4 minutes
Engaged leadership? Check.- Effective governance structure? Check.
- Open lines of communication? Check.
- Adequate resources? Check.
- Risk assessment and independent testing? Check.
- Policies, procedures, training? Check.
You’re taking the right steps, so why are you still finding compliance violations? Turns out, a culture of compliance involves a lot more than just checking items off a list. Those things are certainly important, but if you don’t live it, you’re never really in compliance.
To have a true culture of compliance you must ensure compliance is embedded in everything you do—every business decision and every member interaction. In a culture of compliance, without thinking about it, you are doing the right thing. Not just the legal thing, but the right thing.
Business decisions are made by your board and senior management. That checklist above? It mostly applies to them. But what about member interactions? Your front-line staff represents your best and only opportunity to do it right the first time. But very often front-line staff aren’t properly equipped to do the job. The No. 1 reason you don’t have a culture of compliance is that your front-line staff aren’t fully engaged.
“How is that possible?” you ask. “They got the mandatory compliance training! They have the procedures! We’ve told them exactly what to do to be in compliance! What more can we possibly do?”
What you can do – what you must do – is create a culture of compliance. To do so, go beyond the “what” and the “how” and explain why we do what we do. Sometimes procedures don’t make sense without context. And if something doesn’t make sense, it’s easy to skip or forget.
The account limitations imposed by Regulation D, for example, are frustrating to members and staff alike. It helps to know that Reg D is fully titled “Reserve Requirements for Depository Institutions.” It dates back to the Great Depression and was intended to prevent future runs on banks. When you understand that it’s about reserve requirements, not transfer limitations, you understand why charging fees for excess transactions doesn’t alleviate the need for compliance and why making too many exceptions to the rule might jeopardize your liquidity.
Be conscious of the fact that many young professionals in the workforce today were born after most regulations were written. Once, I was teaching a class on fair lending. There were audible gasps from the audience when I said I remember my mother signing checks “Mrs. TM Burns.” The bank didn’t care who she was, only that she had a husband. The shock of that story will help them remember why women needed protection and why the Equal Credit Opportunity Act was passed.
Explaining that “redlining” literally means picking up a red pen and marking on a map the areas where mortgages won’t be granted gives a powerful visual and great insight into why fair housing laws are so important.
And, as hard as it is to believe, we are hiring young men and women today who are too young to have personal memories of 9/11. So, in addition to showing them pictures of planes crashing into buildings, we need to tell them how the hijackers got to be on those planes, to help them understand the importance of the USA PATRIOT Act and of knowing who and where your member is at all times (not just when the account is opened).
It’s so easy to believe that once you write policies and procedures, and your staff is trained on those procedures, your credit union is and will remain in compliance. But things change. An update to your data processing system may result in required information not printing correctly on a form. Is someone checking for that? Are your loan processors and member service representatives reviewing documents to ensure they are correct before handing them to your members? Do they even know what to look for and why it matters? Or are they just following steps to get the account opened and the member out the door?
At the risk of sounding like an old fogey, we need to share stories about “the olden days” so history doesn’t repeat itself. Your senior managers and your compliance staff need to be accessible to the front line, so employees aren’t afraid to ask questions and they’re comfortable taking problems to the folks who need to know.
In a true culture of compliance, everyone is responsible and everyone is empowered to “do the right thing.”
Gaye DeCesare is president/CEO of COMPASS 4 CUs, Woodbridge, Va., compliance assistance for credit unions.
