OCC Releases Guidelines for Ensuring Consultants’ Qualifications

Consultants hired by U.S. banks to ensure they meet enforcement orders must be thoroughly vetted to make sure they’re qualified to do the job, the Office of the Comptroller of the Currency said in guidance released today.

“The OCC expects a bank to conduct appropriate due diligence to ensure that an independent consultant performing a functional engagement has the necessary expertise,” the agency said. Using consultants “does not absolve bank management or a bank’s board of directors of their responsibility for ensuring that all needed corrective actions are identified and implemented,” according to the regulator of national banks.

The OCC and other regulators frequently order banks to hire outside firms to check their compliance with enforcement actions. The OCC and Federal Reserve were subjected to criticism from lawmakers when a 2011 plan to have consultants check botched mortgages cost mortgage servicers about $2 billion and failed to help borrowers.

The new guidance directs banks to check for conflicts of interest, identify consultant staff members that worked previously at the bank, list other expert firms considered for the work, describe the financial relationship between bank and consultant and tally the number of contracts the consultant has had with the bank in the last few years. That last point will allow the OCC to weigh “whether the number of contracts of services the consultant has had or has with the bank may pose an inherent conflict of interest,” it said.

In April, Daniel P. Stipano, the OCC’s enforcement chief, told lawmakers that his agency would welcome legislative changes to allow it to more easily take enforcement actions directly against contractors.

In several recent cases in which banks such as JPMorgan Chase & Co. and HSBC Holdings Plc violated Bank Secrecy Act rules to guard against money laundering, regulators required them to seek outside firms to help fix their compliance programs.

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