This document discusses establishing an effective compliance program at commercial lenders. It notes the intense pressure for cost reduction and revenue growth that requires a coordinated compliance risk management system. An effective program has elements like qualified compliance staff, risk testing, documentation, and addressing regulatory changes. Key elements include compliance resources, testing, responsibility, policies, communication, training, technology, issue reporting, and adapting to new laws. The document provides sources for further information on preparing for and passing regulatory exams and compliance program best practices.

1. Prism 2017
Bringing Property Risk, Insights, Strategy & Markets to Light
Surviving a Compliance Audit
Frederick A. McDonald, Jr
May 3, 2017

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.
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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.
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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.
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5. Safe and Sound Compliance Program
Elements of Commercial Lending Process
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6. Compliance Program
Authority / Responsibility / Structure
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• 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. Objectives
Provide the framework for internal controls to achieve effective compliance risk management within the organization.
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• 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. Objectives (cont’d)
Provide the framework for internal controls to achieve effective compliance risk management within the organization.
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• 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. Objectives (cont’d)
Provide the framework for internal controls to achieve effective compliance risk management within the organization.
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• 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. Key Elements
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Compliance Resources
Testing
Compliance Responsibility
Policies and Standards
Communication

11. Key Elements (cont’d)
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Compliance Training
Technology
New Business Initiatives
Issue/Exception Reporting and Corrective Action

12. Key Elements (Cont’d)
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New Laws and Regulations
Due Diligence
Compliance Staff Continuing Education
Consumer Complaints

13. Key Elements (Cont’d)
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Support
Examination Management

14. Maybe, this is not my first rodeo.
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15. Sources & References
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How to pass the Regulatory Exam – James Carney (byallacounts)
Prepping & Surviving a Regulatory Exam – Appraisal & Environmental
Kreeger Consulting – Mitch Kreeger, MAI, SRA, MBA
http://www.LinkedIn.com/in/MitchKreeger
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 / bonnie@nachamie.com
EDR Collateral 360 - Vendor Management etc.

16. For questions, contact and/or further Information
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