IT Examiner School eBook May 2025

 Use of other parties or subcontractors by the third party  Scope of internal controls, information security, privacy protections, and audit coverage

 Business resumption strategies and contingency plans  Knowledge of relevant consumer protection regulations  Adequacy of management information systems  Insurance coverage

 Eligibility to perform as a service provider given the existence of any outstanding enforcement actions against the third party, and the requirements of Section 19 of the FDI Act that may apply to institution affiliated parties  Record retention and maintenance practices  Identification of potential conflicts of interest  Impact of proposed contracts on the third-party’s operations and financial condition

Decision Factor 1 ▲

Oversee Service Provider Arrangements. Each bank shall:  Exercise appropriate due diligence in selecting its service providers

Risk-based due diligence is performed on prospective third parties before contracts are signed, including reviews of their background, reputation, financial condition, stability, and security controls.

Control Test Review due diligence documentation for any vendors or service providers added or renewed since the prior examination to ensure the depth of the due diligence aligns with the criticality of the services to be provided. Click here to enter comment 3. Determine whether the following topics are considered when contracts are being structured. The applicability of each topic is dependent upon the nature and significance of the third-party relationship. Contracts should clearly set forth the rights and responsibilities of each party, including the following:  Timeframe covered by the contract  Frequency, format, and specifications of the service or product to be provided  Other services to be provided by the third party, such as software support and maintenance, training of employees, distribution of required disclosures to institution’s customers, and customer service  Adequate and measureable service level agreements (SLAs)  Requirement that the third party comply with all applicable laws, regulations, and regulatory guidance  Authorization for the institution and appropriate Federal and State regulators to have access to the records of the third party as necessary to evaluate compliance with laws, rules, and regulations  Identification of which party will be responsible for delivering any required customer disclosures  Insurance coverage to be maintained by the third party  Terms relating to any use of premises, equipment, or employees  Permissibility/prohibition of the third party to subcontract or use another party to meet its obligations  Authorization for the institution to monitor and periodically review the third party for compliance with its agreement  Independent validation of security controls  Indemnification or other compensation for contract violations  Confidentiality and security of information  Notification of any information security or business continuity incident in a timely manner  Exit/Deconversion costs and responsibilities Decision Factor 1 ▲