WASHINGTON The Office of the Comptroller of the Currency is trying to send a clearer message to banks about potential red flags by clearing away some of the clutter in its exam reports.
Until recently, the agency was grouping both high-priority matters "requiring attention" and lower-priority "recommendations" together in its reports. But officials said that was leading to confusion. As a result, it said it is removing low-level recommendations from reports so that banks can focus on more important MRAs.
"Sometimes the recommendations made it into the report of exam and we've decided that can be confusing and don't want to cloud our message in that regard," Thomas Ramsey, core policy analyst at the OCC, said in an interview. "We want to put things that the board must act on and leave recommendations as a side conversation."
Grovetta Gardineer, deputy comptroller for compliance operations and policy at the OCC, said removing the recommendations from the formal record of examination is "efficiency and communication clarification." But she said that examiners will still let banks know about more minor items that should be addressed.
By removing recommendations from the examination report, the agency is sending a more direct message surrounding compliance deficiencies, which should allow banks to address those problems faster, she said.
"We are looking at making sure that the written record of our examination process really deals with and leaves a path for bank management to understand the difference and distinction between a matter requiring attention that does in-fact require follow-up, but does not necessarily mean that we are going to an enforcement action or if there are actual violations that require a different level attention," said Gardineer.
The change is part of the OCC's push to emphasize the importance of MRAs, which must be addressed promptly by a bank.
"We are going to be looking at MRA compliance as a part of our examinations," said James Vivenzio, senior counsel at the OCC, during a recent conference in New York hosted by the Association of Certified Anti-Money Laundering Specialists. "If you do not comply with an MRA and fail to achieve substantial acceptable compliance towards that MRA it could result in an enforcement action, a cease and desist order."
"Our hands are tied; by statute we have to do something if you do not achieve something that is called substantial acceptable progress," Vivenzio said.
John Byrne, executive vice president of ACAMS who also spoke at the conference, said one problem with fixing MRAs remains how regulators "define acceptable progress" in remedying issues.
But Vivenzio said the key was communication.
"You really need to work with your examiner when things are falling off track to avoid that situation where there is a surprise ... if you cannot meet a commitment or an obligation it is very important to let your examiner know," Vivenzio said.
The OCC issued a bulletin in October signaling a heightened emphasis on MRAs while also encouraging more dialogue between examiners and bank executives and board members. The guidance noted "the need for timely and effective communication with bank management and boards, including open dialogue."
"Part of what has been articulated is really an effort to allow for a bit of an exchange of information to flow back and forth so that it provides the examiners an opportunity to understand an institution's program," said Kevin Petrasic, a partner at the law firm Paul Hastings and a former official with the Office of Thrift Supervision.