The Shield & the Sword: How the Three Lines of Defense Allow You to Avoid the Pain of Self-Reporting

by Becky Breland, J.D., Principal Consultant, Regulatory Advisory Services

Sometimes it is better to use your shield before falling on your sword.  A large regional bank in the Southeast recently learned that lesson.  The Federal Reserve Board imposed a staggering fine, of approximately $2.95 million for unsafe and unsound practices in the bank’s flood insurance compliance program and for flood insurance regulatory violations. The bank agreed to the fine, without admitting or denying the allegations, on August 14, 2023.  This is even though the bank self-reported the violations with respect to not effectively monitoring a significant number of home equity loans and home equity lines of credit.  According to a spokesman for the bank, “We took corrective action and remediated the issue by 2017. There was no customer impact as the matter was confined to our own internal monitoring of flood insurance policies on certain properties.”

Is Self-Reporting Still Beneficial in 2023?

Sometimes, we have to fall on our sword. Regulatory Advisory Services has long advocated when financial institutions identify regulatory violations during their monitoring processes, to self-report to their primary regulator that the violations were discovered and that, as applicable, corrective measures were undertaken to remedy those violations and prevent future violations from occurring...

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