Advice on Consultants: The OCC’s guidance on using third-party consultants during enforcement actions

As part of an enforcement action or when remedial actions are needed, the Office of the Comptroller of the Currency may require national banks and federal thrifts to engage an independent consultant to ensure that independent judgment and the requisite expertise are employed. In November, the OCC issued Bulletin 2013-33, which establishes standards and provides guidance to national banks and, federal savings associations when engaging independent consultants as part of an enforcement action to address significant violations of law, fraud or harm to consumers.

The bulletin is not applicable when the OCC requires a bank to hire a consultant to provide expertise needed to correct operational or management deficiencies.  In those circumstances, banks should review and implement the guidance outlined in OCC Bulletin 2013-29 titled “Third-Party Relationships.”

Through its enforcement authority, the OCC has ordered banks of all sizes to retain independent consultants. Such consultants have been engaged to:

When the OCC determines that an enforcement action requires the use of an independent consultant, the agency requires a bank to submit due diligence information conducted on the independent consultant, including the proposed independent consultant’s qualifications and terms of service for OCC’s review and approval.

The guidance outlines three primary areas of consideration when conducting due diligence on the consultant:

  1. Due diligence expected of an institution proposing to engage an independent consultant. In conducting due diligence, a bank should be guided by OCC Bulletin 2013-29, “Third-Party Relationships: Risk Management Guide,” as well as by 2013-30 Guidance.

When a bank submits the determination of supervisory no objection to a proposed independent, it should submit its evaluation of the consultant’s qualifications, independence, resources, expertise, capacity, reputation, information security and document custody practices, risk management and reporting, conflicts of interests, financial viability of the consultant and any professional disciplinary actions filed against the consultant and the impact of such actions on the engagement.

  1. Assessing the independence of the consultant. The assessment of the proposed consultant’s independence should include any existing and prior relationships with the bank, affiliates or insiders; any potential conflicts of interest; and any other relevant factors. The bank should ask the consultant to provide assurances that the proposed engagement will not breach any professional restrictions governing conflicts of interest to which the consultant is subject.
  2. Engagement contract and work plan. The bank should ensure the proposed consultant engagement contract guarantees that:

Even while engaging an independent consultant, an institution’s board of directors will still be held responsible to ensure that all needed corrective actions are identified and implemented.

The OCC oversees compliance with the enforcement action and the progress of the engagement through its supervisory authority.  Considerations governing the agency’s monitoring include the (1) nature of deficiencies or violations the independent consultant is engaged to identify including with respect to recommendations regarding remediation (2) scope and duration of work and (3) potential for a materiality of harm to consumers and the bank.

During the contact, there may be interactions between the OCC, the bank and the consultant depending on the particular facts and circumstances addressed in the enforcement action, expertise and resources of bank management, nature of the independent consultant’s engagement and timeline for completing the engagement.

As part of the assessment of the bank’s compliance with the enforcement action, the OCC must determine whether the bank has addressed and corrected the violations or deficiencies that formed the basis for the enforcement action.  The OCC will review the independent consultant’s final written report of findings and recommendations to the bank’s board of directors and management.  This review provides the OCC the opportunity to assess whether all matters defined in the enforcement action and reviewed by the independent consultant were adequately addressed, and if not, the OCC may require the independent consultant to perform some additional work.

Kris Welch, CRCM, CAMS is a long time banker and financial services consultant with over 25 years experience in regulatory compliance, risk assessments, financial institution branch management, and real estate appraisal. As a former Bank Secrecy Act/Audit Project Leader with Wells Fargo, Kris has established, coordinated and maintained effective financial institution compliance and reporting programs. Please contact Kris at

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