Consultant: Cultivate Best Compliance Practices
Credit unions looking to shelter themselves from the growing regulatory storm may be best served by developing and sticking to a “best practices” scenario that puts compliance at the center of credit union operations, according to consultant Pam Perdue.
Perdue, chief compliance strategist for Continuity Control, a New Haven, Conn., financial consulting firm, outlined some stormy regulatory weather conditions for community financial institutions on Wednesday at a Continuity Control webinar, “Enforcement Actions Survey: How to Avoid Being the Next Victim of Increased Regulatory Scrutiny.”
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Based on third-quarter 2013 data, those conditions have only gotten more challenging, she said.
Using as her example a hypothetical $300-million asset community financial institution, Perdue estimated it now takes 2.34 full-time equivalent employees to manage an institution’s compliance burden, up from 1.67 FTEs in third-quarter 2012.
While compliance hours may have gone down, the corresponding quarterly cost per institution has increased to $43,493, up from $26,040 for the same period during the prior year.
“Right now, 11.9% of community financial institutions are dealing with regulatory enforcement actions,” Perdue said. “That’s a big number, with focal points all over the board.”
In terms of best compliance practices, Perdue suggested the following steps:
• Manage compliance holistically, rather than as individual tasks.
• Implement regulatory changes promptly and completely when they are still fresh in your mind, but don’t jump the gun on anticipating regulations.
• Execute compliance as an executive task, including articulating expectations, establishing reporting and accountability structures, gathering data for the proper decision making, and knowing what the process is costing the institution in time and resources.
• Share compliance knowledge appropriately with staff and board based on their levels of accountability.
• Remember that compliance happens when and where the work gets done, not in a corner office away from day-to-day activities.
• Maintain a formalized written compliance program that operates as a living document in guiding a financial institutions daily operations.
• Empower compliance staff members to manage risk for the entire institution.
“In the past compliance officers used to behave like scribes and hoard information,” Perdue said. “In the new world it’s their job to get the information out there and share what’s needed when it’s needed.”
That’s the best way for an institution to cope with the increasing threat of enforcement actions and the rising temperature of financial regulation, Perdue said.