Top Ten Ways To Prepare For A Compliance Exam

There are many things throughout our lives we dread. One of the earliest I remember is, "Wait 'til your father gets home!" You knew you were in for it for whatever it was you did but should NOT have. Then there was the dread of playing that far superior team the next week that you knew would beat you to a pulp (literally and otherwise). Later in life, it was "Oh, no, what is going to happen next?!"

As a compliance officer, "dread" is seeing the name of your bank on the FDIC CRA Examination List for an upcoming quarter. Of course, everyone dreads the exam, but likely no one more than yourself, the compliance officer. Then comes the question that always comes next from compliance officer clients, "Well, what areas do I need to really ensure are in order?" So here is my top ten list:

  1. Your prior regulatory exam findings. Never let the examiners see that prior finding on a subsequent exam.

  2. Your Compliance Management System. Better make sure your Compliance Control Self Assessment Program for Retail Branches and Departments is operational, functional, and competent. Make sure loan and deposit side compliance trend reporting is functional, competent and reported to management and the board.

  3. Your independent reviews. Ensure adequate coverage and corrective action on findings cited.

  4. Training of staff and board.

  5. Customer Complaint Policy, Processes, Trend Reporting and inclusion of third party vendors in the process.

  6. Compliance Aspects of Third Party Vendor Management (documentation)

  7. Accuracy and Integrity of Credit Bureau reporting by the Financial Institution.

  8. Testing Aspects of Third Party Vendors to ensure their compliance (examples – are credit card disclosures or investor documentation packages compliant?)

  9. Fair lending documentation and approval of rate and underwriting deviations.

  10. Community Development qualifying loans, investments and services if an Intermediate Small Bank financial institution for CRA purposes.

Yes, we all dread that exam. However, coverage of a top ten list such as this highlights the preparation necessary to face that exam with confidence.