Don’t Let the Grinch of Costly Compliance Errors Steal your Holiday Cheer

Cindy LeBlanc
Cindy LeBlanc – Senior Compliance Advisor

Welcome back everyone. I hope you had a wonderful Thanksgiving holiday! As 2019 winds down, our Temenos Compliance Advisory team wants to provide a glimpse of tomorrow’s Temenos Talks webinar, Hairy Holiday Happenings.

What do online banking, TRID, Flood, SCRA and marketing programs have in common? Well, other than the obvious word — compliance, costly errors can be made in these areas while trying to comply with the various components of each. Our team will discuss these topics in detail tomorrow during a free Temenos Talks presentation. The Temenos Compliance Advisors will provide guidance on what to do when a nightmare of errors happens in your financial institution’s day-to-day activities.

Opening Accounts Online

For example, obtaining and verifying identification can become a nightmare when opening accounts online. To prepare for the unexpected and mitigate the risk of those nightmares, each financial institution should include the following in their CIP program:

  • Circumstances in which the bank should not open an account
  • The terms under which a customer may use an account while the bank attempts to verify the customer’s identity
  • When the bank should close an account, after attempts to verify a customer’s identity have failed
  • When the bank should file a SAR in accordance with applicable law and regulation

TRID’s Timing Troubles

And what about TRID’s timing troubles? Be sure to train your staff thoroughly, so they understand that receipt of the following six items triggers the Loan Estimate (LE) to be provided or placed in the mail by the end of the third business day

  • Name
  • Requested Loan Amount
  • Income
  • Social Security Number
  • Estimated Value of the Property
  • Property Address

Documentation is the primary key to being able to demonstrate compliance with the timing rules in TRID.

Flood Rules

Floating along down to the flood rules where several areas can lead to costly mistakes. Consider a “no value” structure that is located within a Special Flood Hazard Area (SFHA). As long as that structure has at least two rigid walls and a roof, and is permanently affixed and part of your collateral, then you have a designated loan, which requires flood insurance. Closing the loan without the required flood insurance is an expensive mistake. One of the ways to mitigate the risk of this happening is to provide detailed training to staff, implement a quality control process before loan closing and monitor or audit the area after loan closing.

Servicemembers Civil Relief Act

Moving right along, let’s look at SCRA. Did you know that the John S. McCain National Defense Authorization Act for Fiscal Year 2019 amended the SCRA to permit the service member to bring in a copy of their orders or any other appropriate indicator of military service, including a certified letter from a commanding officer? If you have not already done so, we recommend that you adjust your procedures to account for this change. Although the SCRA states that a certified letter from a commanding officer is an appropriate indicator of military service, the SCRA does not define what an appropriate indicator of military service is. A few examples include an unexpired military ID showing the service member is on active duty, a Leave and Earning Statement (the military version of a paystub), a certified letter from a personnel officer, or a copy of the DMDC database.

Marketing Programs

Wrapping this up, let’s move on to melodramatic marketing programs. Advertising rules involve Unfair, Deceptive, or Abusive Acts or Practices (UDAAP) as well as Sweepstakes requirements and Lottery prohibitions. While marketing programs may involve some amazing ideas, sometimes those programs don’t always line up with compliance requirements.

Giveaways and contests are a great example. Financial institutions must tread carefully to ensure they are not sponsoring a lottery when they design a giveaway or contest to promote a new product or branch opening.

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Cindy LeBlanc
Cindy LeBlanc – Senior Compliance Advisor