The Office of the Comptroller of the Currency (OCC) recently issued guidance on what it looks for when requiring national banks and federal thrifts in enforcement orders to engage third-party consultants (3PCs). Bulletin 2013-33 summarizes how OCC will review consultants and monitor their work for federally chartered depository institutions and could very well have a significant impact on a multibillion-dollar industry that has recently come under fire on Capitol Hill.

On January 15, 2014, from 12 1 p.m. ET, Ballard Spahr will conduct a webinar regarding use of third-party consultants by depository institutions. The registration form is now available.

Typically, OCC has required banks to retain independent consultants to assess the banks' compliance with legal requirements in cases involving significant fraud, harm to consumers, and material violations of law, especially violations of the Bank Secrecy Act. In addition, OCC often requires the use of 3PCs for their expertise in addressing operational and management deficiencies. The new guidance addresses concerns about adequate due diligence by a bank in selecting 3PCs and the importance of their maintaining strict independence from bank management.

These new standards follow closely on investigative work by New York's increasingly aggressive Department of Financial Services (DFS) into whether consultants were complicit in helping Standard Chartered evade important regulatory requirements. In a speech earlier this year, DFS Superintendent Benjamin Lawsky observed, "The independence and integrity of monitors and independent consultants is . . . of vital concern to DFS. These consultants are installed at banks and other companies usually after an institution has committed serious regulatory violations or broken the law. The intent is that monitors assist companies in improving controls and ensuring that violations do not reoccur. . . . If the monitors or consultants are simply puppets of the big banks that pay their fees―rather than independent voices―then their work-product can hardly be deemed reliable."

OCC's new guidance echoes these views. "Properly used, independent consultants can help further important supervisory objectives, particularly in the context of enforcement actions," said Comptroller of the Currency Thomas J. Curry. "However, while consultants can provide knowledge, expertise, and additional resources, we must take care to ensure they maintain independence and are subject to appropriate oversight."

Overall, the Bulletin addresses three subjects: the factors used by OCC in determining whether to require use of a 3PC, OCC's review of the proposed 3PC, and OCC's oversight of the work of the 3PC. Click this link for a more detailed description.

Ballard Spahr's Consumer Financial Services and Bank Regulation and Supervision Groups include experienced lawyers who, among other things, counsel banking clients and their boards of directors and senior management on a variety of risk management issues, provide consulting services to assist in compliance with supervisory agreements and consent orders, and prepare reports and recommendations for remediation of identified deficiencies or violations of law or regulation. For more information, please contact CFS Group Practice Leader Alan S. Kaplinsky at 215.864.8544 or, or Keith R. Fisher in the Bank Regulation and Supervision Group at 202.661.2284 or


Copyright © 2013 by Ballard Spahr LLP.
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