On 30 June 2016, the New York State Department of Financial Services (the “Department”) issued new rules, imposing additional compliance monitoring and certification requirements on financial institutions and, interestingly on their boards and senior management.
The Rule (Part 504) of the Banking Division Transaction Monitoring and Filtering Program Requirements and Certifications from the New York Department addresses requirements to maintain (i) a Transaction Monitoring Program subject to multiple requirements and (ii) a Watch List Filtering Program also subject to several specific requirements (together: the “Programs“).
Importantly, to ensure compliance with these requirements, each regulated financial institution shall submit to the Department yearly Certifications to be duly executed by the Board of Directors or Senior Compliance Officer. It must be certified that the financial institution has reviewed or caused to be reviewed, the Programs and that the Programs satisfy all requirements set forth in the Section 504.3. Not only will the Regulated Institution be subject to penalties in case of failure to comply with the new requirements or in case of an incorrect or false Certification, but also, and this could have major consequences, will the Senior Compliance Officer or Board of Directors, as the case may be, be subject to criminal penalties in case of an incorrect or false certification.
The reason for this strict measure is that the Department was recently involved in a number of investigations which showed that many of the Programs applied by NY financial institutions do not meet current standards.
The new rule 504 is effective immediately, but shall apply to all State fiscal years beginning with the fiscal year starting on 1 January 2017. The rule can be found here.