The regulators are watching: are your vendors up to the task?

(October 22, 2014) — The US Department of Justice (DOJ), the Federal Deposit Insurance Corporation (FDIC) and the new Consumer Financial Protection Bureau (CFPB) are key players in what is currently being referred to as “Operation Choke Point,” a program designed to force financial institutions to eliminate associations with legal businesses that the current administration has deemed “high risk” such as third party payment processors, payday lenders and financial technology service providers through threats of heightened regulatory scrutiny.

In response, financial institutions are being forced to review their current and future vendor relationships with a fine-toothed comb.


Rep. Blaine Luetkemeyer, R-Mo., has introduced new legislation to rein in Operation Choke Point. H.R. 4986 is designed to curb overzealous and inappropriate use of regulatory and enforcement tools by changing the system through which the DOJ can seek a subpoena under the Financial Institutions Reform, Recovery and Enforcement Act of 1989.

The bill will also ensure that financial institutions have the security to return to the business of offering products and services to a variety of businesses, provided those businesses are licensed, registered as money services business or have obtained a reasoned legal opinion demonstrating the legality of their business, says Luetkemeyer.

While relief is on the horizon, Operation Choke Point is still in full effect. Financial institutions should be monitoring their current vendors with increased oversight and vetting new vendor relationships more thoroughly.


The Office of the Comptroller of the Currency (OCC), a part of the U.S. Department of the Treasury, has issued guidance for financial institution vendor management. The paper suggests that banks and credit unions with third-party relationships serving to outsource “critical activities” should evaluate current and potential vendors, including ATM providers, with a more critical eye. OCC encourages financial institutions to review:

  • Legal and regulatory compliance documentation
  • A statement of services and requirements
  • Evidence of a sponsor bank where applicable
  • SSAE16 auditing statements from processors
  • Financial standing
  • Actual fee structure and incentives
  • Business experience and reputation
  • Incident reporting
  • Processes
  • Insurance coverage

Full evaluation extends to contract negotiation, for which the OCC recommends clearly defined and assigned responsibilities/expectations; specification of records, reporting and performance measures; and clearly noted communication, notification and termination protocols. On-going, yearly reviews are also suggested.


Outsource ATM is. A thoroughly documented full-service ATM management partner, Outsource ATM has been making life easier for financial institutions since 1991. Leveraging years of payments industry experience, we can provide all the documentation required by the OCC while providing our bank and credit union partners with the opportunity to focus on their core competencies, while offloading a major resource drain.

Our partners get the marketing and financial benefits; we take on the risk and regulations, the hard costs and the headaches, as well as all the maintenance and management.  With Outsource ATM you own the benefits of having a fleet of ATMs without having to own the hardware.

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