Pub. 2 2014 Issue 1
www.uba.org 6 T he board believes the compliance offi- cer has been given adequate policies, training and staff to ensure the bank will not encounter any issues when the regulators arrive for the compliance exam. So the exam should be a non-event right? Let’s talk about the process of an onsite visit. For the staff involved, this regulato- ry visit can be painful to endure, but it is necessary to ensure the safety and sound- ness of the bank. An overlooked mistake could be minor in the overall scheme of things; however, in the worst case scenario, it could cause major penalties up to and including personal liability for the board. So how do you know whether your bank is ready for an exam? How do you determine whether you’re conducting the proper periodic maintenance and routines to keep your compliance programs as effective as possible? The answer is simple by exam- iners standards - by exercising proper oversight of these programs at the board level. If only there was a definite way to determine what the regulators deem “proper” oversight. Oversight is carried out by reviewing the right reports with the right content at the right times. The board must ensure that they are being given solid, accurate information to carry By Darlia Fogarty, Director of Compliance, Compliance Alliance, Inc. The Regulators Coming! The regulators are coming, the regulators are coming… out their fiduciary duties as well as to make informed decisions. One way to do this is to demand quality reports at speci- fied intervals. Reports that are inaccurate, incomplete or delivered too infrequently may conceal weaknesses that should be addressed. Reports should occur at three basic intervals: monthly, quarterly and annually. Monthly reports should focus on the exe- cution of the board’s policies by delivering performance data and metrics. These reports should cover frontline activity and clearly demonstrate whether the day-to- day work of compliance is being done on time and accurately. Monthly reporting should expose where weaknesses may exist, and state the corrective actions being taken to remedy the deficiencies. Quarterly reports should focus on trends and analytics that demonstrate whether risk exposures are increasing or decreas- ing. The quarterly report gives insight into how the compliance program is func- tioning over time. These reports should contain information about regulatory trends and upcoming or changing rules in addition to considering the environmental and operating conditions that could affect the bank’s progress and performance. These reports should also summarize the results of compliance monitoring activities that occurred during the quarter and which activities are planned in the quarter ahead. This data allows directors to conclude what, if any, internal events or changes will influence the bank. In general, these reports show the up-to-the- minute state of preparedness for exams and audits. Finally, annual activities such as audits or third party reviews generate reports on the compliance program’s effectiveness. This annual look-back reflects how well the bank kept its risk exposures to acceptable levels. These types of reports often detail the overall effectiveness of the senior man- agement team and compliance manage- ment in carrying out their responsibilities. These reports take an independent look at the program to gauge its effectiveness, efficiency and performance over a histori- cal period. That being said, remember that, if the reports are not accurate or are considered to be inadequate, the reports will be of no benefit. When reviewing your bank’s reports, keep in mind the following signs
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