Pay Heed to New Challenges for the New Year

Thoughtware Article Published: Mar 05, 2020
Two bankers shaking hands

The last decade was tumultuous for regulatory compliance. By the beginning of 2010, the financial industry was scrambling to recover from the 2008 recession’s crippling effects. A slew of compliance laws came tumbling down the pike in the wake of the consumer harm that was revealed after the mortgage bust. Let’s take a look at what to expect in 2020.

At the forefront of banking leaders’ worries should be staying relevant in a world where consumers are seeking technology-driven financial products. These types of products and services have their own compliance challenges, such as:

  • Bank Secrecy Act/Anti-Money Laundering (BSA/AML)
  • Electronic Fund Transfer Act – Regulation E
  • Unfair, deceptive or abusive acts or practices (UDAAP) compliance for payment system-related products and third-party management
  • Fair lending and UDAAP compliance for loans through third-party lending relationships

Something unexpected to come out of the last decade is the use of virtual currency (also known as cryptocurrency). There are multiple compliance challenges related to virtual currency, with the primary one being BSA/AML implications. For most traditional financial institutions, there are still many questions regarding how to handle virtual currency transactions and virtual currency’s place in traditional banking. ATMs, which have always been regarded as a necessity for consumers to easily access their cash after banking hours, now have the capability to buy and sell virtual currency. Consumers can visit one of these “kiosks,” show a QR code and buy and sell their virtual currency in exchange for fiat currency (currency with value backed by the government that issued it). Banking customers who own these kiosks or deal in virtual currency in other ways may rise to the level of money service businesses, creating more requirements on a financial institution to bank these types of customers. Although guidance was published in May 2019 by FinCEN regarding this type of currency, this guidance did not provide any new information; it was simply a cumulative delivery of all the prior guidance on the subject.

In the last half of the decade, we saw law firms filing class-action lawsuits against financial institutions for websites not complying with the Americans with Disabilities Act. We are seeing this same trend against institutions and credit unions for overdraft fees. Examples of alleged fee violations include practices of high-to-low posting and overdraft fees based on a consumer’s available balance instead of the ledger balance. In addition, Uber and Lyft charges are examples of transactions that, if processed as recurring transactions, could be problematic based on one class-action suit. Take a look at your own institution’s account agreements and overdraft fee application practices in the system, as well as any complaints submitted by consumers.

As we navigate through the challenges of the coming year—and decade—your enterprisewide risk assessment can and should include the items addressed above. The risk assessment should be a tool to help guide you as we move forward into uncharted territory. For more information, reach out to your BKD Trusted Advisor™ or use the Contact Us form below.

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