BREAKING THE COMPLIANCE PARADIGM & CREATING A CULTURE OF YES

by Angela Lucas, Sterling Compliance

We are all products of “No.” Think about it. From a very young age, we are told “No.” “No, you cannot climb those stairs.” “No, you cannot have that candy.”  As kids, “No” is a very real part of our every day, and for those of us who are parents, grandparents, aunts, uncles and the like, “No” simply becomes an everyday (and sometimes, every minute) recitation.  So, how do we make our way as adults when we have been met with “No” our whole lives? This is an especially critical question in the compliance realm.  Historically, we in compliance have been the “No” people.  And while saying “No” can be the safe option, and the option that keeps us out of hot water and within the cozy confines of our comfort zone, it makes those around us – those looking to expand markets, business operations, and take the bank to the next level – bonkers.  We are in the unique position to see and hear both sides – we hear our Compliance and BSA Officers struggling with the Board and management’s push forward, but we also see and hear the Board and management’s struggle with consistently being met with “No” when others are surging forward with their initiatives.  But why?  What does it have to be that way? Plain and simple, it doesn’t.  We need to change this paradigm, we need to break it and we need to get to “Yes!”  But, we all need to be part of that culture shift.

 “Education means research, it means looking into what others have done and how they have done it. It’s about using our regulators as a resource.  It’s about gaining perspective.  It’s not just about innovative products, it is about innovative thinking.  And, it is about empowering your Compliance Officer and supporting him or her.”At its heart, it begins with education…education beyond the technical requirements of rules and regulations. Education means research, it means looking into what others have done and how they have done it. It’s about using our regulators as a resource.  It’s about gaining perspective.  It’s not just about innovative products, it is about innovative thinking.  And, it is about empowering your Compliance Officer and supporting him or her. Fancy words, fancy phrases…but how do we do it?  If you have – if you are – a Compliance Officer who falls into the pattern of “we can’t do that” or takes a more militant stance toward compliance, try shifting the “No” to present other options – to provide viable alternatives.  Let’s take a look at how we can make this shift.

Evaluate Your Own Culture
Self evaluation is a painful thing. However, the ability to honestly and quietly reflect on your culture is one of your most powerful tools for growth. Sometimes you find that if you could kick the person in the pants responsible for most of your trouble, you wouldn’t sit down for a month. Here are some questions to consider – whether you are reading this as the Compliance Officer, or as Senior Management or the Board:

  • Is the Compliance Officer integrally involved from the strategic planning and product development stages through to implementation?  We see a range where this is concerned.  Sometimes we see an ambitious sales and growth-driven Board and management team go full steam ahead with new LPOs in new markets, decide to take on marijuana-related businesses, or sign contracts for new products without considering the compliance aspects of such initiatives, and then expect the Compliance Officer to figure out how to manage it within regulatory constraints when the toothpaste is already out of the tube. This is not the way it should work. Compliance should be brought in before any initiatives are undertaken, and in doing so, the Compliance Officer must remember that banks are in the business of taking risk.  The Compliance Officer’s role is not to continually put up road blocks, but to figure out how to effectively manage and minimize the risks.  Not all risk is created equal. Some carry stiff fines and penalties and risk of consumer harm.

  • Have we empowered our Compliance Officer to fulfill his or her responsibilities, but also to be a strategic asset to the bank?

  • Have we provided the Compliance Officer educational opportunities beyond the classroom (e.g. networking, peer learning, etc.)?  There are so many free resources out there that the Compliance Officer can take advantage of peer networking and discussion where competition doesn’t come into play – we are sharing ideas and the how-tos of what we do day-to-day.  In many cases, these opportunities are far more meaningful than classroom-based, technical learning.

  • Have we committed to our Compliance Officer sufficient resources in terms of staffing, technology and education?

  • Is the Compliance Officer too broadly tasked to effectively manage compliance given the size and risk profile of the bank?

  • Is the compliance function appropriately-risk focused or bogged down with “what we’ve always done” tasks that are no longer sufficiently meaningful?

  •  Is the Compliance Council effective (e.g. right-sized, right-staffed, right-focused and not mired in minutia)?

  •  Does the Compliance Council collaborate effectively to find a path to yes?

  •  Have we blamed our Compliance Officer when things have gone wrong?

  •  Are business units taking sufficient ownership of compliance in their respective areas?

  • Are we setting up the Compliance Officer for success or failure?

Think and Write
Brainstorm and write down real solutions to make changes.  One of the key lessons we try to impart is that you can’t bring a problem to the table without also bringing a proposed solution. If you fail to follow that edict, then an otherwise productive think-tank can easily become a counterproductive complaint session.  This analysis should not be done in a vacuum. It is critical to get others’ input – especially that of the Compliance Officer – and to weight the importance of input equally.  

Strongly Evaluate Resources
Resources. We always need more, right? Whether we are talking about people or tools, we need the resources – and our staff needs the resources – to effectively perform our jobs and contribute to the continued success of the bank.  However, resources cost money. The quality of resources is key. Let’s talk about this in terms of tools…and that 4-letter word: TRID.  TRID has been a thorn in our sides from the beginning. The quality of the LOS was a primary contributing factor to TRID success, though user-effectiveness also played a very large part in the process. In one situation, a bank make the strategic decision to go from the Mercedes of loan originating systems to more of a Honda.  It was still a good system, but not quite as prepared for the TRID changes.  While the bank initially saved a lot of money, they had to pay for add-ons to their new system to get them in compliance. Guess what? In the end, they realized very little cost savings and MUCH frustration.  If the decisionmakers had listened to the staff and had really taken into consideration their concerns and needs, they could have been better positioned and the frustration significantly reduced.  

Keep in mind that additional resources are not always the answer; refocusing those you already have and streamlining your processes may free up existing resources.  We’ve seen this in terms of the other 4-letter word in our compliance vocabulary: HMDA.  Many banks have purchased QuestSoft and similar platforms to assist in HMDA data collection, recording and reporting.  QuestSoft (and its sister-competitors) has so many capabilities to assist you also in CRA and Fair Lending Analyses – all that can be conducted internally, help you better understand your risk, and assess your overall function. However, sometimes we see that banks aren’t even scratching the surface in understanding or utilizing these additional capabilities. Simply by refocusing attention on this existing resource, learning more about it and how best to use it, you can strengthen your internal analyses, identify holes in risk management and free up time that was otherwise spent on manual assessments.

Inspire Appreciation
People will never forget how you made them feel. Ever have one of those mornings? Your alarm didn’t go off on time, there was a water main break so you showered under a trickle, you forgot your breakfast as you were flying out the door and you inched your way to work through traffic hitting every.single.red light. When you walk in, you barely greet those you see with a grunt before closing your office door and gulping scalding coffee.  You know those days…and that grunt you issued?  The impression that it left could determine whether they are with you or not. This concept is especially important today. With increased regulatory scrutiny and new and changing legislation, we need our staff more than ever.  Whether you’re reading this as Senior Management or the Compliance Officer, you understand that you must rely upon your existing staff to go the extra mile, to collaborate and to innovate when the dollars and cents aren’t there for additional staff.  If we treat one another with respect, if we incent our staff to work at their highest levels to their highest standards, if we acknowledge their efforts and we are willing to give them credit for our successes, if we give them the freedom to do their jobs, we are not only showing them how we can be the yes, we are grooming them to be the yes, and to change our culture.

Communicate
Simply put, communication is key. It’s the most important thing – it gets us to a more educated, thoughtful place because we often come at things from different directions, but with the same goal in mind.  Conversation is what gets us there.  We talked about listening to our staff and about listening to our Compliance Officer. It goes beyond that to also communicate with our regulators, with our peers, and with industry groups.  Rather than echoing the old phrase of “show me where it says I can’t do that,” ask “how can we make this happen while maintaining compliance?”  Your regulators are there as a sounding board and in compliance, it isn’t about competition, so share ideas, share solutions, and learn from each other.  

As we begin to draw to a close on the year, we hope you are inspired to take your compliance function to the next level. It should no longer be a back-office annoyance, but a strategic asset that takes you where you want to go.  This is where we need to go to make our world better, faster, stronger.  

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