Preparing for Regulatory Visits in 2020

Compliance expert, Cindy LeBlanc, identifies key focus points for the NCUA and OCC in 2020.

Cindy LeBlanc
Cindy LeBlanc – Senior Compliance Advisor

Now that you have had a chance to get a couple of months of the year 2020 under your belt, you may be wondering what the year holds for examination focus. While we do not have a crystal ball, the NCUA and OCC have given us a peek into their focus for the year 2020. Join me as we look at their lists – you may find some commonality between the two agencies.


Bank Secrecy Act/anti-money laundering (BSA/AML)
Customer due diligence and beneficial ownership requirements will continue to be emphasized in upcoming examinations. The proper filing of Currency Transaction Reports (CTRs) and Suspicious Activity Reports (SARs) including timeliness of filing and clear information provided in the narrative will be included in the review.

Consumer Financial Protection
Regulation E (EFTA)
Policies, procedures as well as initial account disclosures are on the radar. Also ensure your consumer error resolution procedures have been reviewed and updated as needed. Ensure that you have resolved errors in a timely manner, provided notification when required and complied with the specified liability requirements.

Fair Credit Reporting Act (FCRA).
Review and update policies and procedures for credit reporting including accuracy of reporting information to credit bureaus. Pay special attention to the reporting date of the first delinquency.

Privacy Act (Gramm Leach Bliley – GLB)
Ensure your Privacy Policy is consistent with your practices. The protection of consumer’s non-public personal information (NPI) is vital.

Payday Alternative and other small dollar lending.
Review your process with NCUA Payday Alternative Lending (PALs) rules and interest rate cap. Short-term, small-dollar loan programs that are not PALs will be under scrutiny as well.

Truth in Lending Act (Regulation Z).
Accurate disclosure of finance charges and annual percentage rates (APRs) as well as late fees will be reviewed. Take a look at your process for applying loan payments – including principal, interest, fees and other charges. Consistency of the application of loan payments with disclosures and written agreements is key.

Military Lending Act (MLA) and Servicemembers Civil Relief Act (SCRA).
There is an ongoing priority for MLA and SCRA in 2020. If your credit union has not received an MLA and SCRA review recently, be prepared and expect a review for MLA and SCRA compliance.

Other Items

Credit Risk
Underwriting standards and procedures will be emphasized in examinations.

Current Expected Credit Losses (CECL)
Even though credit unions have up to January 2023 to comply with the CEC standards, examiners will be discussing the plans credit unions have for implementation. So, be prepared to have these discussions.

Information Systems and Assurance (Cybersecurity)
The NCUA began cybersecurity maturity assessments for credit unions with assets of $1 billion or more in 2018, and those with assets greater than $250 million up to $1 billion in 2019. In 2020, NCUA will continue with the assessments for credit unions with assets greater the $250 million and also begin assessments for credit unions with assets size greater than $100 million in 2020.

London Interbank Offering Rate (LIBOR) Cessation Planning
Since the United Kingdom’s Financial Conduct Authority has announced it cannot guarantee the availability of LIBOR after 2021, examiners will be assessing credit unions’ “exposure and planning related to the discontinuance of LIBOR”. Ensure your senior management is actively developing a plan related to the discontinuance of LIBOR.

Liquidity Risk
Liquidity management and planning is also on the examiner’s radar for 2020.

Hemp Businesses
Examiners will use examinations to assist in gathering information to indicate the various types of services that credit unions provide to hemp related businesses. The NCUA states that guidance on banking hemp businesses will be forthcoming.

Supervisory Committee Audits Rule
Part 715 was amended effective 1/6/2020 and provides additional flexibility regarding financial statement audits.


Cybersecurity and operational resiliency
Examiner focus will include evaluating information technology risk management and systems maintenance.

Customer due diligence and beneficial ownership; suspicious activity monitoring and reporting; risk assessments in relation to the complexity of the institution; and technology solutions in relation to monitoring and oversight are the focus points for BSA exams.

Commercial and retail credit
Underwriting practices, evaluating credit risk appetites, portfolio exposure, portfolio administration, independent loan review, concentration risk, policy exception tracking stress testing, collection management and collateral valuation will be on the examination radar.

Impact of changing interest rates
Examiners will be paying close attention to risk exposures, deposit costs, funding migration, asset valuations, borrower debt service capacity, and housing affordability.

Current expected credit losses (CECL) accounting standard
Is your institution prepared? Examiners will be considering various implementation dates as they review bank implementation plans and use of third-party vendors to assist in methodology, modeling, and management information systems development.

LIBOR phase-out preparation
Do you have a phase-out plan in place? Focus on risk assessment, vendor management, change management as well as any other compliance and operational risks involved in utilizing an alternate index for loan and deposit pricing.

Technological innovation and implementation
Does your institution utilize cloud computing, artificial intelligence, digitalization in risk management processes? Ensure you have updated your risk assessment with any new products and services, as well as your strategic plans relating to the various technological advances.

Thank you for joining me in looking toward the future, The Temenos Compliance Advisory Services team invites you to join with us as we forge ahead in 2020.

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Cindy LeBlanc
Cindy LeBlanc – Senior Compliance Advisor