What It Takes to Get Out of Regulatory Enforcement

When a financial institution enters into a formal enforcement action, it's easy to view it as the end of the story. In reality, it's often the beginning of a long remediation process.

This week, the Office of the Comptroller of the Currency (OCC) terminated its Formal Agreement with Patriot Bank. In its announcement, the bank stated that the OCC concluded the continued existence of the agreement was no longer necessary for the bank's safety and soundness or its compliance with applicable laws and regulations. While the decision marks an important milestone for the institution, it also offers valuable insight into how regulators assess whether an organization has successfully addressed compliance concerns.

For banks, fintechs, and other regulated businesses, the lesson isn't simply how to avoid enforcement. It's understanding what regulators expect when an institution is working to demonstrate that its compliance program has matured.

Enforcement Is About Strengthening Systems, Not Checking Boxes

Formal enforcement actions are rarely issued because of a single isolated mistake. More often, they reflect concerns about the systems, controls, and governance processes designed to identify and manage risk.

In Patriot Bank's case, the January 2025 Formal Agreement required the bank to address deficiencies across several areas, including strategic planning, capital planning, Bank Secrecy Act (BSA) and Anti-Money Laundering (AML) risk management, payment activities oversight, credit administration, and concentrations risk management. The agreement also required the bank to strengthen its oversight framework by establishing a Compliance Committee responsible for monitoring remediation efforts.

The OCC's decision to terminate the agreement does not erase the original deficiencies. Rather, it reflects the regulator's determination that maintaining the Formal Agreement was no longer necessary under the circumstances.

That distinction matters.

Regulatory remediation is not about completing a checklist. It's about demonstrating that stronger controls, clearer accountability, and more effective oversight have been implemented in a sustainable way.

What Regulators Typically Look For Before Ending an Enforcement Action

Every enforcement action is unique, and each regulator evaluates remediation based on the specific facts of a case. However, institutions generally need to demonstrate meaningful progress in several key areas before formal actions are lifted.

Strong Governance and Accountability

Effective compliance begins with leadership.

Regulators expect boards of directors and senior management to actively oversee risk management and compliance programs rather than treating compliance as a responsibility that sits solely with legal or compliance teams.

Clearly defined responsibilities, regular reporting, documented oversight, and executive engagement all help demonstrate that compliance is embedded within the organization's decision-making processes.

Sustainable Risk Management

Corrective actions need to address root causes, not just immediate issues.

Whether the deficiencies involve financial crime controls, operational processes, lending practices, or third-party oversight, regulators typically expect institutions to implement controls that can operate consistently over time.

This often includes ongoing monitoring, internal testing, documented procedures, periodic reviews, and continuous improvement.

Documentation That Demonstrates Progress

One of the most important aspects of remediation is evidence.

It's not enough to say new controls exist. Institutions should be able to demonstrate how those controls operate through documentation such as policies, procedures, training records, internal testing, audit findings, remediation plans, and management reporting.

Documentation helps regulators evaluate whether improvements are operating effectively rather than existing only on paper.

A Culture of Compliance

Long-term compliance depends on more than policies and procedures.

Employees need to understand their responsibilities, managers need visibility into emerging risks, and leadership needs confidence that issues can be identified and addressed before they become regulatory concerns.

Organizations that embed compliance into everyday operations are generally better positioned to respond to changing regulatory expectations.

Documentation Is Often the Difference Between Improvement and Proof

One of the biggest lessons from regulatory remediation is that evidence matters.

Organizations may invest significant time and resources into improving their compliance programs, but regulators also want to understand how those improvements are maintained over time.

This is where documentation becomes critical.

Clear approval workflows, version histories, review records, audit trails, and documented decision-making help organizations demonstrate that compliance processes are operating consistently rather than relying on informal practices.

For marketing and compliance teams, this is becoming increasingly important as organizations publish larger volumes of content across multiple channels and adopt AI-assisted workflows. Being able to show how content was reviewed, who approved it, and what regulatory considerations were addressed can strengthen internal governance while supporting future examinations or audits.

Why This Matters Beyond Banking

Although Patriot Bank's Formal Agreement addressed institution-specific issues, the broader principles extend across regulated industries.

Financial institutions continue to face increasing expectations around governance, documentation, operational controls, and ongoing risk management. As organizations adopt new technologies, expand digital channels, and accelerate content creation, maintaining clear and repeatable compliance processes becomes increasingly important.

Regulatory expectations are also evolving beyond whether organizations have written policies. Supervisors increasingly look for evidence that controls are consistently implemented, monitored, and improved over time.

The Bigger Takeaway

The OCC's decision to terminate its Formal Agreement with Patriot Bank is a reminder that regulatory enforcement is intended to drive corrective action, not serve as a permanent status.

While every enforcement action is different, regulators generally expect organizations to demonstrate that identified deficiencies have been effectively addressed before formal oversight is removed.

For regulated organizations, sustainable compliance is built through strong governance, effective risk management, documented controls, and a culture that supports continuous improvement.

Those investments don't just help institutions respond to regulatory expectations. They also create more resilient organizations that are better equipped to manage risk, maintain customer trust, and adapt as regulatory requirements continue to evolve.