FFIEC Compliance: The Definitive Guide for Financial Service Organizations
The Federal Financial Institutions Examination Council is an agency that consists of five federal agencies involved in financial institution regulation. These members include:
- Board of Governors of the Federal Reserve System
- Federal Deposit Insurance Corporation
- National Credit Union Administration
- Office of the Comptroller of the Currency
- Office of Thrift Supervision
- State Liaison Committee
They work together to create standards, principles and report forms that are uniform at all financial institutions. Their other responsibility is regulating real estate appraisal. This standardization among financial institutions ensures that they are all being held to the same expectations. As cyber threats continue to mount for the financial industry, the regulations have updated to reflect a need for strong cybersecurity.
Penalties for Failing to Comply With the FFIEC
The FFIEC itself only issues guidelines for financial institutions, so it doesn’t directly fine organizations that fail audits with this agency. However, since the members consist of agencies that do have the ability to fine you, you don’t escape financial consequence from noncompliance.
You won’t receive penalties from all of the members of the FFIEC, only the ones most relevant to your type of financial institution. For example, for credit unions, the National Credit Union Administration would take the audit findings and take enforcement action from there.
Which Organizations Need to Comply With the FFIEC
Federally supervised financial institutions are the primary organization types responsible for complying with the FFIEC guidelines. However, if you’re related to that institution in some way, such as being a holding company or you’re a nonfinancial subsidiary, then you also need to follow these requirements.
How to Comply with the FFIEC
The FFIEC has regulations that cover 11 topics that your financial institution handles for its operations. By understanding all of these areas, you can put the consistent practices in place so that you can operate as a federally supervised financial institution without receiving fines and other penalties.
- Business Continuity Planning: How does your organization stand up to disruptions due to natural disasters, hardware failures, cyber attacks and other incidents that threaten business continuity? You need a strong plan in place with the necessary supporting systems to get things up and running quickly.
- Development and Acquisition: Do you have an understanding of the risks when it comes to business development and acquisition? A poorly managed acquisition could result in many issues with uniform practices and cyber security.
- Electronic Banking: Consumers expect electronic banking services from their financial institutions, so your organization needs to keep this process safe and secure to minimize the risk of financial data getting stolen.
- Information Security: Do your cybersecurity measures appropriately address the types of attacks that financial institutions face? Cybercriminals operate in an ever-evolving landscape, which means that your defenses need to keep up with them.
- IT Audit: What type of auditing practices and procedures do you have in place at your financial institution? Ongoing evaluation is important to continually improve your operations and ensure that you maintain compliance with all relevant regulations. The cyber threat environment of today may be far different in five years.
- IT Management: Your current IT governance policies must focus on meeting the regulatory requirements expected of your type of financial institution.
- Operations: Risk management and mitigation are important procedures to have in place so that you have a way to proactively address cyber attacks and other threats.
- Outsourcing Technology Services: Do your outsourcing partners have the same standards as your financial institution does when it comes to uniform standards and cybersecurity?
- Retail Payment Systems: Understand the risks that are present in a retail payment environment, such as a lack of physical security measures.
- Supervision of Technology Service Providers: You need to oversee any third-party service providers that you’re working with and pay close attention to the recommended guidelines when choosing these partners.
- Wholesale Payment Systems: You have high-value payments going through these systems, so examining your practices separately for this type of system is important.
Getting Help with FFIEC Compliance
Your financial institution may not have the in-house resources to address all 11 of these areas, especially if you have to make major changes in any of them. Noncompliance can lead to significant penalties that may threaten the health of the organization and result in a negative financial impact.
An IT company offers a great deal of help in bringing your policies, procedures and systems into compliance with the FFIEC. They have specialists with hands-on experience in these regulations, along with knowing the difficulties that financial institutions face when implementing new IT measures.
Your in-house IT team doesn’t need to work extended hours and drop other important projects to work on new risk management and mitigation policies or deploying the systems designed to support those requirements. Instead, the IT company provides the necessary staffing and skill sets for a smooth rollout and seamless adjustment period.
The FFIEC guidelines cover broad areas of financial institution operations. If your organization needs expert backing to fulfill all of the requirements and to pass an FFIEC audit, then an IT services company that specializes in IT Services for Financial Service Organizations is an excellent partner for giving you the resources you need to accomplish this goal.