How Credit Unions Can Prevent Compliance Anxiety

by: Marvin Garland, Chief Operating Officer, LEVERAGE

Many credit unions shutter at the thought of preparing for yet another compliance examination. The truth of the matter is compliance plays a vital role in how credit unions conduct business for their members, and we have to find ways to deal with what is in place.

Although regulatory compliance does protect the credit union from civil money penalties and reputational risk, we all know compliance does not bring in deposits, make loans, nor provide a perceived value to members. The value proposition makes it difficult to assign resources and always makes compliance the focus of attention. However, ignoring compliance or waiting until the examiners are in your office to respond causes more anxiety, and typically requires additional resources to address the issue.

Building a plan and following a precise set of steps can prevent your credit union from being caught off-guard, and creates confidence with examiners that your credit union is proactive and takes compliance serious.

Here are some simple but important steps that reduce anxiety, and are a better use of members’ resources.

1. Know Where You Stand (Complete an Assessment) – Take time to make an assessment of what policies you need. Are they up to date? Begin to address those that create the most risk to the credit union.  There are many resources available to assist in the process (ex. State Leagues).

2. Have a Plan – Everything cannot be fixed overnight. Develop a plan to address any issues discovered in your assessment. By doing so, you have at least acknowledged what you have to do, and are taking steps to address any gaps. It cannot be stressed enough – the importance of building an internal process of accountability. The need for members on the team to have a set of guidelines that can be followed and tracked ensure everyone involved considers the ramifications of non-compliance on their credit union. It would be helpful to incorporate a schedule for staff to report on the progress of meeting guidelines.

3. Organize – We consistently hear examiners mention that it takes weeks for credit unions to locate and organize the policies they have in existence, and assess what policies may be needed to match their products and services. Having a central depository for the management team to maintain current policies, and then keeping them up-to-date as regulations change or is added. The ability to communicate necessary functions of the compliance process is an essential aspect of exam preparation. Developing a plan of action, as well as a strategy that requires staff cooperation will help sort out the best route of implementation. Appropriate staff members should be able to reference particular regulations to the team for input and/or a revised strategy.

4. Examine How to Use Resources Efficiently – The efficient use of resources in the compliance process could save staff time, money, and undoubtedly, headaches. Examining what resources to access, and how they should be used will help your credit union determine what is best for the credit union in complying with given regulations. A good question for your credit union to ask is whether it is beneficial to outsource compliance functions – and when is the best time to do so?

5. Prepare Properly for Compliance Examinations – When we talk about compliance examination preparation, it encompasses much of what we have previously discussed. Internal preparation should have an ongoing, specified focus – meaning compliance should remain top-of-mind throughout day-to-day functions. To aid in exam preparation, credit unions should create time for staff awareness, adequately disseminate compliance information, keep organized and updated policies, and, without a doubt, monitor regulations and current credit union compliance.

Understandably, the compliance process for credit unions is at times an arduous one. But the main point to remember is that by taking the proper steps in preparing a focused plan of action alleviates the stress during compliance examinations. Having peace of mind when it comes to regulatory compliance will provide your credit union with the opportunity to concentrate on what is truly most important – serving your membership.

Marvin Garland is the Chief Operating Officer for LEVERAGE, the LSCU Service Corporation. LEVERAGE is a business services provider that offers solutions like ComplyTrac, Ventelligence and ePurchasing. Visit myleverage.com to learn more about how credit unions have leverage in the marketplace. You can follow LEVERAGE on Twitter or LinkedIn.