“Use of third parties reduces management’s direct control of activities and may introduce new or increase existing risks, specifically operational, compliance, reputation, strategic, and credit risks as well as the interrelationship of these risks. Increased risk most often arises from greater complexity, ineffective risk management by the bank, and inferior performance by the third party.” – Office of the Comptroller of the Currency, October 30, 2013 Bulletin

It’s well established that banks are increasingly turning to third parties to handle a wide range of activities and processes, from cash transport and ATM replenishment to IT and other services. However, when you examine the latest standards and scrutiny placed on financial institutions by the FDIC, CFPB, FFIEC, OCC, FinCEN, and others, it is clear that whether the activities are being performed by the bank itself or a third-party vendor, it’s the bank that carries the bulk of the risk. … Continue reading