Department News COMPLIANCE
Compliance During COVID By Carol Barnett, Senior Vice President of Compliance Services
The banking regulators have made it clear that while there may be some exam flexibility shown to banks because of difficult circumstances during the pandemic, compliance with banking laws and regulations is still vitally important. Te MBA BSA/AML and Compliance Conferences were held in September as virtual events, and the following are a few of the crucial points from conference speakers and bank regulators related to bank compliance efforts during the pandemic.
Document, document, document. It doesn’t necessarily have to be extensive, but it’s important to note in writing the important events that transpired with a particular transaction or customer, especially if it was out of the ordinary or represented an exception to the bank’s existing policies and procedures. Your next exam may not be for quite some time and trying to recall months later why something occurred can be avoided if there are good notes and records. Lack of documentation can potentially raise fair lending red flags if an examiner can’t clearly see why two similarly-situated borrowers might have been treated differently — to the loan officers the difference was clearly nondiscriminatory but without documentation in the files, the examiners may reach a different conclusion.
Keep a timeline. Te bank should keep a running timeline of significant events that affected the bank — when the regulators issued guidance, the dates that laws and regulations were enacted and effective, when bank-related events happened, what government orders were in effect at different times, etc. Tese events may have significantly impacted the bank’s compliance efforts. For example, loan processing may have slowed down because personnel were absent because of quarantine, or you had to allocate personnel to process PPP loans instead of residential real estate loans, and some
loan estimates were delayed as a result. Maybe you had many employees working remotely and some had IT problems or printing or mailing difficulties and a CTR wasn’t filed on a timely basis, or documents provided to the customer were incorrect or missing. Documenting the direct correlation and the who, what, when, why, how and where of these events — and how the bank worked to reduce or eliminate the impact — will hopefully help mitigate exam violations.
Pay attention to complaints. Te bank may be receiving new types of complaints or more frequent complaints than pre- COVID. Identifying if there are new issues to address related to bank products, technology, personnel, etc. will help the bank be responsive. Because employees may be scattered and customers may be using new or alternative communication methods, having a centralized complaint process is more important than ever.
Prioritize prevention of consumer harm. If you have to decide where to allocate compliance resources, focus on issues that could result in consumer harm — whether monetary harm (for example, charging impermissible loan fees) or potential harm (such as failing to provide a Truth-in-Savings disclosure at account opening).
Prepare for remote exams. For the foreseeable future, banks can expect the bulk (if not all) of regulatory compliance exams to be conducted off-site. If you are getting ready for an off- site exam, be sure to know what documents in your bank are already accessible electronically and which ones will need to be scanned or imaged or converted to some type of electronic format. It is crucial to understand the bank’s IT limitations and restrictions and to work with the regulators to ensure all files can be uploaded securely. Although multiple employees might be tasked with assembling records, someone should look them over to ensure they are complete, accurate and readable before submitting them. It will facilitate a smoother exam if the examiners don’t constantly have to contact the bank to obtain missing documents. Having all loan files in the same
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