The Office of the Comptroller of the Currency (OCC) has warned banks and financial institutions about elevated operational risks caused by geopolitical tensions and a heightened compliance risk environment complicated by regulatory changes, policy initiatives, and difficulties in hiring qualified compliance professionals.

In its “Semiannual Risk Perspective for Spring 2022,” released Thursday, the OCC warned operational risks include threats of cyberattacks, “with an observed increase in attacks on the financial services industry.” Banks’ increasing reliance on third-party relationships and the growing use of digital assets to complete financial transactions are providing bad actors with more avenues for cyberattacks, the OCC said.

Compliance risks are increasing because of sanctions placed on Russia and Belarus by the United States, the European Union, and other allied countries. In this environment, financial institutions are finding it harder to recruit and retain qualified compliance subject matter experts, and the churn of new employees in compliance departments is making it more difficult to identify and mitigate emerging risks, the OCC said.

While the banking and financial services industry had a strong 2021 and remain in a firm financial position, looming health, economic, and political threats have caused constriction, the OCC said.

“Financial conditions tightened in 2022 with less supportive fiscal and monetary stimulus and increased risks to the economic recovery,” the report said. “Geopolitical risks from the Russian invasion of Ukraine, supply chain disruptions, higher inflation, and tailwinds from pandemic-related public health measures weighed on sentiment and financial market prices.”

The OCC said banks and financial institutions must continue to monitor and respond to evolving and emerging risks related to consumer products and services, and that particular attention should be paid to compliance with fair lending laws and monitoring the performance of third parties like fintechs offering new services to customers.

Anti-money laundering/countering the financing of terrorism (AFL/CFT) continues to be an area of concern, particularly because of increased risks due to the Russian invasion of Ukraine.

The sanctions and other economic actions taken against Russia “are complex and evolving. Financial institution management should assess the applicability and impact of sanctions on their institutions and customers, including the impact of sanctions imposed by both the U.S. and other countries on foreign branches, overseas offices, and subsidiaries,” the report said.

Other AML/CFT risks are found in an increase in environmental crimes linked to corruption and transnational criminal organizations and in fraud related to government pandemic relief programs.