menucloseContact UsEventsNewssearchclose
Services
Industries
Insights
About Us
Careers
Contact UsEventsNews
searchclose

How law firms can respond to banking regulatory enforcement actions

George Rudoy, Shannon Moskal, Sarah Harmon
8/31/2023
Responding to regulatory enforcement actions

When a financial services organization gets word it will be subject to a consent order or other regulatory enforcement action, stress levels soar.

For attorneys and law firms that work with clients in the financial services industry, a client receiving a consent order or other regulatory enforcement action can be a nightmare scenario.

Under a regulatory enforcement action, regulatory agencies have a variety of tools at their disposal to mandate compliance, none of which amount to an enjoyable experience for a financial services organization. The organization could face fines, sanctions, and legal action, not to mention reputational impacts and the pain of being frozen out from strategic activities, such as mergers and acquisitions.

If your law firm represents a financial services client or if you serve as in-house general counsel for one and the client faces this situation, you can expect to be the their first call. Financial services organizations know they need support and legal protection – but legal representation alone usually won’t be enough to guide the organization through a consent order or similar enforcement action.

That’s where an experienced financial services consulting team can step in and bridge the gaps. The right consultants can provide crucial banking regulatory expertise, project management experience, and hands-on support that can help the organization fix issues and validate that the work was performed in accordance with regulatory expectations.

We can help take your law firm where it wants to go.
Explore services

The most efficient path through an enforcement action involves continual and seamless collaboration

The most efficient path through an enforcement action involves continual and seamless collaboration

Crowe regulatory response and legal consulting specialists have successfully collaborated many times with law firms to guide financial services clients through regulatory enforcement actions.

A successful collaboration typically involves the following four steps:

1. Assess the situation and expectations

Law firms and consulting teams must work together to pore through the enforcement action, understand the main issues, and identify any specific remediation and reporting requirements called out in the action. This process can involve reviewing relevant documentation, interviewing key stakeholders, and analyzing data.

2. Build a strategy to respond

Based on the assessment, consultants and law firms can work together to develop a thoughtful, comprehensive strategy to address the enforcement action point by point.

A complete strategy might involve developing a remediation or validation plan, outlining communication procedures, fixing regulatory deficiencies through changes to policies, procedures, and controls, and implementing process improvements.

Execute the strategy

3. Execute the strategy

With a detailed strategy in place, the consulting team and law firm can execute the plan. Execution often requires training for staff, implementation of new processes, and collaboration with regulatory agencies to address any outstanding issues.

Success depends on having the right people in place who have the breadth and depth of expertise to address specific issues called out in the enforcement action. To get those people in place, the consulting team might need to help the organization develop a flexible staffing plan that includes temporary outside resources.

4. Monitor progress

Responding to an enforcement action is like building a watch. It’s a delicate, detailed process with a lot of moving parts. To make sure everything keeps working as intended, it’s vital to monitor progress and verify the effectiveness of management’s corrective actions.

Consultants can make monitoring easier by providing thorough and timely validation support throughout the process. Law firms and consulting teams can work together to verify that the remediation strategy is implemented effectively and in a timely fashion, that the financial services organization remains compliant with relevant laws and regulations, and that corrective actions put into place to address deficiencies are sustainable.

Finding the right financial services consultants can make collaboration easier – and benefit clients

Finding the right financial services consulting firm can make collaboration easier – and benefit clients

Most regulatory enforcement actions require some input from a financial services consultants. But not every interaction between a law firm and a consulting team translates to a true collaboration that benefits the law firm’s client.

Law firms that want to engage in a truly collaborative process and provide the best experience for their client should look for a consulting team that brings the following elements to the table:

  • Regulatory expertise. The landscape of banking rules and regulations is complex and constantly changing. The right consultants understand how to apply the latest regulations to the operations of a financial services organization.

    With access to this expertise, a law firm can understand the fundamental causes of the enforcement action, get to the core of the regulatory issues, and help develop targeted, efficient strategies to address them.
  • Hands-on regulatory response experience. Each regulatory response requires a detailed, comprehensive, and tailored project plan that addresses every aspect of the enforcement action.

    A financial services consulting team that’s ready to handle a regulatory response project offers experienced professionals, recognizes what it takes to successfully navigate this kind of project, and understands the expectations of regulators.
Technology solutions
  • Technology solutions. There’s no reason to tackle a 2023 consent order with an approach from the 1990s. Consulting teams should bring sophisticated technology tools and capabilities.

    Data analytics techniques can help the financial services organization analyze large volumes of data to identify patterns and trends that might be contributing to the issues. Then the organization can use the resulting insights to inform strategic decision-making and identify areas for improvement, including process automation opportunities that can reduce human errors.
  • Process improvement insights and capabilities. If a regulatory response process doesn’t create meaningful process changes at a financial services organization, then the next enforcement action could be just around the corner.

    A financial services consulting team should be able to identify and address process inefficiencies that might have contributed to the causes of the enforcement action. By identifying areas for improvement and implementing proven practices that have helped peer organizations, the right consultants can help the organization reduce the risk of future enforcement actions.

Together, law firms and consulting teams can help lift the stress of a regulatory enforcement action, take the uncertainty out of the remediation process, and strengthen the client’s processes so that future enforcement actions are less likely.

Related insights

Crowe can help guide your client through a consent order or other regulatory enforcement action

Our legal consulting and regulatory response specialists have collaborated with law firms and general counsel many times to help financial services companies of all sizes independently test and validate regulatory enforcement actions.

When your client needs help, don’t wait – get in touch and let’s talk.

Contact us

George Rudoy
George Rudoy
Principal, Legal Consulting Leader
+1 212 751 8255
Profile
Shannon Moskal
Shannon Moskal
Principal, Financial Services Consulting
+1 630 990 4421
Profile
Sarah Harmon
Sarah Harmon
Financial Services Consulting
+1 404 495 7141