Regulators faulted for ‘box checking’ mentality on anti-laundering enforcement

This is the headline this week in a Source Media article.  The article goes on to say that regulators are being criticized for not looking deeper at anti-money laundering compliance.  The check box mentality is being criticized.  Why does this scare me?  Well, regulators don’t always work well together, in fact, they will tell you compliance doesn’t talk to safety and soundness and vice versa BUT that does not mean they don’t interpret what they think they hear.  Cracking down on regulators for checking boxes for AML enforcement can easily equate to cracking down on regulators for checking boxes for regulatory compliance in other areas.  Don’t kid yourself, they are all afraid of going the way of the OTS.  They cannot become expendable.  (note: my comments here are related to the agencies and not specific examiners.)

I think I have shared with you a conversation I had with an examiner last year, they want audits to change direction and be all inclusive.  They want a review of a loan file (compliance not financial) to include all regs that apply.  So that would include Reg. E, if the loan has an auto debit for the payment, as well as flood, TRID, SAFE, etc.   Most banks consider Reg. E for operations only, but it seems that approach must change.

I don’t see audit firms jumping on that band wagon just yet, but he who carries the biggest stick wins in the end.