1. Optimizing Your Regulatory Compliance Program
MAY 17, 2017
Optimizing Your Regulatory Compliance Program
New York Bankers Association Technology, Compliance & Risk Management Forum

2. Offices in Buffalo, Batavia, Rochester and Syracuse NY
WHO WE ARE
More than 300 employees
Established in 1958
Offices in Buffalo, Batavia, Rochester and Syracuse NY
Tax, Audit, Financial & Technology Risk Management services
Industry practices in financial institutions, healthcare, manufacturing and real estate

3. Agenda Regulatory Environment
Elements of a Compliance Management System
Consumer Compliance Rating System
Size, Complexity & Risk
Open Discussion

4. Regulatory Environment
Regulatory Guidance?
Should or Shall
The CFPB Effect
Pace of change More regulatory monitoring
Risk-Based examination focus
Will include an analysis of your overall compliance management processes (OCC).
Can you demonstrate an effective compliance management system?
Enforcement Actions
Increasingly becoming formal and public; Impact to CAMELS; Monetary penalties
Require assembly of a compliance committee and retention of outside consultant ($)

5. “
The enforcement actions we are issuing today make it clear that the OCC will take forceful action, not only when the institutions we supervise engage in wrongdoing, but when management fails to exercise the oversight necessary to ensure that employees follow laws and regulations intended to protect customers and maintain the integrity of markets. “
- Thomas J. Curry, Comptroller of the Currency, November 2014

6. Elements of a Compliance Management System
Tone at the top – is there evidence of board oversight?
Consumer Compliance Officer
If your board only appoints a BSA Compliance Officer… may want to rethink that.
Elements of CMS
Policies and Procedures
Training
Monitoring
Response to consumer complaints
Independent Compliance Audit (s)
Change Control
Sys·tem (‘sistem/) n,
A particular set of connected things or parts forming a complex whole
A set of principles or procedures according to which something is done; an organized scheme or method

7. FFIEC Interagency Guidance – Consumer Compliance Rating System
Guiding Principles for Regulators
Risk-based (size, complexity and risk profile)
Transparent (clear distinctions of categories – all on the same page)
Actionable (direct attention to areas of weakness)
Incent Compliance (self identification and correction)
Rating Scale – 1 – 5 (COSO)
1 – Highest rating; strong program
5 – Lowest rating; critically deficient

8. Consumer Compliance Rating System
Three broad categories
Board and Management Oversight
Compliance Program
Assessment categories – size, complexity and risk
“All institutions, regardless of size, should maintain an effective CMS.”
Violations of Law and Consumer Harm
Root Cause; Severity; Duration; and Pervasiveness
Section 1025 of DFA – applies to federally insured institutions with more than $10 billion in total assets. Exclusive authority to CFPB

9. Size, Complexity and Risk Profile
Here’s what we know about size…
Big Banks (> $50 billion)
“Getting to Strong” is the expectation – this is not new
Major hurdles
True independence for compliance management and staff
Compliance budget
Monitoring / Testing
Employee goals and evaluations
Effective escalation procedures

10. Size, Complexity and Risk Profile
COMPLEXITY AND RISK GO TOGETHER
GOVERNANCE
ORGANIZATIONAL
STRUCTURE
THIRD PARTY
PROCESSORS
INCENTIVE
COMPENSATION
PRIVATE
BANKING
CONCENTRATIONS
AUDIT
ISSUES
PRODUCTS & SERVICES
FOOTPRINT
REGULATORY
ISSUES
OUTSOURCING
MODELS

11. Optimization Critical CMS Components RISK ASSESSMENT
POLICIES & PROCEDURES
GOVERNANCE
Critical CMS
Components
COMPLIANCE MONITORINIG
& TESTING
REGULATORY
INTERACTION
COMPLIANCE TECHNOLOGY
REPORTING & COMMUNICATION
COMPLIANCE TRAINING

12. Optimization
Good things… “Getting to Great” may or may not be not optimal for you Compliance Self Assessment Compliance Strategic Plan Compliance Committee (Board) Knowledge Center (Technology) Bad things… doing nothing, assuming your CMS is fine

13. Thank You!
FREEDMAXICK.COM