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Covering Your Bases McDonald


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Covering Your Bases McDonald

  1. 1. Prism 2017 Bringing Property Risk, Insights, Strategy & Markets to Light Surviving a Compliance Audit Frederick A. McDonald, Jr May 3, 2017
  2. 2. Safe and Sound Compliance Program Due to the intense pressure to reduce operating expense and regain revenue growth, commercial lenders need a coordinated and functional uniform system of managing and controlling compliance risk on a national level to adherence to federal, state, and local laws and regulations and related internal policies. Applies across the company in a consistent manner regardless of geographic location or business line. • Regulated by the Federal Reserve Bank of New York. • New York state Department of Finance and Consumer Financial Protection Bureau. 2
  3. 3. Safe and Sound Compliance Program • Firms need to run their business like they are preparing for a regulatory exam every day to have a culture of compliance • Be proactive addressing compliance challenges and establish solid operational processes that shows that you embrace your firms policy on a consistent basis. Also have the ability to detect and correct the problems. • A compliance manual should describe what is required from a regulatory perspective and an operations manual should describe best practices for working within the requirements. • Be familiar and updated on the Guidelines for your particular Examiner (i.e. Fed, OCC, FDIC, etc.). • Have qualified Compliance Officer and employees that attend industry conferences and seminars. • On-going risk testing and appropriate documentation is essential to show that you are in control. Track observations and recommendations from previous audits. 3
  4. 4. Risk Mitigation through the Life of the Loan Appraisal reviews to FIRREA, Interagency Appraisal and Evaluations Guidelines and USPAP Standards. Environmental Phase I (ESA) and Property Condition Assessment (PCA) reviews to ASTM Standards. Construction/Renovation Project Management oversight and monitoring. 4
  5. 5. Safe and Sound Compliance Program Elements of Commercial Lending Process 5
  6. 6. Compliance Program Authority / Responsibility / Structure 6 • Board • Senior Management • Director Risk Management • Corporate Compliance Director • Regulatory Compliance Manager 1. Oversees compliance CRA, HMDA, & other regulations • Compliance Officer [The staff (Legal, Audit, other departments)] is charged with managing compliance risk. • BSA/AML/OFAC Manager • Regulatory Risk Testing Manager (RRTM)
  7. 7. Objectives Provide the framework for internal controls to achieve effective compliance risk management within the organization. 7 • Minimize compliance risk caused by systemic or inadvertent violations and control weaknesses. • Identify and assign responsibility for all compliance tasks. • Provide a link between compliance tasks and the specific internal policies and procedures that detail who, how and when these tasks are to be performed. • Act as a resource for identifying approved policies and procedures and to whom the same are applicable. • Provide an effective framework for compliance communications and training to ensure management and employee awareness of compliance issues.
  8. 8. Objectives (cont’d) Provide the framework for internal controls to achieve effective compliance risk management within the organization. 8 • Provide the framework for a proactive response to regulatory or legislative changes that affect compliance. • Ensure the development and timely revision of policies and procedures in response to changes in compliance requirements. • Ensure that new services, products and systems, as well as changes to those that exist, satisfy regulatory and compliance-related requirements. • Integrate compliance controls into the day-to-day workflow and processes. • Ensure that compliance exceptions are detected, properly reported and corrected in a timely manner.
  9. 9. Objectives (cont’d) Provide the framework for internal controls to achieve effective compliance risk management within the organization. 9 • Ensure the use of technology to the full extent possible to control compliance risk, and detect and prevent instances of non-compliance with regulatory requirements, as well as to effectively monitor and control those compliance risks outside the reach of technology. • Ensure that regulatory risk monitoring procedures for compliance are in place and effectively implemented
  10. 10. Key Elements 10 Compliance Resources Testing Compliance Responsibility Policies and Standards Communication
  11. 11. Key Elements (cont’d) 11 Compliance Training Technology New Business Initiatives Issue/Exception Reporting and Corrective Action
  12. 12. Key Elements (Cont’d) 12 New Laws and Regulations Due Diligence Compliance Staff Continuing Education Consumer Complaints
  13. 13. Key Elements (Cont’d) 13 Support Examination Management
  14. 14. Maybe, this is not my first rodeo. 14
  15. 15. Sources & References 15 How to pass the Regulatory Exam – James Carney (byallacounts) Prepping & Surviving a Regulatory Exam – Appraisal & Environmental Kreeger Consulting – Mitch Kreeger, MAI, SRA, MBA Ready for Review – Tips to prepare your community bank’s next compliance exam – Ruth Razook Interagency Appraisal and Evaluation Guidelines Mortgage Bakers Association of New York (MBAofNY) Ace Your Banking Exam – Legal Compliance Bonnie S. Nachamie 7 Smith Street Merrick, New York 11556 (516) 678-7110 / EDR Collateral 360 - Vendor Management etc.
  16. 16. For questions, contact and/or further Information 16