Auditing Success

With all the recent changes in the federal government, it is important to understand banking regulators and their charters. The different types of national banks, thrift holding companies, credit unions, and depositary institutions are enough to make your head spin! Depositary institutions have multiple federal regulators, ensuring regulations are met with depository requirements, securities markets, consumer protection, and governmental sponsored activities. Multiple agencies can regulate banks based on their institution types, market activities, and participation in the securities markets. This can lead to confusion on who and what regulations would apply in certain situations. My experience in the banking industry has given me exposure to all different types of regulations and regulators.

 Depositary Regulators: Federal Reserve for banks (FRB), Office of the Comptroller of the Currency (OCC), Federal Deposit Insurance Corporation (FDIC)

Working in wealth management at a range of different organizations, I have had the experience of conducting a variety of trust audits (Market activity). Trusts are legal entities that hold property and assets. Institutions have prudential regulators of the FRB. This would normally mean we would follow FRB regulations; however, FRB did not have specific trust regulations. Instead, rules from the OCC (12 CFR 9) needed to be followed as they were the guiding authorities on trust administration. As you can see, being regulated by one organization while having to follow guidance from another regulator could confuse if you are not aware of the regulations out there.

Another example of this was a review conducted by the CFPB over evidence of compliance with CFPB regulations (Consumer Protection). Once again, the CFPB is not the prudential regulator, but CFPB regulations must be followed to ensure compliance with consumer protection. Thankfully, I had scoped into a deposit audit regulation E, D, and DD which allowed us to demonstrate a coverage strategy for CFPB regulatory requirements. It is important for auditors to think about and build out audit coverage strategies in the event regulators would like to understand how an institution provides coverage over specific regulations.

Adherence to federal regulations is a challenging and interesting part of being an auditor. Building out coverage strategies over your prudential regulatory and regulations, while also ensuring coverage over regulations governing market activities. Take a look at your audit universe this year and see if you can justify your coverage to regulators.