If your credit union's compliance officer still acts as littlemore than a watchdog, barking directives about what you can andcan't do, he or she may be taking unintended bites out of yourfuture member service capabilities and competitive positioning.

In an environment characterized by a plethora of new laws andburgeoning enforcement actions, compliance officerstoday must operate as business catalysts, helping their creditunions grow within the rigors of a rapidly changing regulatorylandscape, according to AndyGreenawalt, founder and CEO of Continuity Control, a New Haven,Conn.-based financial technology company.

“Compliance officers must look at things with a critical eye andhave a mindset of possibilities,” said Greenawalt during his Dec.12 webinar titled, “Compliance Officer 2.0 – Are You Ready?”“Changing your thinking is absolutely imperative to the survival ofyour institution and your industry.”

The evolution of compliance officers' roles from that of thinkerand researcher to one of enabler and leader represents a sea changein the role that compliance officers must play in the emergingregulatory environment, Greenawalt said. Much of that change isdictated by the attitude of the regulators themselves, who havestepped up enforcement actions that meet and exceed the growinginfluence of regulation.

“Examiners are getting tired of ill-framed and poorly organizedreporting,” Greenawalt told webinar participants. “They wantarticulation, and the lack of it is what agitates the beast, whatpokes the tiger.”

New regulations continue to percolate at a steady pace but thenumber of enforcement actions among financial institutions,including credit unions, have spiked in the past 10 years, nowaveraging between 150 and 200 actions per quarter compared toaround 25 a decade ago, said Greenawalt. In the last year, theincremental compliance cost-per-quarter has risen to $43,493 perinstitution in the third quarter of 2013, up from $26,040 in thethird quarter of 2012, according to combined financial regulatordata.

“Compliance needs have exploded, the technology has changed andthe pressure is absolutely here,” Greenawalt said.

The growing compliance requirements also havebecome costlier forsmaller institutions, some of which lack the resources to addressdemand, according to Greenawalt. While big banks seem better ableto roll with the punches, smaller institutions struggle under theincreasing regulatory weight. Greater integration of the compliancefunction into the daily operating environment is critical to makingthe most from limited resources, he added.

“Today, compliance officers have to look at their jobs verydifferently,” said Greenawalt. “Compliance officer 2.0 is theintegral role in the business of banking, and the business ofbanking isn't possible without it.”

Read more: Taking a holistic approach…

In years past, compliance officers have seen their roles as thecredit union's safety net, mid-level managers who specialized intaking methodical, often slow steps in examining conditions with aneye toward keeping the institutions out of harm's way, according toGreenawalt.

Under a 2.0 scenario, compliance officers should view their roleas more holistic, Greenawalt said, including identifying processesto make the credit union more competitive while still complyingwith changing regulations. Compliance must become anorganization-wide responsibility under an officer now considered apart senior management, he added.

“This requires an attitude of optimism,” Greenawalt said. “It'sno longer a matter of saying, 'We can't do this,' but rather, 'Howare we going to do this?'”

Rather than reviewing compliance needs merely as a set of tasks,they must be seen with the context of the credit union's businessobjectives, said Greenawalt. What had previously been consideredroadblocks to progress should be seen merely as speed bumps toovercome so that high levels of member service can prevail despitewhat might be perceived as regulatory limitations, he suggested.That requires a change of focus, the consultant said, as well as anemphasis on developing compliance management systems.

“The current challenges are systemic,” Greenawalt said. “Thechanges keep coming and credit unions need to have a system inplace designed to deal with those changes.”

According to the FDIC,a compliance management system is designed by a financialinstitution to assess its consumer protection, fair lending andCommunity Reinvestment Act responsibilities, ensure that employeesunderstand these responsibilities and requirements are incorporatedinto business processes. The system should also review operationsto ensure that responsibilities are carried out and requirementsmet and take prompt corrective action and update materials,disclosures and training as necessary

“Historically, the compliance job was research-oriented andintrospective,” said Greenawalt. “In 2.0, compliance officers areout in the field to better figure out how to integrate regulationsinto daily operations.”

The change in emphasis also has changed the amount of time spenton the position's various key responsibilities. Previously,compliance officers had spent more than 60% of their time onanalysis and 15% on implementation, Greenawalt said. Under 2.0, theemphasis has changed, with compliance officers now spending just20% of their time on analysis and more than 60% onimplementation.

Today and in the years to come, Greenawalt said credit unioncompliance officers will need to be thought leaders andimplementers within their institutions with executive thinking andcommunication skills augmenting detailed analysis capabilities.

The end result, Greenawalt said, is to keep the credit unionsafe while using the regulatory challenges it faces to build abetter, more service-oriented and more profitable institution.

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