WACHA Going Paperless

Transcription

1 WACHA Going Paperless Presented by: PAUL A. CARRUBBA Adams and Reese LLP Phone: (601)

2 Paul Carrubba Paul is a partner in the law firm of Adams and Reese LLP. His primary focus is on Banking Law and legal issues dealing with payments system laws and regulations and bank operations issues. He has over 42 years of experience in the banking industry as a Bank Operations Manager, a consultant, an author, and an attorney. Mr. Carrubba is the author of five books including: Revised UCC Article 3 and 4, A Banker s Guide to Checks and Principles of Banking. He is the co-author, with Dan Fisher, of both Remote Deposit Capture Practical Considerations and most recently, Risk Management Series Remote Deposit Capture. 2

3 Presentation Content THIS PRESENTATION IS DESIGNED TO PROVIDE ACCURATE AND AUTHORITATIVE INFORMATION REGARDING ITS SUBJECT MATTER. IT IS PRESENTED WITH THE UNDERSTANDING THAT THE PRESENTER IS NOT RENDERING LEGAL, ACCOUNTING, OR OTHER PROFESSIONAL SERVICES. IF LEGAL ADVICE OR OTHER EXPERT ASSISTANCE IS REQUIRED, THE SERVICES OF A COMPETENT PROFESSIONAL PERSON SHOULD BE SOUGHT. 3

4 Introduction Going Paperless Part of Records Retention Program Legal Requirements Compliance Federal Regulation State Banking Regulations Customer and Business Requirements ESIGN ACT estatements Disclosures (Reg E, Reg Z, Reg DD, etc.) Electronic Loan Documentation Litigation e-discovery 4

5 Why use Record Retention? 5

6 Why a Record Retention and Destruction Program is Essential Information contains value Legal requirements Litigation Government Investigation Compliance Each regulated entity must establish and maintain a written record retention program Management and the Office of Finance shall evaluate in writing this program at least every two years Customer Requirements Business Requirements 6

7 Failure to Manage Records Risky/Costly Inability to use business critical information Loss of strategic opportunities Increased costs of doing business Failure to comply with statutory or regulatory retention and destruction requirements Failure to comply with security breach notification requirements Reduced ability to comply with court orders and other litigation Inability to respond promptly to government inquiries [1] [1] Best Practice Guidelines & Commentary for Managing Information & Records in the Electronic Age, Sedona Conference Working Group on Best Practices for Electronic Document Retention & Production, Second Edition, November

8 Concerns Internal Challenges Buy-In from Senior Management Building the System Training Staff Cyber Threats 8

9 Risk of legal action Failure to preserve documents Failure to produce documents Inability to locate records Inability to suspend destruction of records Lack of written document retention policy 9

10 Downfalls to Avoid Nothing less than 100%: Invest in Process Set up practices and Procedures 10

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12 General Elements of a Good Program Assemble the right team for the project Establish clearly defined goals (what and why) and accountability (who) Define types of records Create a schedule of retention / archive / destruction Process for suspending destruction of records Draft a policy incorporating all of the above 12

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14 Establish your team Compliance officers/specialists- regulatory compliance, legal staff, internal audit Business managers IT Legal Others? Create a Records/Document Manager Position- or another individual or committee to oversee, coordinate, and implement 14

15 Required Records Customer Account records Applications Supervisory activity records Regulatory reports Surveillance records Enforcement files Legal Activity records 15

16 Benefits of Going Paperless 16

17 Benefits of Going Paperless Allows for better organization of imaged files Creates consistency Improves speed and reliability in searching and processing imaged documents Reduces storage and paper Faster thru-put and approval times Improves electronic records management Streamlines processes Increases efficiencies Improves staff productivity and customer satisfaction Reduces audit processes 17

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19 Electronic Signatures In Global and National Commerce (E-SIGN)

20 What is E-SIGN? Federal law enacted by Congress in 2000 providing that a signature, contract, or record cannot be denied legal effect, validity, or enforceability solely because it is in electronic form, or, in the case of contracts, solely because an electronic record was used in its formation. This means that signatures, contracts, and records created and/or stored in electronic form have the same force and effect as if they were in the traditional paper form. 20

21 What is E-SIGN? The Act also provides that laws or rules requiring records or contracts to be retained, even if required to be in original form, are satisfied by retaining an electronic record of the information as long as the record accurately reflects the information and remains accessible to those entitled to access it. Checks may be retained electronically in the same manner. These electronic records are admissible into evidence in a court of law to the same extent as they would be if in traditional paper form. 21

22 Definitions Electronic Signature Broader definition under E-SIGN than what we traditionally think of as a signature Means an electronic sound, symbol, or process, attached to or logically associated with a contract or other record and executed or adopted by a person with the intent to sign the record. Consumer: an individual, or his legal representative, who obtains, through a transaction, products or services used primarily for personal, family, or household purposes 22

23 Definitions Record: information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form. Electronic Record: a contract or other record created, generated, sent, communicated, received, or stored by electronic means. 23

24 Electronic Signatures FAQ Electronic Signatures Q - Is an electronic signature legal? A - Yes, both federal and state law gives electronic signatures the same legal status as handwritten signatures. Q - What are the legal requirements of electronic signatures? A - (a) The signature must be unique to the person using it. (b) The signature must be verifiable. (c) The signature must be under the sole control of the person using it. (d) The electronic signature process must guarantee that the document signed cannot be altered after it has been electronically signed. (e) The electronic signature must capture and preserve the signer's intent, consent, understanding, or responsibility related to a document that is being signed. Uniform Electronic Transaction Act (UETA) 24

25 E-SIGN Consumer Provisions 15 U.S.C. 7001(c) sets forth the provisions and requirements for using electronic records, contracts, and signatures with consumers. This section is very long and detailed, and a comprehensive review of the requirements is beyond the scope of this presentation. 25

26 E-SIGN Consumer Provisions Highlights Information relating to a transaction required to be provided to a consumer in writing may be provided electronically if several conditions are met. Generally speaking (again, the statute goes into greater detail) the consumer must: Affirmatively consent to the electronic record Be aware that she can refuse consent or withdraw consent once given. Be informed as to which transaction, record, or categories of records the consent applies Be informed of the procedures used to withdraw consent Be informed of how to obtain a paper copy of the record and if a fee will be charged to obtain it. 26

27 E-SIGN Consumer Provisions Highlights The consumer also must be informed about the computer requirements to access the records. The consumer must: Be provided with the hardware and software requirements for accessing and retaining the electronic records. Consent electronically in a manner demonstrating she will be able to access the records electronically. Be provided with a statement explaining changes to the hardware and software requirements and consent to such changes, if changes are made after consent is given. 27

28 Electronic Disclosures Information required by law to be disclosed to consumers (such as Truth-in- Lending, Truth-in-Savings, etc.) may be disclosed in electronic form. CAVEAT: The consumer must be able to retain/store or print/reproduce the information or else the record may be denied legal effect. If another law requires a record to be posted or displayed in a certain manner, the record must be posted and displayed as specified by the other law. Reg E - Form of disclosures. Disclosures required under this part shall be clear and readily understandable, in writing, and in a form the consumer may keep, except as otherwise provided in this part. The disclosures required by this part may be provided to the consumer in electronic form, subject to compliance with the consumer-consent and other applicable provisions of the Electronic Signatures in Global and National Commerce Act (E-Sign Act) (15 U.S.C et seq.). 28

29 ELECTRONIC DISCLOSURES Reg B (Equal Credit Opportunity Act) Reg E (EFTA) Reg M (Consumer Leasing Act) Reg Z (Truth in Lending Act) Reg DD (Truth in Savings Act) Reg CC (EFAA) 29

30 Use of Electronic Agents E-SIGN allows for a contract to be created between Bank and Customer without a bank representative ever having to be involved personally. A contract can be formed, created, or delivered by an electronic agent so long as the action taken is legally attributable to the person or entity to be bound. An electronic agent is computer program or an electronic or other automated means used independently to initiate or respond to an action without review or action by an individual at the time of the action or response. 30

31 Use of Electronic Agents Example of this principle of E-SIGN in practice: Customer goes to Bank s website to sign up for internet banking Customer clicks on the link to sign up for internet banking Bank s website responds with a prompt for Customer to enter account information and splashes an internet banking agreement on the screen requiring Customer to click I Agree (Clickwrap Browserwrap) When Customer clicks I Agree a legally binding contract for internet banking services has been entered into between Customer and Bank, despite a bank representative never having been personally involved in the contract formation. Bank s website in this scenario is an electronic agent that is capable of creating a legally binding contract on Bank s behalf. 31

32 Exceptions to E-SIGN There are several types of contracts and records to which E-SIGN does not apply. The most important to our discussion is the UCC. E-SIGN only applies to sections and and Articles 2 and 2A of the UCC. The reason for this is that the other Articles of the UCC contain their own provisions governing electronic signatures, contracts, and records. 32

33 State Law Transactions E-SIGN provides that it does not apply to state law transactions as long as the state in question has adopted the Uniform Electronic Transactions Act (UETA) proposed by the National Conference of Commissioners on Uniform State Laws (NCCUSL) in Currently, 46 states and the District of Columbia have enacted the UETA. Congress used the UETA as a guide to draft E-SIGN, and thus, the provisions of E-SIGN and the UETA are very similar. 33

34 OCC AL Electronic Record Systems Electronic Record Systems Potential use in litigation Internal and External Controls Bank Supervision Compliance with Regulatory Requirements 34

35 OCC AL Electronic Record Systems- Continued Implementation Considerations Security Internal Controls Backup and Recovery Record Destruction and Control Retention Records and Content Change Management 35

36 FFIEC IT EXAMINATION HANDBOOK Imaging Control Points Capture Indexing Security Training Audit Back-Up and Recovery Legal Issues 36

37 PAPERLESS LENDING 37

38 Documents Note Original Imaged Deed of Trust Recording Office Secondary Market Notaries Other 38

39 Compliance Federal Disclosures Helps Ensure Compliance Reporting Trail Mail Paper Copy when Not Accessed Electronically 39

40 Litigation E-discovery 40

41 Key Issues Preservation Collecting and Producing Electronic Evidence Penalties for Failure to Preserve 41

42 Preservation 42

43 Preservation What is a Litigation Hold? When Should a Litigation Hold be Issued? Who is Involved in the Litigation Hold Process? How is Electronic Information Preserved? 43

44 What is a Litigation Hold? Notice to retain information relevant to litigation Designed as first step to ensure that Electronically Stored Information ( ESI ) is preserved Works with retention policy to stop all destruction until relevant information is preserved Established procedures created in conjunction with a retention policy 44

45 When Should a Litigation Hold be Issued? Litigation Hold is meant to preserve evidence for litigation Time to issue a hold is when litigation is reasonably anticipated Waiting until actual lawsuit is filed may not be sufficient 45

46 Who is Involved in the Litigation Hold Process? Litigation Hold notice should go to anyone who may have information relevant to litigation People with information are referred to as Custodians Requires initial investigation to determine who should get the notice Initial investigation followed by meetings to identify other potential Custodians Generally a good idea to obtain acknowledgement of receipt 46

47 Guidelines for Litigation Hold Should cover all forms of ESI Provide information on litigation so Custodians will know what is to be preserved Vendor may be used to preserve ESI as it appears on the original computer Electronic preservation saves Meta Data in form as of time of preservation 47

48 Collecting and Producing ESI Once preserved ESI must be collected from the Custodian for review and production in litigation Significant amounts of ESI generally require specialized vendors to collect, store and process Before production in litigation ESI must be reviewed Remove privileged information Identify relevant information to produce 48

49 Collecting and Producing ESI Review can be most expensive part of the process Outside vendors may help contain costs of review Once reviewed process for production 49

50 Penalties for Failure to Retain Evidence Courts are very serious about retaining ESI Severe sanctions can be leveled in the litigation for failure to preserve Criminal penalties may also apply 50

51 Admissibility of Electronic Documents and Images of Originals Generally speaking, an electronic image of an original document will be treated like a Xerox copy for purposes of admissibility in court Biggest problem unique to ESI is authenticity requirement Extra precaution is necessary on a case by case basis to be sure all documents maintained in an electronic record retention program can be fully proven as authentic 51

52 QUESTIONS Paul A. Carrubba

53 WACHA Going Paperless Presented by: PAUL A. CARRUBBA Adams and Reese LLP Phone: (601)