OCC risk report: Russian sanctions and staff turnover make compliance more difficult

Banks and financial institutions have received warnings from the Office of the Comptroller of the Currency (OCC) about increased operational risks brought on by geopolitical tensions and a heightened compliance risk environment complicated by regulatory changes, policy initiatives, and challenges in finding qualified compliance professionals.

The OCC warned operational risks include threats of cyberattacks, "with an observed increase in attacks on the financial services industry," in its "Semiannual Risk Perspective for Spring 2022," which was published on Thursday. According to the OCC, as banks depend more on third parties and use digital assets to complete financial transactions, bad actors have more opportunities to launch cyberattacks.


Sanctions imposed on Russia and Belarus by the United States, the European Union, and other allies have increased the risks associated with compliance. According to the OCC, in this environment financial institutions are having a harder time finding and keeping qualified compliance subject matter experts, and the constant influx of new hires into compliance departments is making it harder to spot and manage emerging risks.

Despite a successful year in 2021 and continued financial stability, the banking and financial services sector has been constrained, according to the OCC, by impending political, economic, and health risks.


The report stated that, "in 2022 with less supportive fiscal and monetary stimulus and increased risks to the economic recover. Geopolitical risks from the Russian invasion of Ukraine, supply chain disruptions, higher inflation, and tailwinds from pandemic-related public health measures weighed on sentiment and financial market prices." 


The OCC stated that banks and financial institutions must continue to monitor and respond to evolving and emerging risks related to consumer products and services. Particular attention should be paid to compliance with fair lending laws and watching the performance of third parties, such as fintechs, who are providing new services to customers, according to the OCC.


AFL/CFT (anti-money laundering/countering the financing of terrorism) is still a problem, especially in light of the increased risks brought on by Russia's invasion of Ukraine.


The economic sanctions and other measures imposed on Russia "are intricate and changing. The report recommended that management of financial institutions evaluate the applicability and effects of sanctions on their organizations and clients, including the effects of sanctions imposed by the United States and other nations on overseas branches, offices, and subsidiaries.


Additional AML/CFT risks include a rise in environmental crimes connected to transnational criminal organizations and corruption, as well as fraud connected to government pandemic relief programs.

By fLEXI tEAM