Regulators have high concerns for how banks manage their third parties and therefore have set out guidelines where the bank must have a third-party risk program in place that addresses the vendors and the level of risk they pose.
Banks are expected to:
Centralize the data on your third parties to efficiently manage, monitor and risk assess your third parties.
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Cybersecurity has the attention of all bank regulatory bodies who have called on banks to address the risk through appropriate due diligence and ongoing oversight and monitoring.
It’s important that you can demonstrate that you are taking proactive steps to identify and mitigate potential areas of weakness otherwise you face enforcement actions or high fines.
All bank federal and state regulators have called for banks to remain vigilant as cyber threats are increasing in speed, scope and sophistication. They have stressed that third party risk management remains a top supervisory focus.
Be aware that in the past several years, the CFPB has used UDAAP as a primary enforcement mechanism for many third party related items. Staying aware of all aspects of outsourced products and services is not only a regulatory requirement but also a best practice to prevent lapses that could lead to those costly UDAAP enforcement actions.