For financial institutions, having compliance management systems that mitigate in-house risk is not sufficient to meet regulatory expectations. With more work now outsourced to third party vendors, financial institutions are facing heightened regulatory scrutiny of their vendors’ actions and their oversight of vendors. Several recent consent orders between financial institutions and the Consumer Financial Protection Bureau spotlight the need for proper vendor oversight.
If the consent orders were not enough to highlight the need for vigilance, the CFPB’s director emphasized recently that accountability for financial institutions requires holding them responsible for their vendors’ conduct. Speaking to the Federal Reserve Bank of Chicago on May 9, 2014, Richard Cordray said "that companies remain responsible for having an effective process for managing the risks of service provider relationships."
Originally published in BNA’s Banking Report on July 29, 2014.
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