How to build an effective and efficient compliance program at your financial institution

A version of this article was previously published in the August 2018 edition of the Callahan Credit Union CPA Guide.

As national administrations turn over, changes are often made that affect credit unions and their regulatory requirements. Under the Trump administration, for example, the Economic Growth, Regulatory Relief, and Consumer Protection Act signed into law on May 24, 2018, provided targeted regulatory relief to financial institutions.

Without an effective and efficient compliance department, regulatory changes such as these can cause unnecessary stress to a financial institution and its officers and board of directors. Below are items to consider when building a compliance program.

Set the tone at the top

Instilling a culture of compliance at a credit union begins with senior-level management and buy-in from the board of directors. Together, these two populations set the tone for an entire institution. This can be accomplished through three key steps:

• Ensuring compliance efforts are mentioned in all job descriptions and annual employee reviews
• Implementing and overseeing an effective compliance management system, which includes a compliance monitoring system and audit programs
• Appointing a qualified compliance officer to fit the risk of the credit union, establish a reporting structure, and deal with compliance resolutions across all departments

Build a strong compliance team

The size of an institution’s compliance team should directly correlate to the complexity and risk profile of the credit union. This may be influenced by an institution’s size, risk appetite, and the products and services offered.

Compliance teams are commonly viewed as cost centers, which often results in them being leanly staffed. However, viewing them instead as profit protectors may prove more beneficial because the expense of a civil money penalty will almost always greatly outweigh the expense of employing knowledgeable and professional staff as part of an effective compliance management system.

Organizations can also benefit from thinking of compliance teams as an investment to help mitigate an institution’s reputational risk. To help achieve this goal, build a team with diverse experience from different types of financial-service organizations, such as:

• Prior employment at institutions in a different asset-size class