Reinforcing each link in the compliance management chain

By Kelly Pike

In today’s dynamic regulatory environment, efficient and effective compliance management isn’t about one position—it’s about a compliance management chain through which everyone from the board of directors to the front-line tellers makes compliance a daily part of their job.

Experts agree on where this chain must begin: with the board of directors and the compliance oversight structure they choose. Because compliance now touches more and more aspects of the community bank, a board must determine which approach is most effective based on its bank’s size, complexity and product mix.

A definitive structure is necessary to manage the flow as compliance seeps into other departments. Mortgage and credit card employees have been directly affected by new rules while tellers remain at the front line of BSA and anti-money laundering efforts. Even human resources is getting in on the act with the SAFE Act; these professionals are often tasked with keeping employee records necessary to register with the database for mortgage loan originators.  

To cope with the growing complexity and ongoing change, compliance committees are sprouting at community banks of all sizes. Drawing on the expertise of people from different departments, a committee ensures that compliance requirements filter through the entire organization, says Linda Albrecht, senior manager at Eide Bailly LLP, an accounting and business advisory firm in Mankato, Minn.

A compliance committee might include the head of every major bank department and function, from mortgages and trusts to IT and marketing. Meetings are an opportunity for the compliance officer to share information about new regulations and solicit input on how to best implement them. Depending on the community bank’s structure, the compliance officer might even assign people with specific areas to oversee, such as deposits, the front line or back-office operations.

“As a committee, you’re almost creating a specialty in some areas,” Albrecht says. “The person in charge of deposits can trickle that information down to the people who need to know it.”

Having a compliance committee also creates accountability, says John Zasada, principal of financial institutions at Larson Allen, an accounting, consulting and advisory firm in Minneapolis. By meeting quarterly—and more often during times of many regulatory changes—everyone stays informed of the bank’s progress.

“If you’re testing in mortgages and find a lot of violations due to all the changes, it’s nice if other departments know about that,” Zasada says. Not only can that knowledge help motivate the department to fix a problem; it also lets others understand why one department might be getting more resources.