Community Bank Internal Controls: The Ticket to Compliance - 2 Part Series

The major components of an effective Compliance Management System:

• The relationship between CMS governance and internal controls
• Board and senior management responsibilities
• The role of the compliance officer and business-line management
• The three lines of defense in a community bank
• Preventive, detective, and corrective controls
• Manual and automated controls
• Supervisory and management-review controls
• Segregation of duties and dual-control principles
• Approval limits and exception authority
• Reconciliations and exception reports
• Quality-control reviews and compliance monitoring
• Complaint data as a detective control
• Documentation and retention of control evidence,Identifying control gaps and control weaknesses
• Root causes of recurring compliance violations
• Scaling controls for a community bank

The workshop portion will include practical scenarios involving deposit, lending, marketing, disclosure, and customer-service activities. Participants will identify the regulatory risk, determine which controls are missing or ineffective, and recommend practical improvements.

A case study will guide participants through a CMS weakness in which the bank has adequate policies but continues to experience repeat compliance errors. Participants will evaluate whether the problem results from poor control design, inadequate execution, unclear ownership, insufficient training, weak monitoring, or ineffective corrective action.

Equal Credit Opportunity Act and fair lending:

• Fair Housing Act considerations
• Truth in Lending Act
• TILA-RESPA Integrated Disclosure requirements
• Real Estate Settlement Procedures Act
• Home Mortgage Disclosure Act
• Flood insurance requirements
• Servicemembers Civil Relief Act
• Military Lending Act
• Fair Credit Reporting Act
• Electronic Fund Transfer Act and Regulation E
• Truth in Savings Act and Regulation DD
• Expedited Funds Availability Act and Regulation CC
• Funds-transfer and remittance requirements
• Unfair, deceptive, or abusive acts or practices
• Overdraft and fee practices
• Advertising and marketing compliance
• Privacy and information-sharing requirements
• Customer complaint management
• Record-retention requirements
• Compliance risks involving third-party service providers

For each major area, the instructor will address:

• The highest-risk requirements
• Common operational breakdowns
• Typical examination or audit findings
• Preventive controls that can stop errors before they occur
• Detective controls that identify errors quickly
• Corrective controls that address affected customers and root causes
• Appropriate first-line monitoring
• Compliance testing considerations

The workshop will include case studies and participant scenarios involving common community-bank compliance failures. Participants will identify where the process failed, determine which control should have prevented or detected the issue, assign responsibility for the control, and recommend corrective action.

One case study will require participants to design a control framework for a high-risk compliance process. A second scenario will focus on a repeat violation and require participants to determine whether the bank&rsquo,s corrective action addressed the root cause or merely corrected individual exceptions.