytes here); (ii) a revised OCC report of examination policy based on the revised Federal Financial Institutions Examination Council report of examination policy; (iii) the revisions to the OCC’s enforcement action policies (covered by InfoBytes here); and (iv) changes to the OCC’s credit underwriting assessment.

    Agency Rule-Making & Guidance OCC Bank Supervision Examination Enforcement Comptroller's Handbook

  • CFPB issues summer 2019 Supervisory Highlights

    Federal Issues

    On September 13, the CFPB released its summer 2019 Supervisory Highlights, which outlines its supervisory and enforcement actions in the areas of automobile loan origination, credit card account management, debt collection, furnishing, and mortgage origination. The findings of the report cover examinations that generally were completed between December 2018 and March 2019. Highlights of the examination findings include:

    • Auto loan origination. The Bureau noted that one or more examinations found that guaranteed asset protection (GAP) products were sold to consumers with low loan-to-value (LTV) loans, resulting in those consumers purchasing a product that was not beneficial to them. The Bureau concluded these sales were an abusive practice, as “the lenders took unreasonable advantage of the consumers’ lack of understanding of the material risks, costs, or conditions of the product.”
    • Credit card account management. The Bureau found several issues with credit card account servicing, including violations of Regulation Z for failing to clearly and conspicuously provide disclosures required by triggering terms in online advertisements and for offsetting consumers’ credit card debt against funds that the consumers had on deposit with the issuers without sufficient indication that the consumer intended to grant a security interest in those funds.
    • Debt collection. The Bureau noted violations of the FDCPA’s prohibition on falsely representing the amount due when debt collectors claimed and collected interest that was not authorized by the underlying contracts between the debt collectors and the creditors.
    • Credit information furnishing. The Bureau found multiple violations of the FCRA, including furnishers failing to complete dispute investigations within the required time period and failing to promptly send corrections or updates to all applicable credit reporting agencies after a determination that the information was no longer accurate.
    • Mortgage origination. The Bureau noted that creditors had violated Regulation Z by disclosing inaccurate APRs for closed-end reverse mortgages and also by using a unit-period of one month instead of one year to calculate the total annual loan cost (TALC) rate and the future value of all advances, leading to inaccurate TALC disclosures.

    The report notes that in response to most examination findings, the companies have taken, or are taking, remedial and corrective actions, including by identifying and compensating impacted consumers and updating their policies and procedures to prevent future violations.

    Lastly, the report also highlights the Bureau’s recently issued rules and guidance.

    Federal Issues CFPB Supervision Examination Auto Finance Credit Cards Debt Collection FDCPA Regulation Z TILA FCRA Mortgages Mortgage Origination

  • FDIC updates Consumer Compliance Examination Manual

    Agency Rule-Making & Guidance

    On September 10, the FDIC announced updates to its Consumer Compliance Examination Manual (CEM). The CEM includes supervisory policies and examination procedures for evaluating financial institutions’ compliance with federal consumer protection laws and regulations. The recent updates include, among other things, (i) changes to the sections and questions of the Fair Lending Scope and Conclusions Memorandum; and (ii) incorporation of the private flood insurance final rule’s provisions pertaining to the mandatory and discretionary acceptance of private flood insurance by financial institutions.

    Agency Rule-Making & Guidance FDIC Supervision Examination

  • CFPB updates auto finance section of the Supervision and Examinations Manual

    Agency Rule-Making & Guidance

    On August 28, the CFPB updated its examination procedures for automobile finance in its Supervision and Examinations Manual. The procedures are comprised of seven modules and each examination will cover one or more modules. Prior to using the procedures, examiners will complete a risk assessment and examination scope memorandum, which will assist in determining which of the seven modules the exam will cover: (i) company business model; (ii) advertising and marketing; (iii) application and origination; (iv) payment processing and account maintenance; (v) collections, debt restructuring, repossession, and accounts in bankruptcy; (vi) credit reporting, information sharing, and privacy; and (vii) examiner conclusions and wrap-up.

    Agency Rule-Making & Guidance CFPB Supervision Examination Risk Management Auto Finance

  • FDIC adds to risk management exam policies

    Agency Rule-Making & Guidance

    On August 27, the FDIC issued Financial Institution Letter FIL-47-2019 announcing an update to its Risk Management Manual of Examination Policies to incorporate a new section titled “Risk-Focused, Forward-Looking Safety and Soundness Supervision.” According to the letter, the new section covers the FDIC’s “long-standing examination philosophy” that the focus of supervision should be on areas that present the greatest risk. The letter notes that the risk-focused approach is “forward-looking,” with the intent to look beyond the condition of an institution at a specific point in time to just how well the institution will be able to respond to a changing market and assist examiners in identifying and correcting “weaknesses in conditions or practices before they impact an institution’s financial condition.”

    Agency Rule-Making & Guidance FDIC Supervision Examination Risk Management

  • Fed updates private flood insurance interagency examination procedures

    Agency Rule-Making & Guidance

    On August 22, the Federal Reserve Board (Fed) issued CA 19-10, which provides updates to the interagency examination procedures for the Flood Disaster Protection Act (FDPA). The updated guidance is applicable to all Fed-supervised institutions with total consolidated assets of $10 billion or less, and supersedes CA 16-1’s FDPA examination procedures. Specifically, the updated procedures address new sections from a final interagency rule issued in February concerning the acceptability of private flood insurance (previously covered by InfoBytes here). Additionally, the updated procedures provide guidelines for lending institutions when considering a mutual aid society flood protection plan. The Fed notes that “state member banks may not typically analyze mutual aid society plans in the course of their lending activities,” and reminds lenders that acceptance standards for mutual aid society plans will vary depending on the state.

    Agency Rule-Making & Guidance Federal Reserve Flood Insurance Examination Flood Disaster Protection Act Mortgages

  • OCC updates risk governance and audit booklets

    Agency Rule-Making & Guidance

    On July 25, the OCC announced the issuance of a fully revised “Corporate and Risk Governance” booklet for the Comptroller’s Handbook, as well as limited updates to the “Internal and External Audits” booklet for examiners completing core assessments affected by audit functions. Among other things, the revised  “Corporate and Risk Governance” booklet is intended to provide examiners with a summary of corporate and risk governance, related risks, the board’s role and responsibilities in corporate and risk governance, strategic planning, and examination procedures. The revised booklet identifies the following as the primary risk categories associated with corporate and risk governance: (i) strategic; (ii) reputation; (iii) compliance; and (iv) operational. Updates to both booklets incorporate references to relevant OCC issuances and auditing standards published since the booklets were last issued, reflect the integration of federal savings associations into certain regulations, and make clarifying edits regarding supervisory guidance, sound risk management practices, legal language, and the roles of the bank’s board and management.

    Agency Rule-Making & Guidance OCC Examination Comptroller's Handbook

  • Federal banking agencies and FinCEN issue statement on risk-focused BSA/AML examinations

    Agency Rule-Making & Guidance

    On July 22, the Federal Reserve Board, FDIC, NCUA, and the OCC along with the Financial Crimes Enforcement Network (FinCEN), released a joint statement to improve transparency of their risk-focused approach to Bank Secrecy Act/anti-money laundering (BSA/AML) supervision. The statement outlines common practices for assessing a bank’s risk profile, including (i) leveraging available information, including internal BSA/AML risk assessments, independent audits, and results from previous examinations; (ii) contacting banks between examinations or before finalizing the scope of an examination; and (iii) considering the bank’s ability to identify, measure, monitor, and control risks. Examiners will use the information from the risk assessments to scope and plan the examination, as well as to evaluate the adequacy of the bank’s BSA/AML compliance program. The statement notes that the extent of examination activities needed to evaluate a bank’s BSA/AML compliance program, “generally depends on a bank’s risk profile and the quality of its risk management processes.”

    Agency Rule-Making & Guidance FDIC OCC NCUA Federal Reserve FinCEN Financial Crimes Bank Secrecy Act Anti-Money Laundering Supervision Examination

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