By Katalina M. Bianco, J.D.
The American Bankers Association held its 2018 regulatory compliance conference June 24 - 27 in Nashville, Tenn., and it was, as usual, informative and interesting.
Overview. Attendees were introduced to a new area of banking operations this year: managing conduct risk. Conduct risk is actually misconduct risk as it applies here. The managing of conduct has become a major concern in light of the Wells Fargo sales practices fiasco. Institutions have responded by developing and implementing best practices to rein in misconduct issues.
Also featured in this year’s conference: Bank Secrecy Act/anti-money laundering; modernization of the Community Reinvestment Act; banking in the digital age; and the new statute with the name that nobody could remember—the Economic Growth, Regulatory Relief, and Consumer Protection Act, simply referred to as S. 2155 or the Crapo bill.
Conduct and culture. A team led by a senior representative of Wells Fargo (a bit of irony there but who better to know the aftermath of reputational risk?) discussed lessons learned in the aftermath of the sales practices debacle and how financial institutions have begun to formalize those lessons. The session covered the elements of conduct risk, how conduct risk management frameworks are constructed, the various roles and responsibilities of bank personnel, and leading practices on controlling conduct risk.
BSA/AML and the need to digitalize. While BSA and anti-money laundering discussions have been staples at the ABA conferences for many years, this year the focus was on the need to drag this area of practice into the 21st century. Speakers referred to the BSA as "woefully behind" in its progress given the importance in this day and age for protections against money laundering activities. Using technology is key, but there are challenges. Speakers described testing done by the Financial Conduct Authority in London to determine if issuing a regulation via code rather than text is feasible. The test was a success. The FCA has gathered hundreds of bankers, regulators, and techies, observed by six U.S. regulatory agencies, to apply the technology to the BSA.
Modernization of the CRA. As stressed by a number of moderators and speakers, including the banking regulators, it’s also time to modernize the CRA. Banking has changed over the years, but the CRA has remained stagnant. The regulators named CRA modernization as their number one priority and indicated that inter-agency discussions have been ongoing. The industry is expected to see an advance notice of proposed rulemaking in the near future. The regulators are hoping to receive feedback on the ANPR that they can use to move forward on a proposal. Speakers predicted that CRA reform not only is imminent, it will be as significant, if not more so, than the last reform conducted in 1995.
Banking in the digital age. A number of sessions at the conference addressed the challenges and benefits of banking in the digital age. Topics covered e-lending, social media, website "rehab," compliance risks in the new payments world, accounts opening concerns, data mining, and big data.
S. 2155 is here. The implications of S. 2155 were discussed and analyzed and certain provisions highlighted for their applicability to the compliance space.
The standards and the CFPB. Finally, the ABA presented an avalanche of materials targeting the compliance standards, such as: implementation of Home Mortgage Disclosure Act rules; mortgage servicing rules; fair lending; and UDAAP. Discussion about the role of the CFPB (or BCFP?) moving forward was interspersed throughout the conference.
Take away. All in all, a conference well worth attending. Next year: New Orleans!
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