Compliance Before and After Y2K

We're almost down to the wire with Y2K. Hopefully everything will go smoothly and we will never have to mention the subject again! However, there is just time for a last gasp.

Compliance managers should be thinking about a few last minute preparations - and bracing for a few things that could go wrong in our compliance turf if something does go wrong in early January. Richard Insley (whom you can reach at aprsystems.com) has prepared a list of things that can go wrong before and after Y2K that you can manage.

Before Y2K
First, there is BSA. Insley reminds you that the Y2K craziness is an opportunity of a millennium for crooks. So many people are doing "odd" things with their money - including hoarding supplies - that we may be too easily inclined to dismiss an action as Y2K-driven instead of suspicious. We need to be extra alert for cash transactions, especially those that rise to the level of suspicious.

This (right now) is a good time to remind staff of the CTR and SAR basics, including deadlines. Use whatever communications vehicles you have. Review the most common errors in a training session, staff meeting, or memo. At a minimum, review issues with your branch managers so that they are on top of their skills. And the ultimate position is, when in doubt, report.

The other "before" topic you should consider is Regulation D and whether or not to impose the seven day rule. Determine in advance whether your bank will use this provision to restrict withdrawals and announce it to customers. Don't surprise customers on the 27th of December by telling them there will be a waiting period before they get their money.

And finally, buy plenty of batteries.

After Y2K
After Y2K, you can expect BSA to be just as important as before Y2K. There are likely to be lots of unusual hoards of cash returning to banks. Insley advises banks to be especially alert in January. The return of cash is a natural camouflage for money laundering. The same training and filing concerns (when in doubt, file) apply to January, 2000.

Next, use any quiet time in December to brush up on the check collection rules. Delve deep into the Uniform Commercial Code, Regulations J and CC, and FRB Operating Circulars. Be prepared to deal with situations such as delayed presentment and schedule relaxations by the Federal Reserve.

Then, if there are power outages or computer glitches, be prepared to do some things manually. This includes being able to prepare disclosures for Truth in Lending (both open end and closed end) and Truth in Savings. Insley advises increasing quality control if you resort to using manual procedures.

Another Truth in Lending issue you may face is waivers of the right to rescind. Consumers may experience damage to their home from power or plumbing problems. If so, they'll want emergency money and won't want the three day wait. Review rescission procedures with your staff. Remind them that rescission may be waived in a bona fide personal emergency and that the waiver must be written in the consumer's own handwriting. Do not prepare special forms!

Instead of loans, customers may want to draw cash out of a time deposit. Be sure that your policy on this is in place before the end of December and that all branch staff are aware of the bank's policy. In setting your policy, remember that this is a good opportunity to gain customer loyalty by providing good service!

ACTION STEPS

Review CTR preparation with branch managers. Have them review it with all staff that may fill out a CTR.
Provide Branch Managers with a list of common errors and problems filling out CTRs.
Set a special schedule for completing and forwarding CTR's to ensure that you have no delays over the New Year.
Discuss - or communicate by memo - the types of situations that may be suspicious and those that are "normal" for Y2K. You might even make a collection of these to keep staff interested.
Review the manual calculation methods for APRs and APYs. Generate some models from your software to use. Remember to also have a supply of blank forms and batteries!
Review rescission procedures with your lending staff. Be sure they understand what a personal financial emergency is - and isn't.
Get clarification on what your bank will do about imposing penalties for early withdrawal from time deposits. Communicate this to all branches.
Branch managers should be responsible for all Y2K-related communications to customer service staff. Make sure they understand the importance of this role.
Brush up (or make sure your lawyers do) on the U.C.C., Regulations J and CC, and FRB Operating Circulars. It's probably a good idea to set up a communication chain for any questions relating to check and wire processing so staff knows whom to call.