Managing Merger & Acquisition Compliance The Compliance Officer’s Role in Mergers and Acquisitions 2017 GBA Advanced Compliance School May 12, 2017 Louvera Walden, CRCM Assistant Director Southeast Region Risk, Information Security and Compliance Solutions
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Managing Merger & Acquisition Compliance The Compliance Officer’s Role in Mergers and Acquisitions
2017 GBA Advanced Compliance School
May 12, 2017
Louvera Walden, CRCM
Assistant Director Southeast Region
Risk, Information Security and Compliance Solutions
Identify any products sold in conjuction with consumer loans, i.e. credit
life Medium
Flood Insurance
Loan Operations Pre-Conversion Duplication of vendors for determination? Low
Loan Operations Pre-Conversion Update vendor info for CD Medium
Compliance Pre-Conversion Perform a flood review of acquired entites High
Loan Operations Pre-Conversion Method used to determine the flood zone, vendor process Medium
Loan Operations Pre-Conversion Life of loan tracking process Medium
Loan Operations Pre-Conversion Force placement procedures/process Medium
Loan Operations, Compliance
Pre-Conversion
Determine if combined bank falls under small lender exemption for
escrowing flood insurance. Medium
Loan Operations
Pre-Conversion
Notify Administrator of FEMA (or all flood insurance agents used by
customers) of any change in the servicer of a loan within 60 days after
the effective date of the change. Medium
HMDA
Compliance, Loan Operations Pre-Conversion Determine HMDA Reporting System (2 systems) High
Compliance, Loan Operations Pre-Conversion Back up prior and current year HMDA data HighPre-Conversion Print current HMDA LAR prior to integration and merger Medium
Pre-Conversion
HMDA - Determine separate or combined LAR; Determine if
considered a "purchase", Change acquiring entity Respondent ID Medium
Compliance, Loan Operations Pre-Conversion
Obtain Principal Balance at Acqusition, List of Loans Acquired (Failed
Banks) for HMDA LAR Purchase Coding High
Compliance Calendar Year Perform a data validation of acquiring entity HMDA-LAR Medium
Compliance Pre-Conversion Perform a data scrub of all "Purchased Loans" Medium
Compliance Pre-Conversion Identify HMDA Staffing for Data Scrubs, Data Validations Medium
Does the Bank have a home improvement product (classified on call
report)? Low
Loan Operations, Compliance Pre-Conversion
Does the Bank have written procedures to explain the HMDA reporting
process? Low
Loan Operations, Compliance Pre-Conversion Retention of records and loan files Medium
Loan Operations, Compliance Pre-Conversion Does the Bank report Home Equity Lines of Credit? Low
Reg O / Insider Lending
REG O Officer Pre-Conversion Reg O Insider Lending (additions, reporting) high
REG O Officer Pre-Conversion Affiliate officers now meet definition of EO per Reg O? high
REG O Officer Pre-Conversion Ownership of reporting requirements high
REG O Officer Pre-Conversion Obtain updated list of Exec Officers and Board members high
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419 Walden Managing MA Compliance Compliance Merger Acquisition Project Checklist
PRIMARY DEPARTMENT(S) IMPACTED,
AREAS OF RESP TARGET DATE ISSUE PRIORITY ASSIGNED STATUS
COMPLETION
DATE
REG O Officer Day 1 - 30 Obtain copy of policies for: Reg. O., Employee loans and Overdrafts high
REG O Officer Pre-Conversion List of insiders and correspondents high
REG O Officer Pre-Conversion Copy of their call provision Low
REG O Officer Pre-Conversion Statement of Interest Review Low
REG O Officer Pre-Conversion List of outstandings as of acquisition date Low
REG O Officer
Pre-Conversion
FFIEC survey form (or other form used to ascertain executive officer
indebtedness to correspondents) Medium
Loan Documentation
Loan Operations/Administration Pre-Conversion Update affiliated business arrangements disclosure Low
Loan Operations/Administration Pre-Conversion HELOC 15 year examples updated Low
ECOALoan Operations/Administration Pre-Conversion Centrallize loan denials / withdrawals for record retention purposes LowLoan Operations/Administration Pre-Conversion Determine whether a 2nd review process is in place High
Loan Operations/Administration Pre-Conversion
Loan products, description and underwriting guidelines, does the bank
use credit scoring? Medium
Loan Operations/Administration Pre-Conversion Procedures to comply with the regulation Low
Loan Operations/Administration Pre-Conversion Copy of adverse action notices, applications, etc Medium
Loan Operations/Administration Pre-Conversion Notice of right to copy of appraisal Medium
Loan Operations/Administration Pre-Conversion Retention requirements Medium
RESPA
Loan Operations/Administration Pre-Conversion Distribution of Affiliated Business Arrangement form to BB offices mediumLoan Operations/Administration Pre-Conversion Develop revised Affiliated Business Arrangement Notice LowLoan Operations/Administration Pre-Conversion Procedures, forms & notification, evidence of compliance Low
Loan Operations/Administration Pre-Conversion
Transfer of Servicing – notification requirement that servicing of the
loan will be transferred medium
Loan Operations/Administration Pre-Conversion Initial and annual escrow statements High
Loan Operations/Administration Pre-Conversion List of settlement service providers medium
Loan Operations/Administration Pre-Conversion List of any affiliated business arrangements (legal, title, appraiser) High
TILA
Loans, Compliance
Pre-Conversion
Determine whether any allowable change in terms will occur (fees,
terms, rates)
High
Loan Operations/Administration Pre-Conversion Provide Change in Terms Notice High
Compliance Pre-Conversion
Perform APR/Finance Charge Sampling of Consumer and/or
Mortgage Loans (bank may be subject to restitution) High
Loan Operations/Administration Pre-Conversion
List of all types of consumer credit offered and the terms applicable to
each, including fees. Medium
Compliance Pre-Conversion Identify tools used to calculate the annual percentage rate disclosures Low
Compliance Pre-Conversion
Identify any recent loans where the consumer waived the right to
rescind Low
Loans, Compliance Pre-Conversion
Obtain a copy of initial disclosure statements for open-end loan
products, including home equity lines of credit Medium
Loans, Compliance Pre-Conversion Obtain copy of all loan documents and disclosures Medium
Loans, Compliance Pre-Conversion
Obtain Compliance Approval on all Customer Correspondence,
Disclosures, Fees, Signage prior to implementation High
UDAAP
Loan Operations/Administration Pre-Conversion Cosigner liability notification process Low
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419 Walden Managing MA Compliance Compliance Merger Acquisition Project Checklist
PRIMARY DEPARTMENT(S) IMPACTED,
AREAS OF RESP TARGET DATE ISSUE PRIORITY ASSIGNED STATUS
COMPLETION
DATE
Compliance Pre-Conversion
Determine Complaint Management process/policy. Review any
outstanding complaints. Medium
Safe Act
Human Resources, Compliance Pre-Conversion Obtain list of all Mortgage Loan Originators High
Human Resources, Compliance Pre-Conversion
Transfer MLO registration to acquiring bank within 60 days of date of
merger. High
Human Resources, Compliance Pre-Conversion Update acquiring bank MLO list. Medium
Military Lending Act and SCRA
Loans, Compliance Pre-Conversion Obtain list of all military customers of acquired bank. Medium
Loans, Compliance Pre-Conversion Obtain policy and procedures for complying with MLA and SCRA Medium
Loans, Compliance Pre-Conversion Review sample of Military Customer's accounts for compliance Medium
Consumer Leasing
Loans Pre-Conversion Consumer lease disclosures for each type of lease – if applicable Low
Dealer Loans
Loans Pre-Conversion Obtain list of dealers and dealer contracts Medium
Loans Pre-Conversion Review contracts Medium
Loans Pre-Conversion Review policies and procedures Medium
Fair Debt Collection Practices Act
Special Assets Pre-Conversion Determine whether debt collection is conducted via third party Medium
Special Assets Day 1 - 30 Obtain Policy, Process & procedures, if applicable Medium
Credit Cards
Loans Pre-Conversion Obtain credit card disclosures and applications Medium
Loans Pre-Conversion Review Policies and Procedures Medium
OVERDRAFT PROTECTION PROGRAMS
Deposit Operations Pre-Conversion
Overdraft Program Mapping / Conversion. Determine Product
Changes Medium
Deposit Operations Pre-Conversion Overdraft Medium
Deposit Operations Pre-Conversion Bounce Protection Medium
NON-DEPOSIT INVESTMENT PRODUCTS
Compliance, Operations Pre-conversion Determine if employee or joint employee of bank sells these products.
Compliance, Operations Pre-conversion Obtain copy of marketing agreement.
Compliance, Operations Pre-conversion Review Disclosures and signage.
Compliance, Operations Pre-conversion Obtain list of all products sold.
AFFILIATED COMPANY
Compliance, Operations Pre-conversion
Is there an affiliated business, i.e investment company, insurance
company, mortgage company?
Compliance, Operations Pre-conversion Review policy/procedures/disclosures for each.
BSA/AML/OFAC
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419 Walden Managing MA Compliance Compliance Merger Acquisition Project Checklist
PRIMARY DEPARTMENT(S) IMPACTED,
AREAS OF RESP TARGET DATE ISSUE PRIORITY ASSIGNED STATUS
COMPLETION
DATE
BSA OFFICER
Day 1 - 30
Obtain BSA / AML / OFAC / CIP Policies of acquiring Bank -
Compare to existing Bank - Utilize Policy Checklist to identify
gaps high
BSA OFFICER Day 1 - 30 Obtain prior Examination, Audits, and Independent Testing Reports high
BSA OFFICER Pre-Conversion What software will be used as of merger for BSA Documentation medium
BSA OFFICER Pre-Conversion OFAC methods - data scrubs, account opening, etc. low