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Compliance Management

Compliance Management

Use Case for Assessing Risk on Compliance Management

Why assess the risk? A compliance management system is the method by which the bank manages the entire consumer compliance process. It includes the compliance program and the compliance audit function, sometimes referred to as compliance review or self-assessment (fair lending). The compliance program consists of the policies and procedures which guide employees’ adherence to laws and regulations. The compliance audit function is independent testing of an institution’s transactions to determine its level of compliance with consumer protection laws, as well as the effectiveness of, and adherence with, policies and procedures. Non-compliance with law and regulation weakens the bank and exposes it to dollar losses, regulatory censure (including civil money penalties levied against directors), customer complaints, inaccurate reporting and potential lawsuits.

Who should assess the risks? Compliance Officer, BSA Officer, Chief Operating Officer

How to assess the risk: Rate the KRIs to determine if a threat would successfully exploit a vulnerability and to justify expenditures to implement countermeasures to protect the bank’s assets or reputation. Use the “Focus Risk Assessment” tool for in-depth analysis of risks and mitigation techniques.

 

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Mortgage Banking

Use Case for Assessing Risk on Mortgage Banking

Why assess the risk? Mortgage banking generally involves loan originations, purchases and sales through the secondary mortgage market. An operational breakdown or general weakness in any part of a bank’s mortgage banking activities can harm its reputation. For example, a bank that services loans for third party investors bears operational and administrative responsibilities to act prudently on behalf of investors and borrowers. Misrepresentations, breaches of duty, administrative lapses, and conflicts of interest can result in lawsuits, financial loss, and/or damage to the company’s reputation. In addition, a bank that originates and sells loans into the secondary market should follow effective underwriting and documentation standards to protect its reputation in the market to support future loan sales. The applicable risks associated with mortgage banking are: credit risk, interest rate risk, price risk, transaction risk, liquidity risk, compliance risk, strategic risk and reputation risk.

Who should assess the risks? Chief Credit Officer, Credit Administrator, Chief Mortgage Lending Officer, Chief Lending Officer, Loan Servicing Mgr., Compliance Officer

How to assess the risk: Rate the KRIs to determine if a threat would successfully exploit a vulnerability and to justify expenditures to implement countermeasures to protect the bank’s assets or reputation. Use the “Focus Risk Assessment” tool for in-depth analysis of risks and mitigation techniques.