OCC Guidance on Independent Consultants used in Enforcement Actions


Issued on November 12, 2013, OCC Bulletin 2013-33, Use and Review of Independent Consultants in Enforcement Actions provides standards governing the use of independent consultants in enforcement actions involving significant violations of law, fraud, or harm to consumers.  

In its Note for Community Banks, the OCC specifies that this bulletin does not apply when the OCC requires the bank to hire a consultant to provide expertise needed to correct operational or management deficiencies. These types of “functional” engagements have been particularly valuable for community banks and do not raise the same level of concerns addressed in this bulletin. In these circumstances, banks should consult Bulletin 2013-29, Third-Party Relationships: Risk Management Guidance.  

Requiring an Independent Consultant.  When determining whether to require an independent consultant, the OCC considers
  • The severity of the problem
  • Criticality of the function which must be remediated
  • Their confidence in management’s ability to effect remediation
  • Expertise, staffing and resources of the bank
  • Actions already taken by the bank to address the problem

OCC Review of the Proposed Consultant.  The OCC will assess:
  • The bank’s due diligence, including evaluation of the proposed consultant’s qualifications, independence, resources, expertise, capacity, reputation, information security and document custody practices, risk management and reporting, and financial viability, as well as any conflicts of interest.  The bank should also have determined if the consultant has had any professional disciplinary actions and evaluated the impact of those on the engagement.
  • Independence of the consultant through an evaluation of potential conflicts of interest or the appearance thereof, including the previous relationship between the bank and the consultant, what percentage of total revenue the bank’s fees represent for the consultant, business or personal relationships between consulting staff and the board or executive officers of the bank, and prior employment of consultant staff by the bank.
  • The engagement contract and work plan, to ensure that their terms are consistent with the requirements of the enforcement action.  All work papers, analyses, drafts and reports must be available to the OCC, who may also meet privately with the consultant.  Material modifications to the contract, work plan, or staffing must be approved in writing by the OCC, as must the subcontracting of any work.  The OCC also retains the right to cancel the contract with no right of appeal by the consultant.

OCC Oversight of the Engagement
  • Depth of oversight is commensurate with the seriousness of the violation and complexity of remediation.
  • The OCC will review the consultant’s final written report and findings, which are also presented to the bank’s board of directors.
  • Once the bank has prepared a plan to address the findings and implement the board’s responses, the OCC will determine whether these are adequate and corrective actions will be sustainable.