Flashcards in Misc Deck (89):
generally strong compliance position; capable M; system of internal operating procedures and controls has been established to ensure compliance, but violations occurred, but involve technical aspects of the law or result from oversight;
conduct affairs in a generally adequate manner;
policies and procedures governing important phases of administration or operations may be nonexistent or inadequately defined, but practices are generally appropriate to faithfully discharge the department’s fiduciary obligations
IT Composite Rating?
self-assessment practices are weak and are generally reactive to audit and regulatory exceptions;
repeat concerns may exist, indicating M may lack the ability or willingness to resolve concerns;
financial condition of the service provider may be weak and/or negative trends may be evident;
while financial or operational failure is unlikely, increased supervision is necessary;
formal or informal supervisory action may be necessary to secure corrective action
IT Composite Rating?
modest weaknesses, corrected in normal course;
RM processes adequately identify and monitor;
strategic plans may require clarification, better coordination or improved communication throughout, so M anticipates but responds less quickly to changes in needs
How do you cite apparent violations of Part 326 for BSA?
(b) (1) program weaknesses
(b) (2) CIP weaknesses
(c) cited for specific pillar
Meeting with D- Composite 1 or 2?
36 months or more since the last such meeting
M is rated 3,4, or 5
Any 2 components are 3,4, or 5,
Any component is 4 or 5
Could be B committee if the committee influences policy, meets regularly, consists of reasonable outside representation, and reports regularly to the full B.
may be significant non-compliance with laws and regs;
RM practices unacceptable;
close supervisory attention required;
formal EA necessary;
poses risk to the DIF;
failure a distinct possibility
What are the CRA ratings?
Only Saban Needs Saving
What type of business fall under Phase I BSA exemptions?
U.S. dept or agency
Entity established by a U.S. state or political subdivision
Stock traded on the NYSE, NASDAQ (or a sub if 51% owned by the publicly-traded entity)
operating procedures and controls aren’t effective and require strengthening, may be accomplished by designating a CO and implementing a comprehensive and effective compliance program; by identifying marginal compliance early, additional supervisory measures can eliminate violations and prevent further deterioration
Meeting with D - Composite 3?
What is the CMP penalty for late or false Call Reports? Inadvertent, not inadvertent, first/second offense, false
Inadvertent: $3,200/day (T1)
Not inadvertent: $32,000/day
Tier 1: $3,200/day
First Offense: $330/day for 15 days then $600/day
Second offense (within 5 qtrs): $550/day for first 15 days then $1,100/day
Tier 2: $32,000/day
False T1: $3200/day T2: $32,000/day
Knowingly or recklessly with disregard: lesser of $1,425,000 or 1% TA.
IT Composite Ratings?
M doesn’t address the technological needs of the entity;
M doesn’t correct audit and regulatory concerns;
financial condition of the service provider is poor and failure is highly probable due to poor operating performance or financial instability;
ongoing supervisory attention is necessary.
What are the min requirements of Trust Department Management?
Trust dept needs to be its own separate department with trust assets separated from the bank
Must have separate books and records from the bank and reflect all activities
some problems of relative significance may exist, but none are of such importance as to pose a threat to the trust beneficiaries or to the soundness of the bank;
M is adequate;
the supervisory response is limited to follow-up on correction of criticizable features.
How many days prior must the FDIC be notified of a change in control in an institution?
IT Composite Rating?
some degree of supervisory concern from moderate to severe weaknesses;
if weaknesses persist, further deterioration in the condition and performance of the bank or service provider is likely;
RM processes may not effectively identify risks and may not be appropriate;
strategic plans are vaguely defined and may not provide adequate direction for IT initiatives, so M often has difficulty responding to changes in needs of the entity;
What point in the CMP point scale will penalties be accessed?
individuals: > 40
Institutions: > 60
What is the deadline to file a SAR?
Within 30 calendar days of detecting criminal activity
If unable to identify a suspect within 30 days, can delay reporting for another 30 days
When is CTR filed?
Currency transaction over $10K
deposits, withdrawals, exchanges, or transfer
Change in control - what is the definition of control?
Acquiring person will own, control, of hold power to vote 25% or more of any class of voting securities of the institution
Rebuttable presumption: Acquiring person or persons will own, control, or hold power to vote 10% or more of any class of voting securities and if:
the institution has securities registered under SEC, or no other person will own, control, of hold the power to vote a greater percentage of that class of voting securities.
immediate outside financial or other assistance is needed to remain viable;
ongoing supervisory attention is necessary;
pose a significant risk to DIF;
failure highly probable.
Calculate exam interval
Start counting: from the date the ROE was submitted by the EIC, or 60 days from the LX start date, whichever is less.
Why are CMPs assessed?
Punish the violator and deter future violations
needs strongest supervisory attention and monitoring; substantial non-compliance with consumer statutes and regs; M has demonstrated its unwillingness or inability to operate within the scope of consumer statutes and regs
What are the minimum requirements for CIP?
no component worse than 3;
well within the B and M’s capabilities and willingness to correct;
stable and are capable of withstanding business fluctuations
What is the statute of limitation for 8(e) and CMP actions?
5 years of the transaction that is the cause of the action, but in a court case 5 years from time of loss
CTR required info?
Amount and description of transaction
When should a limited scope exam be done?
Change in risk profile
Monitor compliance with a corrective program
Investigate unusual or adverse situations
Determine progress in correcting deficiencies
Assess compliance with supervisory requirements established through an order
What are the primary factors in determining CMP assessment amounts?
Financial resources of the individual charged
Involvement of individual charged
Gain to the individual
Amount of loss
Gravity of the violation
What are the IT components that are rated?
Development and Acquisition
Support and Delivery
such problems pose a threat to beneficiaries, and if left unchecked, could evolve into conditions that could ultimately undermine public confidence in the bank;
such departments require special supervisory attention.
314 (a) vs 314 (b)
314 (a) mandatory information sharing between U.S. Govt and financial institution
314 (b) voluntary information sharing between financial institutions
IT Composite Rating?
in need of immediate remedial action;
serious weaknesses may exist throughout the org.
RM processes are severely deficient and provide M little or no perception of risk;
strategic plans don’t exist or are ineffective;
M and the B provide little or no direction for IT initiatives
less than satisfactory; cause for supervisory concern; requires more than normal supervision to remedy deficiencies; violations may be numerous; repeat violations may be uncorrected; any overcharges involve a few people and minimal dollars; no discrimination; M may have the ability to comply, but increased efforts are necessary; numerous violations indicate M hasn’t devoted sufficient time and attention
substantial compliance with laws and regs;
RM practices are satisfactory;
no material supervisory concerns;
supervisory response is informal and limited
IT Composite Ratings?
financial condition of the service provider is severely impaired and/or deteriorating;
failure of the bank or service provider may be likely unless IT problems are remedied;
close supervisory attention is necessary, and in most cases, formal enforcement action is warranted.
RM practices may be less than satisfactory;
require more than normal supervision;
may include formal or informal EAs;
failure appears unlikely b/c of overall strength and capacity.
What are the essential components of an effective IT MIS?
exam schedule for non-insured converting to insured?
full scope within 12 months of the last exam prior to conversion
M hasn’t exerted sufficient effort to ensure compliance; attitude may indicate a lack of interest that may have contributed to the seriousness of problems; internal procedures and controls haven’t proven effective and are seriously deficient; prompt supervisory action may enable the bank to correct deficiencies and improve its compliance position
How should evidence of support for a CMP be stored?
Copied and retained in the FO, segregated in a labeled envelope, and kept apart from regular workpapers.
CMP may be assessed for the violation of:
Laws or regs
Final or temp orders
Written condition in FDIC applications
exam schedule for bank converting to non-member
full scope within 12 months of the last ex prior to conversion
What is the criteria for the FDIC's reliance on state examinations?
formal/informal arrangements between the state and FDIC are adequate
Ind. determination can be made about the bank's condition based on the State's ROE
Documentation supports the assessments and findings of the Report
Meet exam objectives
Part 364 requires banks to have IS programs with the following safeguards?
what is OFAC?
Regulation that requires FI to block accounts and other assets and prohibits unlicensed trade with specific countries
There is not any regulatory program requirement for compliance; however, FI are subject to the prohibitions and reporting required by OFAC regulations.
What is the review requirements for Phase I? (BSA)
Annual review performed only for listed public company and sub
Some degree of supervisory concern in 1 or more component;
moderate to severe weaknesses, but no component worse than 4;
Management may lack ability or willingness to effectively address weaknesses within appropriate time frames
such conditions evidence a flagrant disregard for the interests of beneficiaries and may pose a serious threat to the soundness of the bank; require immediate corrective action, constant supervisory attention, and the possible imposition of regulatory sanctions
one or more major problems centered in inexperienced or inattentive management, failure to adhere to
sound administrative policies, numerous violations, weak or dangerous operating practices, or an accumulation of unsatisfactory features of lesser importance
modification in compliance program and/or establishment of additional review/audit procedures may eliminate many of the violations; training is satisfactory; no discrimination, reimbursable violations, or repeat violations
Meeting with D- Composite 4 or 5?
Quorum required + RD (or designee) must also attend
requires close supervisory attention and monitoring to promptly correct serious compliance problems; numerous violations; any overcharges affect a significant number of people and involve substantial money; previous violations remain uncorrected; may be discrimination
Deadline for filing a CTR?
15 calendar days
What are the 3 tiers of CMP?
Tier 1: $7.5K/day for violations of laws/regs; final or temp order; condition imposed in writing
Tier 2: $37.5k/day if party recklessly engages in an U or U practice or breach of fiduciary duty. More than minimal loss to institution
Tier 3: lesser of $1.375MM or 1% of TA for institution. For individual $1.425MM. U or U practice of breach of duty is knowingly committed and causes a substantial loss
critically deficient performance;
inadequate RM practices;
of the greatest supervisory concern;
volume and severity of problems beyond M’s ability or willingness to correct
Section 8 of the FDI Act?
8(a) termination of insurance
8(b) Consent Order
8(c) Temporary C&D
8(e) Removal and prohibition
8(g) Temporary Removal/Suspension
strong compliance position; capable M; staff is sufficient; effective compliance program; efficient system of internal procedures and controls; changes in consumer statutes and regulations are promptly reflected in policies, procedures and compliance training
How often does a review need to take place for Phase II exemption companies?
When are insured branches of foreign bank eligible for a 18 month cycle?
TA of less than $500MM
Composite RM, Operations Controls, Compliance, and AQ (ROCA) of 1 or 2
Not subject to a formal enforcement action
Not have undergone a change in control during the preceding 12 months
Have Tier 1 and TRBC (foreign bank) of 6% and 10% or have maintained on a daily basis eligible assets in an amount not less than 108percent of the preceding quarter's average third party liabilities
Operations, Internal Controls, and Auditing
IT Composite Ratings?
Unsafe or Unsound environment that may impair future viability;
operating weaknesses are indicative of serious managerial deficiencies;
RM processes inadequately identify and monitor risk, and practices aren’t appropriate;
strategic plans are poorly-defined and aren’t coordinated or communicated throughout, so M and the B aren’t ensuring needs are met;
M doesn’t perform self-assessments and isn’t correcting audit and regulatory concerns
IT Composite Rating?
strategic plans are well-defined and fully integrated, allowing M to quickly adapt to changing market, business, and technology needs;
M identifies weaknesses promptly and takes appropriate corrective action to resolve audit and regulatory concerns;
financial condition of the service provider is strong and overall performance shows no cause for supervisory concern
M has demonstrated its unwillingness or inability to operate within the scope of consumer statutes and regs; previous regulatory efforts to obtain voluntary compliance have been unproductive; discrimination, substantial overcharges, or practices resulting in serious repeat violations are present.
U or U;
serious financial or managerial deficiencies;
severe to critically deficient problems;
not being satisfactorily addressed or resolved;
not capable of withstanding business fluctuations
Exam schedule for a newly chartered institution?
6 months - limited scope
12 months and annually thereafter through the 7th year- full scope
What are the three stages of money laundering?
Under what instances should a SAR be filed?
Insider abuse involving any amount
Transactions aggregating $5k or more where a suspect can be identified
Transactions aggregating $25K or more regardless of potential suspects (suspect cant be identified)
Transactions aggregating $5k or more that involve potential money laundering or violation of the BSA
resistant to outside influences;
strongest performance and RM practices;
no cause for supervisory concern
critically deficient in numerous major respects arising from incompetent or neglected administration,
flagrant and/or repeated disregard of applicable laws and regs, or willful departure from sound fiduciary principles and practices
isolated instances of noncompliance with laws, regs or M-prescribed policies or procedures, but corrective action without loss to the fiduciaries is assured
What type of business falls under Phase II exemptions for BSA?
Non-listed business and payroll customers if:
Had an account for at least 2 consecutive months or before 2 months if determined by a risk based analysis
Make frequent transactions of more than $10k to pay U.S. employees
They're registered in the U.S.
What are the primary areas of review for compliance rating?
IT Composite Ratings?
greater reliance is placed on audit and regulatory intervention to identify and resolve concerns;
financial condition of the service provider is acceptable and while internal control weaknesses may exist, there are no significant supervisory concerns, they’re informal and limited.
Alternate exams with the state are acceptable when?
Composite 1 or 2
Composite 3 and the bank is stable or improving
Actions provoking CMPs should meet one of the following 4 criteria?
Sheraton Was Better for Points
Willful, Flagrant, or otherwise evidences bad faith
Bank Insider who benefits
Previous supervisory means ineffective
generally less capable of withstanding business fluctuations;
more vulnerable to outside influences than Composite 1s or 2s;
may be in significant noncompliance with laws and regs;
When is an exam letter given to the bank?
Any bank newly assigned a CAMELS composite 3 rating or worse
Superior in almost every respect;
critical findings are minor, no fundamental deficiency in policies, practices or procedures
adequate training; violations are relatively minor deficiencies in forms or practices that are easily corrected; no discrimination, reimbursable violations, or repeat violations; promptly corrected by M; no cause for supervisory concern.
experienced and competent staff with demonstrated ability to administer existing accounts and anticipated future business in strict conformity with applicable laws and regulations and in accordance with sound fiduciary principles
What is the purpose of a trust exam?
Determine if the bank's handling of trust accounts exposes the bank to contingent liabilities, direct liabilities, estimated losses that would impact capital
Sound in every respect;
components rated 1 or 2;
minor weaknesses, can be handled in a routine manner by the B and M;
most capable of withstanding
IT Composite Rating?
strong performance in every respect;
generally has components rated 1 or 2;
minor weaknesses, easily corrected;
RM processes provide a comprehensive program to identify and monitor risk;
fundamentally sound, but don’t measure up in 1 or more respects to top rating;
modest weaknesses that are readily correctable
Banks get consent to exercise trust powers from who? Who grants the trust powers?
Consent from the FDIC
State grants those powers