Next Level Risk-Based Pricing is Coming: Beyond Decisioning and Pricing is Outcome Analysis

When economic times are good and funds are relatively easy to lend without meaningful short-term risk, most financial institutions find themselves in strong positions from a credit risk and earnings perspective. Yet, the tough lessons of lending and risk over the past 30 years have taught us many times over that economic cycles repeat. It’s an all-too-often forgotten pattern that reminds us that good times, which always seem to feel like they are here to stay, only last so long.

Each of the major economic Continue reading →

Compliance Abhors a Vacuum – If the Void Is Filled with Heightened BSA Scrutiny, Would You Be Ready?

Originally appeared in CBIZ Insights

While a climate of regulatory relief sweeps across the industry, it is a prudent compliance officer who keeps both feet on the ground and considers what risks such a climate could possibly present. Beyond awareness that regulatory enforcement is cyclical and subject to potentially rapid changes based on external or internal events, there’s another potentially more-immediate threat to consider.

Although some areas have been removed from the regulatory playing field by new thresholds, that doesn’t mean regulators go away until Continue reading →

In Search Of Compliance Independence From Your ISO? (Good Luck With That)

In banking, disclosures matter, especially when it comes to credit cards. The rules, and they are not a few, are specifically spelled out in great detail. Where it can get a little fuzzy is when third parties enter the equation. This is especially true with third parties known as independent service organizations, or ISOs, as Mid America Bank & Trust Company, located in Missouri, found out late last year.

ISOs may purchase charged-off or past-due consumer debt from financial institutions, then issue the consumer a Continue reading →

The Wheels on the BSA Go Round and Round: In Pursuit of the Well-Written SAR Narrative (Part 2)

Consider your BSA program as one of the wheels that supports the vehicle that is your compliance program. Within this wheel, there are several smaller components—the rim, axle, and spokes could perhaps be considered due diligence, training, and suspicious activity monitoring. For BSA, one of these crucial pieces is the suspicious activity report (SAR) narrative.

SAR narratives can be one of the more problematic areas of BSA compliance, but they are also an important tool for helping government authorities fight criminal financial activity. Missing, faulty, Continue reading →

In Pursuit of the Well-Written SAR Narrative

Suspicious Activity Report (SAR) narratives can be one of the more problematic areas of BSA compliance. However, not only are SARs an important tool for government authorities to help fight criminal financial activity, they frequently trip up financial institutions in examinations, leading to potentially costly fines and an adverse impact on their reputations, which is why it is crucial to make your SAR narrative as thorough as possible.

Furthermore, if you can get the SAR narrative down, you’ve gone a long way to demonstrating the Continue reading →

Social Media and Your Financial Institution: Why and How

In the age of digital media marketing, regulators continue to turn their heads toward social media use. Whether your financial institution has embraced social media marketing or not, best practices for risk management recommend having social media procedures for current or potential future use.

Here we take a look at different aspects of social media and what it has to do with your financial institution.

Why Social Media?

Social media is more than “selfies” and connecting with old high school acquaintances; it is a way to reach Continue reading →

Two Definitions to Help you Understand FinCEN’s Customer Due Diligence Requirements

Originally published on CU Insight.

At present, banks and credit unions are not required to know the identity of the individuals who own and/or control their legal entity customers or members. FinCEN and the federal law enforcement agencies have long seen this as a weakness in the BSA/AML programs that financial institutions are required to administer. So, FinCEN came up with a new rule to combat that vulnerability.

Effective July 11, 2016, FinCEN’s new rule is designed to address this concern by requiring financial institutions to Continue reading →

The Secret BSA/AML Weapons of Smaller Financial Institutions (Part 2)

The ever-increasing importance of a robust BSA/AML monitoring system has become more than clear in recent years. However, an all-encompassing monitoring system often feels beyond the reach of the smaller financial institution. Resources are finite, and some institutions are left floundering when attempting to cover all their bases. What must your small financial institution do to determine whether its BSA/AML monitoring system is as sound as those applied by their far larger counterparts?

In Part 1 of this two-part post, we discussed the first secret weapon vital Continue reading →

ECOA Tug-of-War Continues on a National Level

The U.S. Supreme Court stirred up quite a bit of confusion for lenders concerning the Equal Credit Opportunity Act. Whether or not guarantors are considered applicants under the Equal Credit Opportunity Act and Reg. B has traditionally depended on which court’s jurisdiction the guarantor resides in. Having different rules in each jurisdiction made it harder for lenders to determine if guarantors are applicants or not. Lenders hoped the tug-of-war could be settled once and for all.

Taking it to Court

Hawkins v. Community Bank of Raymore Continue reading →

Harvesting the Highlights of the Rural Communities Act

The CFPB’s new interim final rule on Reg. Z will have an impact on operations in rural and underserved areas. But what exactly is an interim final rule, and what does it mean to your financial institution?

An interim rule is a kind of hybrid between a final rule and a proposed rule. In this case, it means this rural and underserved area rule went into effect on March 31 of this year, but the public is still permitted to comment on the provisions, and Continue reading →