Independent Banker - December 2018 - 20

PORTFOLIO
risk profile; and (4) ongoing monitoring
for reporting suspicious transactions and,
on a risk basis, maintaining and updating
customer information.
Banks must maintain written procedures
reasonably designed to identify
and verify the beneficial owners of legal
entity customers, and have appropriate
risk-based procedures to conduct ongoing
CDD; monitor to identify and report
suspicious transactions; and, based on
risk, maintain and update customer information.
In September, FinCEN made
permanent exceptive relief from beneficial
owner requirements for certain account
rollovers and renewals.
Prepaid Accounts and the Electronic Fund Transfer Act
(Regulation E) and Truth in Lending Act (Regulation Z)
In October 2016, the CFPB issued a final rule creating federal
consumer protections for prepaid financial products
under Regulations E and Z. The rule amends Regulation E,
making a minor modification to Regulation Z for accounts
with an overdraft feature. Compliance with the prepaid
" We will benefit from a few of
the changes [in S.2155], but
many are coming too late. "
-Tim Grooms, First State Bank
rule (originally set for Oct. 1, 2017) will begin April 1,
2019, and prepaid account issuers were required to submit
all their prepaid account agreements to the CFPB beginning
Oct. 1, 2018.
Compliance management and oversight
The industry is feeling the effects of political and administrative
changes in Washington, D.C. In February, the
CFPB released a strategic plan for 2018-2022. The plan
imposes financial discipline, reduces wasteful spending
and restricts the agency's enforcement authority. While a
limited number of community banks are under the direct
supervision of the CFPB, financial institutions on a broad
scale could be affected by changes in the agency's rulemaking
authority.
In May 2018, Congress passed S.2155: the Economic
20 Q ICBA Independent Banker Q December 2018
Growth, Regulatory Relief, and Consumer Protection Act.
Some of the more noteworthy provisions are aimed at less
intrusive reporting and examination practices, including:
Q permitting less regulatory oversight for banks between
$50 billion and $250 billion in assets
Q exempting banks with less than $10 billion in assets
from some rules
Q requiring federal regulators to take the size of banks into
account when constructing regulations.
How might this regulatory " easing " affect community
banks' compliance program administration? Probably not
much, according to both Grooms and Tripp.
Tripp welcomes regulatory relief but says his community
bank has not adjusted or loosened its compliance risk
tolerance in response. He adds, " Our compliance program
continues to focus on enhanced methods for internal
monitoring to identify and correct issues in a 'real-time' or
more timely manner. "
" We will benefit from a few of the changes, " says
Grooms, " but many are coming too late. For instance,
we've implemented systems and trained our staff for the
HMDA changes, and the relief would require us to undo
much of what we've worked diligently on for the past year
or more. We do see a shift back from Dodd-Frank to allow
community banks to help communities and customers.
" In any case, we have strong management support for
compliance as a valuable element of risk management, " he
adds, " and we'll continue to evaluate, enhance and apply
our program to mitigate that risk. "
Mary Thorson Wright, a former Federal Reserve examiner, is
a freelance writer in Virginia.
Independent Banker - December 2018

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