It Could Really Cost Later - Bank Compliance

One of the things I hear from some compliance officers is, "No way can I consider purchasing a BSA/AML monitoring software, an independent review, training, etc., management just does not want to spend money on compliance." Sometimes financial institutions think since they have been without a BSA/AML monitoring software for twenty-five years and done their monitoring exactly the same way for all that time and the examiners have said nothing, so why should we change our way of doing things now?

FINCEN Advisory FIN-2014-A007 dated August 11, 2014 makes a pretty strong statement related to BSA/AML as follows: "An institution's interest in revenue should not compromise efforts to effectively manage and mitigate BSA/AML deficiencies and risks."

That is a pretty strong statement.

Below are additional reasons for spending the money on compliance related matters.

1. Customer Service - You have a customer service representative sitting with a customer making decisions in opening an account that will have FDIC insurance, tax planning (IRA, SEP), estate planning, etc. repercussions to that customer; yet, you provide only sales training and tools to the representative. For a lender something as simple as a customer putting a loan in the name of a business entity may enable a former TRID applicable loan to be made; yet, with no TRID lender training, the loan is never made. Is this the best quality of true customer service a bank can give its customers?

2. Being a good corporate citizen - In terms of BSA/AML suspicious activity, banks are in the best position to see red flags in terms of elder financial abuse, money laundering, human trafficking, terrorist financing, id theft, etc. Should a bank ensure factual reporting of its customer experience with credit bureaus so that customers are not wrongly adversely affected in terms of providing financial services to them? How about the benefits of CRA outreach programs and their potential impact in terms of community and economic development? How about the Ability To Repay rules in terms of ensuring a customer is not getting in a situation lacking the ability to repay the debt?

3. Enforcement actions, private right of action, etc. - These are things that are costly in terms of money but also create reputation risk.

The customer, the community, and the bank, they all pay when a bank "does not want to spend money on compliance". Could be the bank and the board will pay in the end as well in terms of which banks remain standing at the end of the day and which do not.

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