Summary

This operational audit, for the period March 2004 through February 2006, with selected actions through June 30, 2006, focused on Office of Financial Regulation (Office) procedures and practices for the regulation of money transmitters and mortgage brokers and lenders.  While we found the Office has made noteworthy efforts in regulation despite a large growth of activity for these industries, the following additional opportunities for improvements were noted in various aspects of the programs:

Finding No. 1:          The Office should continue to identify opportunities for educating entities of Federal requirements associated with money transmitter licenses. 

Finding No. 2:        The Money Transmitter Unit (Unit) is drafting a comprehensive risk analysis matrix to be used as part of a future integrated regulatory enforcement and licensing system, scheduled for implementation by 2009.  In the interim, the Unit should develop and document a workable, comprehensive risk assessment process.

Finding No. 3:        Written policies and procedures related to money transmitter regulatory activities should be updated to reflect current practices.

Finding No. 4:        The Office did not appropriately verify and reconcile remittances received and invoices paid for the deferred presentment provider database and call center.

Finding No. 5:        The Office did not timely update the Department Licensing System to reflect the denial of applications remaining incomplete following the 90-day application period.

Finding No. 6:        The Office could enhance its current practice to identify potential conflicts of interest of its regulatory staff and management by annually requiring a statement regarding any known conflicts of interest.

Finding No. 7:        To supplement its efforts to identify unlicensed activity during the course of examinations, the Office should enhance its written procedures requiring the proactive searches for unlicensed activity.