State regulated companies that offer financial services are subject to state examinations. This guide will prepare you for your next state examination. However, it’s important to remember that each industry and state are different.
A critical part of the state examination is to ensure state specific regulations are complied with. The goal of each examiner is to ensure compliance with their respective rules and regulations. Non-compliance with any of these items will result in a state violation and could result in fines and or penalties. Below is a list of some core items that are typically verified during a state examination as well as helpful hints:
Some of the keys to a positive state examination experience are: the hospitality provided to examiners, and the consistent interaction by management with the state examination team.
Make the examiners feel welcome:
Always be active on conversations and consistently follow up with examiners on any outstanding items. Maintain an outstanding item tracker and attempt to provide the items to the examiners as early as possible. Share the tracker with the examiners daily in the morning and afternoon to update them on the status of any outstanding items.
One of the responsibilities for an examiner in charge (“EIC”) of a state examination is to schedule all the meetings with management and manage the receipt of requested pre-state examination documents. We recommend our customers be proactive and take charge as much as possible during the pre-exam stage. This communicates a level of positive commitment to the examiners.
Some of the simple ways this can occur is by:
Below is a list of areas that may be covered by a state examination:
The exit meeting will typically take place on site during the last day of the onsite visit. It’s good practice to offer to schedule the exit meeting in advance as state examiners do not schedule off-site exit meetings. It is critical that all pending items be resolved before the last day examiners are onsite. The exit meeting can allow for discussion and clarification of possible issues that could have resulted in a violation or recommendation in the state examination report. The exit meeting is a valuable part of the state examination process as it gives insight as to what to expect in the official state examination report.
Brandi Reynolds, CAMS-Audit, is a Senior Compliance Professional with Chartwell and has over 11 years of experience in the money services business industry in anti-money laundering (AML), consumer compliance and corporate governance. In additional to her AML expertise, Brandi has experience in federal and state level consumer compliance. For more information, please contact Brandi at email@example.com.
Christian Coupet, CAMS, is a Senior Compliance Professional at Chartwell Compliance. His capabilities include leading state and multi-state examinations, as well as conducting due diligence audits for international agents and branches in the U.S., Canada and the Caribbean. For more information, please contact Christian at firstname.lastname@example.org