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Question & Answer
Question:Our examiner criticized us for not having a formal KYC policy. Although the examiner could not point to a regulation or other official pronouncement that specifically requires this, he pointed to his examiners checklist which asks whether the bank has a policy. Is this examiner correct?
Answer: This is exactly what you should be concerned about given the breadth of the proposed KYC rule. It leaves room for examiners to "invent-a-reg." We've seen that happen with CRA. That, in fact, is where documentation came from. Examiners decided that if the bank couldn't show them - using paper - then the bank had not produced any evidence that they had done what they claimed.
This seems to be happening with KYC even before there is a rule. We encourage you to let the Washington staff of your regulatory agency know that this happened. According to the Washington-based rule-writers, this kind of examiner "invent-a-reg" behavior is not supposed to happen. However, it does, and here's a good example.
As to fighting the write-up - there should be no penalties or negative impact on the bank's rating for not doing something that it wasn't required to do. However, examiners don't usually like resistance. This one is probably not worth making into a big issue unless the examiner does try to use it to lower your rating.
Copyright © 1999 Compliance Action. Originally appeared in Compliance Action, Vol. 4, No. 2, 2/99
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