U.S. banking regulators warn on loans to undocumented workers
The main U.S. banking regulators 7on the 13issued an official warning to financial institutions about lending practices for undocumented workers. The regulators said they called for stronger oversight of identity verification, internal controls, and 3partnerships.
U.S. banking regulators 7on the 13issued an official warning to financial institutions about the practice of lending to undocumented workers. Investors and depositors should consider the possibility that regulatory and compliance issues could spread into operational risk.
The warning was jointly announced by the Federal Deposit Insurance Corporation, the Federal Reserve Board, and the Office of the Comptroller of the Currency. The three agencies expressed concern in a joint statement.
The regulators said loans to customers in undocumented status could create legal, regulatory, and reputational risks. They said financial institutions need to review and mitigate related risks.
The statement included recommendations to strengthen customer identity verification, due diligence, and internal control and compliance procedures.3The regulator said lending channels through third-party partnerships also fall within its supervisory scope.
The agencies said they would review relevant practices during the supervisory process. They added that supervisory measures or additional guidance could be issued if needed.
Some financial institutions are reported to be reviewing their internal policies and partnership agreements. The regulator’s recommendations could lead to future reporting and supervisory requirements.
The latest warning once again highlighted operational risks related to regulatory compliance. It is important to review financial institutions’ disclosures and regulatory letters.
Sources: Yahoo Finance,Investing.com News
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