The Reserve Bank of India (RBI) on Friday said it has imposed a penalty of Rs 31.80 lakh on American Express Banking Corp for non-compliance with certain directions on ‘Credit Card and Debit Card – Issuance and Conduct’.
The central bank has also imposed a penalty of Rs 4.2 lakh on HDB Financial Services for non-compliance with certain provisions of the ‘Reserve Bank of India (Know Your Customer (KYC) Directions, 2016’.
In a statement, the RBI said it conducted a statutory inspection for supervisory evaluation (ISE 2024) of American Express Banking Corp with reference to its financial position as on March 31, 2024.
Based on the supervisory findings of non-compliance with RBI directions and related correspondence, a show cause notice was issued.
After considering the bank’s reply to the notice, additional submissions made by it and oral submissions made during the personal hearing, RBI found that the charge warranted imposition of monetary penalty. The American Express Banking Corp did not make any efforts to reverse credit balances of certain credit cardholders, arising out of refund / failed / reversed transactions, to their bank accounts. RBI also said that the penalty is based on deficiencies in regulatory compliance and is not intended to pronounce upon the validity of any transaction or agreement entered into by the bank with its customers.
In another statement, RBI said based on supervisory findings of non-compliance with directions and related correspondence in that regard, a show cause notice was issued to HDB Financial Services.
After considering the company’s reply to the notice, RBI said it found that the charge was sustained, warranting imposition of monetary penalty.
The company failed to obtain Permanent Account Number (PAN) or equivalent e-document thereof or Form No. 60 in certain loan accounts disbursed during FY 2023-24, RBI said.
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In this case also, the central bank said the penalty is based on deficiencies in regulatory compliance and not intended to pronounce upon the validity of any transaction or agreement entered into by the company.
TD Bank is bolstering its anti-money-laundering practices with leadership changes and investment in data and technology following regulatory scrutiny resulting in major fines The Financial Crimes Enforcement Network fined the Toronto-based bank $1.3 billion and the U.S. Department of Justice levied $1.8 billion in fines on Oct. 10, charging that TD failed to comply with […]
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Banks know that to gain a competitive edge in the market and better service customers, they must modernize their tech stack. There is a definite awareness of the challenges that legacy core providers face in keeping up with the evolution of today’s digital banking demands. However, much of the conversation has been centered on time, expense and risk of disruption from undergoing a major system overhaul.
Kathleen Yeh, head of North American product compliance, Galileo
But there’s another key factor holding banks back — a lack of clarity and detail around how core banking providers can help banks maintain regulatory compliance as they implement these new systems.
While having the best digital user experience isn’t everything, it is essential that a core banking platform powering UX is backed by the latest regulatory compliance standards. The consequence of non-compliance is something that banks simply cannot afford.
Navigating the compliance risk arena is where hesitance to embrace core modernization hits as unknowns exist around what the risks are, how to approach this path and how to mitigate those risks. But before banks vet a potential digital core provider, there are key questions to consider. The first six will help clarify a bank’s approach to digital transformation.
1. What is a bank’s tolerance for regulatory risk as it relates to technology?
2. What is the impact of a potential digital core solution to regulatory risk, and what acceptable mechanisms can be implemented to help mitigate risk?
3. How will the digital core solution streamline the current compliance processes; what benefits are expected and do the benefits outweigh the costs?
4. What impacts will the digital core solution have to the regulatory change management process?
5. Putting this into practice, how does the bank make regulatory partners and examiners comfortable with the decisions?
6. How does a bank translate its current risk tolerance and plan a digital environment?
Once there is internal clarity on a bank’s approach to digital transformation, it should ask more informed and meaningful questions to its prospective digital core provider, including:
7. How has the digital core solution been designed to enable the bank to comply with regulatory requirements?
8. How does a bank ensure a regulatory compliance approach is future-proofed to evolve with continued changes in the market?
9. How is the bank tracking today’s changes and how is this communicated with clients as requirements evolve?
10. How does the change management program fit into a bank’s overall compliance framework?
11. How does the bank ensure that its compliance program is robust enough to meet industry expectations and oversight requirements of bank regulators?
12. Who are the regulatory compliance experts on the team — what is their knowledge base in each key area?
Bridge the digital divide
Given that all banks must juggle today to make the digital core banking switch, it’s easy to understand why banks are so risk averse. This is where trust and experience are needed to bridge the digital divide while effectively addressing the regulatory compliance elements of a digital core transformation or augmentation. In fintech, this means working with a proven financial services platform that relies on a dedicated product compliance team that understands the complexities of the U.S. banking market.
As you explore next-gen digital core providers, look for proven vendors that have decades of experience building trust in the market by combining the power of technology and industry expertise with a robust team of banking-as-a-service and digital banking market experts. Consider a provider that operates faster, smarter and more cost effectively with intelligent automation as well as one that works with banks to tackle financial and technical operations services, including security, compliance, risk management and customer service.
A level of comfort to initiate the core banking transition can be achieved when working with a market-tested partner that knows implementing a digital core is about a solution that is secure, sustainable, minimizes disruption to business, can co-exist with current operations and is designed with regulatory compliance in mind.
More than ever, banks have a powerful opportunity to deliver trusted, secure, flexible and tailored financial offerings for their customers — all while prioritizing compliance. The first step is asking the right questions to inform what technology matches the unique needs of the bank and its customers.
Kathleen Yeh is Head of North American Product Compliance at Galileo, where she brings more than 20 years of experience in banking and financial services. Prior to this, she served as Head of Compliance for Poppy Bank, and Chief Compliance Officer with Tri Counties Bank. Yeh previously held senior-level Consultant roles with a variety of banks and banking institutions, including Wells Fargo, Treliant, Aurora Bank and Infosys.
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