NCUA releases ALERT for Credit Unions Servicing Marijuana and Hemp related businesses
Last week we attended (and sponsored) the Risk Management Association's 12th Annual Governance, Compliance and Operational Risk Conference in Cambridge, MA. What follows are some key takeaways and summary.
Trust Exchange welcomes Frankenmuth Credit Union as a customer for our vendor compliance monitoring application.
Yesterday, our partner AuditLink, hosted their 3rd webinar in a 5 part series discussing how Credit Unions can more effectively comply with Vendor Management regulations. The webinar was hosted by Jim Vilker, the VP of Professional Services at AuditLink and focused on the monitoring requirements in the regulations.
Jim opened by reviewing the latest vendor management guidelines and requirements published by the FFIEC and OCC (OCC Bulletin 2017-7) . The key takeaway was the new monitoring requirements add a significant amount of work that must be done in order to effectively monitor vendor performance and compliance. The additional cost associated with these new monitoring requirements can be significant as the increase in the amount of work required has increased exponentially. The only way to scale this is through automation. AuditLink uses the Trust Exchange platform for vendor management and to automate their monitoring thus significantly reducing the direct and indirect costs of vendor monitoring compliance.
He also discussed responding to alerts generated through the Trust Exchange application, what they mean, their criticality and best practice actions. Prior to taking questions, Jim demonstrated some of the key features in the Trust Exchange dashboard. The dashboard is designed to provide key vendor compliance information at a glance.
The Trust Exchange is a community of businesses who securely disclose and monitor key information to increase their trust in each other. Compliance is a key application for our platform and we are redefining how credit union vendor management should be done. To learn more about how we work with partners like AuditLink to solve compliance problems in many industries, follow the contact link below.
I read an interesting article recently in FinRegAlert: Fintech, Regtech and the Role of Compliance. In it the author points out the tension between the drive to adopt new financial technologies and complexity added by new regulatory requirements. The article is a good summary of the information published by Thomson Reuteurs which can be dowloaded here. However, I do think it misses a key point in that the new regulatory requirements are an EXPONENTIAL increase in complexity which will never be fully addressed by incremental regtech.
Exponential problems are difficult if not impossible to get under control and trying to solve these problems wtih linear solutions (more storage, processors or deploying more people etc.) is a fool's errand that can add unbounded cost. The solution is exponential regtech!
Here at Trust Exchange we are working to solve these problems by bringing exponential technologies to the sharp edge of these challenges. For instance, we are using crowdsourcing to solve the data collection problem inherent in most regulatory requirements. Like Facebook collect information from the edge, compile it and present it in clear and actionable ways.
If you wold like to learn more, CONTACT US for more information.
Credit Unions and CUSO's are facing a tough compliance landscape. After the passing of Dodd-Frank, vendor management, as applied to financial institutions became much more complex. Each regulatory body (OCC, FDIC, NCUA, OCC and the Federal Reserve) has issued their own rules and guidelines for achieving and maintaining compliance with the new regulations. The monitoring aspect of these guidelines require financial institutions and their vendors to communicate and exchange critical information more frequently and on a much deeper level. CUSO's (Credit Union Service Organizations for the uninitiated) and some financial "super vendors," have a particularly challenging problem with compliance due to the multiple layers of one-to-many relationships.
The monitoring requirement for Credit Union and CUSO compliance, increases the number of minimum interactions between a vendor and credit union exponentially. The frequency and depth of these interactions depend upon the risk posed by each service provided. High risk vendors (payments, clearing, settlement) must be monitored at a higher frequency than low risk vendors (non-core, staffing, facilities etc.). For example, a high risk vendor might require the review of monthly SLA's, quarterly performance and qualifications, whereas a low risk vendor might only require the review of insurance and qualifications annually.
Adding to this compliance complexity for CUSOs is the fact that many of them provide more than one service and may utilize downstream vendors as well. Each of these services has an independent risk profile and associated monitoring frequency. Just delivering these compliance documents to their Credit Union clients can quickly become an unmanageable problem: a seemingly infinite number of interactions. This is an exponential problem and unfortunately, the existing tools (email, spreadsheets, people) are linear solutions and won't solve it without increasing costs.
Fortunately, the latest influx of solutions from the Internet has provided us with several models that give us hints on how to untie this knot. For instance, the sharing or collaborative economy model illustrates a clear path to getting to scale without breaking the bank by opening up the data and enabling each participant to create valuable data.
At TrustExchange, we've studied this problem from several industry points of view: finance, logistics, shipping and healthcare and have built a product that leverages a few of these key innovations to solve the compliance problem. Credit Unions and CUSO's have a unique compliance challenge because of their position as a "super vendor" and sitting in the middle of a large compliance interchange. By creating a solution that leverages lessons from the collaborative economy, we've built a scalable collaborative compliance platform that solves this problem for CUSO's and Credit Unions simultaneously.
Contact us to learn more about how we can solve this problem for you!