if they have not been given appropriate instruction on what is required of them. In structuring a compliance training program, the first step is a needs assessment — the types of products and services offered, current level of staff knowledge, problems identified in audits and examinations, and so forth. The goal of the compliance training is to provide line officers and other staff with the information they need to produce positive compliance results in their particular area or job. It is not to be an exercise in information overload. Therefore, the person in charge of training (whether classroom, online, etc.) needs to scope out the relevant laws and regulations to be covered, determine how to tie the rules into the institution’s functions, decide which media and tools to use, and so forth. Regular communication of compliance information is an important complement to regular training. It helps keep staff aware of changes in the compliance rules and expectations, as well as keeping compliance issues on their “radar screens.” Testing A robust internal compliance review program, including both periodic audits and ongoing monitoring, can serve several purposes. These include giving early warning of problems, providing a defense against litigation, meeting regulatory expectations, and furnishing measurements of department/area or individual performance. Enforcement Without consistent enforcement of accountability for compliance performance, all the other elements are pretty much for naught. If individual line managers and other personnel are “let off the hook” for poor compliance performance because, for example, of high loan production volume, the system is likely to fail. Making It Work Human nature being what it is, there needs to be incentives for good compliance performance and, perhaps more importantly, disincentives for poor results. In addition, if all staff are not held to the same standards, then any exhortations for good results and performance will ring hollow to everyone. Those that the institution tries to hold to proper standards will begin to resist, since they are expected to meet standards that others are not. Such a “program” is not fair and cannot succeed. Compliance performance elements should be factored into job descriptions, performance evaluations, and incentive pay. It needs to be clear that line managers are ultimately responsible and accountable for compliance performance in their areas, and that compliance is an explicit part of everyone’s job. If there are line managers who cannot or will not take responsibility for their own or their area’s compliance performance and, therefore, expose the institution to risk, the institution should send them packing and replace them with managers who are positive about compliance issues and willing to take on this important obligation. Otherwise, the institution has to pay for expensive, redundant processes to check the work of that person(s) or area and fix their errors. Running such a “fix-it” shop is not an efficient way to manage compliance. Establishing and enforcing accountability can produce the lowest-cost compliance — compliance that is embedded in the institution’s normal operations rather than added on, with everyone working to get it right the first time. A useful tool for running an accountability system is an accountability matrix, which can be customized to fit an institution’s particular situation, structure and needs. It can help assure management that someone or an area has been designated as responsible for each compliance rule or issue that impacts its lines of business. The matrix should outline the rules or issues, who is responsible for them, which areas they affect, and so forth. Conclusion As discussed, accountability for compliance performance — good or bad — is essential for an institution’s success in effectively managing its compliance function. Properly structured and enforced, a strong accountability program helps ensure cost-effective, positive compliance results. William J. Showalter, CRCM, CRP, is a senior consultant with Young & Associates Inc. (www.younginc.com), with over 30 years of experience in compliance consulting, advising and assisting financial institutions on consumer compliance and compliance management issues. He also develops and conducts compliance training programs for individual banks and their trade associations, and has authored or co-authored numerous compliance publications and articles. Bill can be reached at (330) 678-0524 or wshowalter@younginc.com. NEBRASKA INDEPENDENT BANKER 19
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