by: Steve Gibbs, AVP Shared Compliance, Credit Union Resources, Inc.
The Dodd-Frank Financial Reform Act as well as other recent changes to regulations, including those initiated through the Consumer Financial Protection Bureau (CFPB) has added additional emphasis to the impact of penalties and negative sanctions. These regulatory directives, including the SAFE Act, have been put into place to spotlight the seriousness with which these issues are viewed. There is still an element in the industry that chooses to cling to old ideas and attitudes about dealing with compliance issues.
The following are some fallacies related to understanding compliance and how it is managed.
- Our Attorney Should Be Able to Manage Compliance – Response: If your attorney has compliance certifications or experience, then he/she may well be able to handle your compliance questions and issues. Many credit union managers assume that because someone is an attorney, they have added knowledge of compliance and related situations. Unless that person has had the additional training and experience, this is not the case.
- Our Internal Auditor Also Serves as Our Compliance Officer – Response: The question you should ask yourself is, “Can an auditor audit their own work?” The Compliance area is subject to audit in the same manner as lending, deposits, accounting and other operational areas. Additionally, as in the discussion of attorneys (above) and compliance, an audit background does not necessarily imply compliance knowledge. Many auditors work with compliance issues, however unless there is specific training, you cannot assume compliance knowledge or expertise. The appointment of a compliance officer is a requirement of the USA PATRIOT Act, and that person should be independent and have authority to perform their duties.
- That’s not a Problem – the Examiners Have Never Written It Up – Response: This mentality has turned on many credit union CEOs and cost them valuable ratings points with examiners. Often, examiners (and auditors) will not catch violations due to a reduced scope examination (or audit) or time constraints. This does not prevent an examiner from coming in at a later date and writing up that violation. This is a perfect reason for conducting self-audits within departments or supporting a solid internal audit program. If you can find problems within your credit union’s system, most regulations allow for “curing” (or fixing) the violation.
- If Responsibility Isn’t delegated to One Person – The Examiners Can’t Hold Anyone Responsible – Response: Examiners, in general, want to have a single party to discuss issues with regarding various areas (ex., lending, deposits, compliance, accounting, etc.). Separating responsibilities in a way to makes the chain of command appear more complex than need be or overly confusing will elicit negative comments from examiners.
- If I’m violating any regulations, I’ll just pay the fines and continue with what I’m doing. – Response: You may pay penalties once or twice but continued blatant disregard for regulations can result in additional sanctions (letters of understanding, cease and desist orders) or even more punitive measures (removal and prohibition orders, criminal charges – for gross negligence).
About Credit Union Resources, Inc. The for-profit service corporation of the Texas Credit Union League, Credit Union Resources, Inc. offers a wide variety of fee-based products and services, helping you gain greater efficiency and effectiveness in serving members. The Texas Credit Union League provides education and training, advocate activities-political and legislative, regulatory/compliance assistance, asset/liability services, communication, research and public relations for Texas credit unions. . To learn more, please visit www.curesources.coop or call (800) 442-5762.