What should a compliance officer determine during a review of charge-offs and losses?

During a review of charge-offs and losses, it is essential for a compliance officer to determine if there is an internal control weakness. Identifying such weaknesses is crucial because they may indicate systemic issues within the organization's processes or practices that allowed for the losses to occur. By pinpointing these weaknesses, the organization can take corrective actions to prevent future losses, strengthen its overall control environment, and improve compliance with relevant regulations.

The analysis of charge-offs and losses serves not only to understand the financial impact but also to assess the effectiveness of existing controls. If internal control weaknesses are present, it raises concerns about the reliability and integrity of the organization's reporting, risk management, and enforcement of policies. This proactive approach helps ensure the organization remains compliant and minimizes future risks.

In contrast, addressing repayment schedules or determining a customer's ability to cover losses focus on actions tied to financial recovery but do not solve underlying compliance issues. Similarly, notifying the media is not a compliance function and may not be relevant to the internal review process, which is primarily concerned with understanding and improving organizational controls.