Record Retention as Risk Management
by: Gregory R. Wilson, Esq.
Proper record retention mitigates operational and compliance risk presented to any institution conducting business in this ever-changing regulatory environment. A well-established record retention program maintains records in an appropriate manner and for an appropriate duration thereby ensuring compliance, and providing for easier substantiation of compliance to auditors and examiners. In addition, when records are kept up to date and in known locations it becomes less burdensome for employees at an institution to access and utilize these records in the performance of their duties.
Approaches to record retention vary based on the size of the institution and the resources available for the creation and maintenance of a record retention program. Larger companies may utilize software or third party solutions for record retention, while smaller companies may opt for a home-grown or simplified approach. The point is that a record retention program, like any risk management system, should be commensurate to the size and business model of the institution. Whatever approach is taken by the institution, there are three major issues to be considered when determining how to retain records and for what duration.
First of all, the institution needs to identify its compliance obligations for retaining records. For example, the institution should consider how long it must keep certain documents to satisfy applicable regulations and/or regulators. Secondly, the institution should consider its legal obligations and potential for future litigation, most notably contract durations and statutes of limitations, to protect the interests of the institution. Finally, the institution should consider whether the documents serve a business purpose beyond the duration of the aforementioned retention periods thus justifying additional costs of retention.
Identifying the applicable statutory or regulatory prescribed retention periods that affect your institution’s business is the first step in establishing a record retention program. In the mortgage industry, companies face many different retention periods related to the creation of a residential mortgage loan. For example, consider Table 1 below:
Anna DeSimone founded Bankers Advisory in 1986 and is a nationally recognized authority in residential mortgage lending. She has received numerous industry awards and has authored more than 40 best practices guides and hundreds of articles.
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