Modernizing risk & compliance and Regulation YY implementation

In our previous blogs on foreign banking organizations (FBOs), we highlighted our thoughts on some of the next set of challenges for large FBOs following the July 1, 2016 compliance deadline to establish Intermediate Holding Companies (IHCs).  We recognize the long road to operationalizing run-the-bank (RtB) processes has just begun and the true “use” tests of the IHCs and their combined US Operations will be unfolding for some time.  FBOs have experienced a significant period of change for more than three years, and the baton has now been passed from large change programs to implementation programs. The focus has shifted to embedding the IHC/Regulation YY requirements into businesses to execute, control functions (i.e., second line functions) to monitor and test, and internal audit to validate.

It is critical that FBOs operationalize and then sustain their RtB processes, and reinforce and/or enhance the Three Lines of Defense (3 LoD) governance models currently in place. The ability of these functions working end-to-end and across siloes to do their jobs will be a critical point for enabling risk identification, monitoring and mitigation, ensuring a robust risk and compliance culture, and providing a US-centric view of the FBO’s operations and risk profile.  The regulatory spotlight, especially over the course of the next year, will be on risk, compliance and internal audit, and the effectiveness of these second and third lines of defense to identify whether the processes are working.

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CMS adds new changes to Medicare audit rules already under review

The Medicare Parts C and D Oversight and Enforcement Group (MOEG) of the Centers for Medicare and Medicaid Services (CMS) have released updates to the proposed 2017 Program Audit Protocols and Data Requests (CMS-10191) for Medicare Parts C and D that RegPulse first commented on in August 2016.

These changes have arisen, in part, because of public comments the agency received during the first 60-day comment period on the revised rules. Health plans that participate in these programs should familiarize themselves with the changes, especially the particular elements that have substantive effect, and may wish to participate in the new public comment period that ends December 5, 2016.

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SEC approves the CAT National Market System Plan

On November 15, 2016, the Securities and Exchange Commission (SEC) approved the National Market System (NMS) Plan governing the creation and operation of the Consolidated Audit Trail (CAT), capping four years of development by the 21 self-regulatory organizations (SROs) responsible for implementing the CAT.1 The CAT NMS Plan will require broker-dealers conducting business in the US equity and options markets to report all transactions—including orders, quotes, executions, cancels, allocations, and sensitive customer and account information—to a central repository.

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CMS releases rules to implement site-neutral Medicare payments for certain provider-based departments starting January 1, 2017

The Centers for Medicare and Medicaid Services (CMS) on Tuesday, November 1, 2016, moved forward with the adoption of a site-neutral Medicare payment policy for non-excepted (non-grandfathered) items and services provided at certain off-campus provider-based departments (PBDs). CMS provided the guidance as part of the final rule on the Medicare Hospital Outpatient Prospective Payment System (OPPS).

The final rule is scheduled to be published in the Federal Register on November 14, 2016.

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Compliance to power performance

As demands on the compliance function continue to increase in an era of enhanced regulatory scrutiny, data from the 2016 Deloitte Insurance Ethics and Compliance Survey demonstrate a correlation between financial performance metrics and the maturity levels of insurance and ethics programs.

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Final open enrollment for ACA health insurance exchanges under President Obama begins: What do the numbers tell us?

The open enrollment period for coverage for 2017 through the health insurance Exchanges created under the Affordable Care Act (ACA) begins today, Tuesday, November 1, 2016. This is the fourth open enrollment period since the Exchanges opened in 2014 and the final open enrollment period of President Obama’s Administration. The open enrollment period will close on January 31, 2017.

Sylvia Mathews Burrell, Secretary of the Department of Health and Human Services (HHS), on October 19, 2016, announced that the Administration expects 13.8 million people to enroll in coverage for 2017 during the open enrollment period. Following the 2012 Supreme Court decision that upheld the ACA’s individual mandate and made it easier for states to opt out of the ACA’s Medicaid expansion, the non-partisan Congressional Budget Office (CBO) projected that 25 million people would be enrolled in coverage through the Exchanges in 2017.1 Notably, enrollment in employer-sponsored coverage has not decreased as CBO projected in 2012, and Medicaid enrollment has exceeded the 2012 CBO projections.

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The role of internal audit in recovery and resolution planning


US regulators continue to flex their muscles and push resolution planning as a key regulatory driver to reduce systemic risk and the likelihood of an institution being “too big to fail.” On April 13, 2016, the Federal Reserve Board (FRB) and the Federal Deposit Insurance Corporation (FDIC) (collectively, the “Agencies”) jointly determined, for the first time, that certain resolution plans submitted by domestic systemically important banks (D-SIBs) were “not credible or would not facilitate an orderly resolution”1 under the US Bankruptcy Code. Further, the Agencies issued prescriptive guidance increasing expectations for the eight US D-SIBs’ resolution plan submissions due July 1, 2017 (2017 Guidance).2

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