Due Diligence and Ongoing Monitoring

  • 1.  Joint Venture

    Posted 09-22-2021 04:06 PM
    As a very generic question, a Joint Venture would not be considered a true vendor, correct? My thought is that it would be a separate "entity" altogether and would not reside in the world of Vendor Management. Any insight on this scenario?


  • 2.  RE: Joint Venture

    Posted 09-23-2021 08:15 AM
    Hi John, if you are in financial services especially banking, you might need to consider joint ventures to be a third party and part of the TPRM process.  

    The Fed, FDIC and OCC recently released Proposed Interagency Guidance on Third-Party Relationships: Risk Management for public review and comment.  I believe the comment period ends mid to late October (there was an extension to the comment period granted).  That guidance explicitly includes joint ventures as a covered third-party relationship:

    "The proposed guidance provides examples of third-party relationships, including use of independent consultants, networking arrangements, merchant payment processing services, services provided by affiliates and subsidiaries, joint ventures, and other business arrangements in which a banking organization has an ongoing relationship or may have responsibility for the associated records."

    https://www.federalregister.gov/documents/2021/07/19/2021-15308/proposed-interagency-guidance-on-third-party-relationships-risk-management

    Shelly




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    Shelly Chase
    Senior Risk Analyst Officer
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  • 3.  RE: Joint Venture

    Posted 09-23-2021 10:16 AM
    That's where it gets cloudy, though. We are not a bank, but a mortgage lender. This FAQ and the original OCC Bulletin specify it is guidance to national banks and federal savings associations. I know it's always better to be over cautious than relaxed in the due diligence, but at the same time, do not want to add possibly unnecessary requirements on the JV. If you know of another of the OCC's bulletins that better defines a 'non-bank mortgage lender', please let me know about it, but I haven't found anything yet.

    Thank you so much for your help, Shelly! I really do appreciate it!


  • 4.  RE: Joint Venture

    Posted 09-23-2021 11:05 AM
    Hi John, I suspect that the proposed interagency guidance will be adopted pretty close to as is in which case it will then also apply to any entities regulated by the FDIC and Fed and not just the OCC.  

    For now I have this on my radar but I am not planning on implementing new requirements until final decision on the joint guidance is made.  In absence of solid guidance on what a JV is, I might consider defining it in my Policy so at least internally I have a a rationale for what is in and what's out.  If I excluded JV's from TPRM I would explicitly exclude by Policy with rationale as to why- that way I have something I can at least discuss with regulators and point to versus it being perceived as a hole or lack of controls.

    Shelly


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    Shelly Chase
    Senior Risk Analyst Officer
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  • 5.  RE: Joint Venture

    Posted 09-23-2021 11:10 AM
    Thanks, Shelly! That makes perfect sense!