Food for Thought: Critical Compliance Challenges for New York Branches of Foreign Banks

Wednesday, March 13, 2019

 "Food for Thought" is a series showcasing insights and best practices from Exiger's roundtables, where senior financial services professionals and industry thought leaders come together to discuss the latest industry developments over a bite to eat.

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The U.S. offices of foreign banking institutions often face significant compliance challenges, including establishing consistent global AML and sanctions program elements that are also aligned with U.S. regulatory expectations. Senior compliance leaders from a number of U.S. branches of foreign banks recently attended an Exiger-hosted roundtable moderated by Agricultural Bank of China’s General Counsel Lisa Prager. The attendees shared their perspectives on important topics related to their most critical compliance and regulatory challenges, including alignment with home office, recent areas of regulatory focus and managing relationships with other home office affiliates and their customers. 

In light of recent regulatory focus areas, such as the New York State Department of Financial Services (NYDFS) part 504 Rule (Rule 504) and U.S. enforcement actions against foreign banks, it is more important than ever to have comprehensive, fit-for-purpose compliance program controls and governance structures.  U.S branches of foreign banks also face challenges having transparency into the policies and procedures of other home office affiliates, especially in the context of USD clearing.

 

Alignment with home office

  • U.S. branches of the foreign banks should communicate to their home office regarding current information on quickly evolving U.S. regulatory expectations and their potential impact on U.S. branch operations;
  • It is important to align home office and affiliate policies and procedures with the often more-stringent policies of the U.S. branch to help promote consistency in the compliance program and its governance and management of the bank’s risk appetite, including FCC risk considerations associated with customers, products, and geographies.

 

Recent areas of regulatory focus

  • Rule 504 is all about the “plumbing”; ensuring the data used to feed transaction monitoring systems is as accurate and complete as possible, including data feeds from messaging systems, KYC repositories and case management systems.
  • While transaction monitoring systems can be either manual or automated under Rule 504, it is increasingly clear that there is a regulatory expectation that even small financial institutions with limited business operations should use an automated transaction monitoring system.

 

Management of affiliates and affiliate customers

  • For US branches to perform effective transaction monitoring alert resolution, they need to develop a solid understanding of their home office and affiliate customers and business as well as establish a robust Request for Information (RFI) processes between all offices;
  • In the context of USD clearing, US operations will need to treat home office and foreign affiliates like foreign correspondent banks in terms of due diligence, transaction monitoring and ongoing activity reviews.  This effort can become complicated by home office data privacy restrictions.

 

We’re here to help

Exiger’s cross-disciplinary teams are uniquely situated to address significant compliance and regulatory challenges, including the NYDFS Part 504 Program Certification.  Our compliance professionals can help you:

  • Stay ahead of evolving regulatory expectations and the challenges of aligning local FCC operations, policies and procedures with home office systems and governance structures
    Schedule a meeting with our FCC Professionals

 

  • Assess your NYDFS Part 504 Model and validate your transaction monitoring and filtering systems
    Schedule a meeting with our Analytics Professionals

 

 
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