You are most likely familiar with the Financial Crimes Enforcement Network (FinCEN) which is a bureau of the Treasury Department. FinCEN’s mission is “to safeguard the financial system from illicit use and combat money laundering and promote national security” through the use of financial services information.
Bank Secrecy Act (BSA) Anti Money Laundering (AML) regulations previously applied to banks and credit unions, but over the past three decades the law has been expanded to cover a very wide array of financial institutions, maybe even yours. Today, FinCEN maintains webpages for money services businesses (MSB), depository institutions, the insurance industry, securities and futures, casinos, and more. … Continue reading
The Office of the Comptroller of the Currency (OCC) is focused on the responsibility of financial institutions—national banks and Federal savings associations—to be responsible for the risk management of business operations whether they are performed internally or through third party vendors.
CIT companies are clearly included in this mandate.
The OCC recognizes that the growing interconnectedness of banks with third party cash management service providers has created new sources of risk due to gaps or inconsistencies of controls that can occur where distinct businesses interface. In everyday terms, this means there can be situations where “no one is in charge.”
Since the OCC is responsible for the security of the overall financial system, it is moving to make banks accountable for the gaps and inconsistencies between them and third party vendors that may pose risk to the system.
This creates specific kinds of difficulties for banks because they can be held accountable for the actions of organizations they do not own. Banks and their third party vendors, including CIT businesses, have different regulatory, standard practice, and incentive profiles, as well as different cultures and assumptions. It will take especially thorough due diligence to write contracts that lay out the important responsibilities and performance expectations for the different parties to get all the entities on the same page.
In these circumstances, monitoring performance takes on greater importance. There is a substantial possibility that unanticipated gaps or inconsistencies will emerge despite careful risk management planning. Banks have a strong incentive to measure performance and find irregularities as quickly as possible. … Continue reading