For credit unions, the right tools to support compliance is part of larger growth strategy

Huron, South Dakota is a small city with a population of around 14,000 people. Despite its size, the city is also an unlikely innovation center. In addition to the well-recognized South Dakota State Fair, Huron is also home to Dakotaland Federal Credit Union. While it was founded in 1935 with its first 10 members, today just about everywhere may be considered Dakotaland. Today, the credit union boasts more than 40,000 members in 46 states.

With its impressive growth, Dakotaland maintains its commitment to its members, which includes the implementation of a strong compliance framework. The credit union has kept pace with growth and tech innovation while navigating the regulatory landscape thanks in part to its robust records management program and use of electronic records management tools.

Credit unions must navigate countless regulations

Like any financial services organization, Dakotaland is heavily regulated. Even as a nonprofit cooperative, it must comply with numerous laws about record-keeping to ensure it protects sensitive member information and confidential documents, among a host of other considerations.

For example, the National Credit Union Administration (NCUA), an organization regulating credit unions in the U.S., stipulates in its code that, credit unions “must have a written program that includes plans for safeguarding records and reconstructing vital records.” These records must be available even if destroyed in the wake of catastrophe. Dakotaland and other credit unions must also comply with other federal regulations, such as the Bank Secrecy Act (BSA). The BSA holds credit unions responsible for filing reports and maintaining information in the event of suspicious transactions, fraud or other financial crime.

Along with keeping abreast of federal laws, credit unions must also account for state laws, such as two recent California acts that place additional regulatory burden on organizations. For Dakotaland, as for any credit union, scaling membership across state lines and maintaining excellent customer service while complying with a litany of rules can be a tall task.

Following existing frameworks, investing in technology reduces regulatory risk

Regulatory compliance is as much about file storage habits as it is being an expert in legalese. The NCUA requires that preserved records be accurate, reproducible and accessible to an auditor. Accessibility is challenging when the typical records-retention processes consist of a room stacked to the ceiling with cardboard boxes. Managing records for thousands of members in this manner is more than just time-consuming and inefficient. It can easily lead to non-compliance and any sanctions that come along with it.

While the NCUA does not demand a specific record-keeping format, credit unions can turn to SEC rules for a framework to improve upon outdated, manual processes. While the SEC’s reach does not include credit unions, its recommendations are nevertheless useful for credit unions to consider.

Electronic record-keeping systems turn the warehouse full paper documents into a digital network of easily accessible files. Beyond opening up expensive real estate, records management systems may offer more granular access controls, encryption capabilities, records retention and disposition, document metadata and/or audit trails.

These types of features offer a number of benefits for credit unions, including:

• Reducing the risk of unauthorized access or disclosure of sensitive information
• Preventing data breaches by reducing the risk of unauthorized access or disclosure of sensitive information
• Establishing consistent record-keeping policy and procedure

Mitigating major risks associated with poor record-keeping practices better equips credit unions to avoid potential fines, legal liabilities and reputational damage.

Digital tools can ensure compliance, unlock potential

Dakotaland’s modernization journey began with regulatory compliance in mind. It soon blossomed into a full-fledged digital transformation. Today, the credit union uses its content management system and records management solution for nearly all its day-to-day operations, enabling the organization to streamline member services and back-office operations from HR to IT. Other credit unions can learn from that approach and invest in technology that enables compliance through core functionality. Selecting digitization tools that can expand into other business facets will, aside from maintaining compliance, ensure business continuity and resilience, improve operational efficiency and allow everyone to do their jobs more effectively.

As credit unions expand, their regulatory burden will scale in kind. But regulatory compliance is not the only challenge that increases in complexity as a business evolves. For credit unions, digital technology can address many specific pain points along the way. Digital tools that act as the center of a comprehensive ecosystem can do far more, unlocking potential and paving the way for enduring growth.