ABA RCC – Reporter’s Notebook
Monday was another great day of informative sessions at the ABA’s Regulatory Compliance Conference in New Orleans. A couple of my favorites were “Legal Risk” and “The Right Tool for the Job: Effective 2nd Line of Defense Compliance Testing”.
The “Legal Risk” session discussed how to measure, manage and track legal risk and how to determine when to involve an attorney. Some of the key points and recommendations were: 1) complete a risk profile focusing on legal and compliance and taking into consideration legal requests and complaints, 2) compile a list of possible attorneys and recognize when to involve legal counsel (e.g. if something has potential to turn into litigation), 3) inform the bank’s insurance company if litigation might arise and inform the bank’s attorney about any coverage an insurance policy might provide, 4) track actual and possible litigation issues using a spreadsheet or other tools, 5) develop an incidence response plan and team to help manage the legal issue, and, finally, 6) emphasize to those involved the importance of confidentiality. One other point worth noting is that many banks have attorneys who serve as Directors; these Directors, who also happen to be attorneys, should not give legal advice as part of their role as Director. If you have an attorney on your Board of Directors, consider disclosing to the Board of Directors not to expect legal advice from that Director. This was a great session with very knowledgeable speakers.
Another valuable session with great dialogue among the speakers was “The Right Tool for the Job: Effective 2nd Line of Defense Compliance Testing”. It referenced the 2005 Basel guidance as the baseline for an effective compliance program. The presenters noted, the breakdown of implementing a second line of defense begins with a formalized framework (policy, charter and purpose). Additionally, you should develop a performance plan including an annual plan and scope (track progress of completion), oversight and accountability (reporting, tracking and corrective actions), and staff needed to accomplish the goals. And when an examiner is confident in your process and relies on your testing during an exam, you’ll know you have done something right…very right.
Reported by Robin Cooper