Compliance issues can come up on a daily basis, but sometimes, a project’s compliance implications may not be obvious to everyone at a credit union. While credit unions have experienced modest regulatory relief, the complex regulatory framework means it is helpful for a compliance officer to have a seat at the table to help evaluate the various risks of a new product or service.
Sometimes, a compliance officer may be brought into a discussion at the tail end of a project or initiative which is generally not the ideal time to identify a compliance pitfall. Checking in with compliance early can save time and resources by identifying possible regulatory challenges and finding solutions before heading into a new venture or acquiring a new service.
Here are three scenarios where it would be helpful to include your compliance team in initial planning:
Scenario 1: A credit union’s marketing team is meeting to strategize about a targeted campaign for a new credit card. A suggestion is made to target a certain audience based on zip code.
It may sound like a good idea to tailor a promotion to individuals living in a certain geographic area. However, the credit union’s compliance team could provide their expertise on fair lending and explain that regulatory requirements would not permit targeting by zip code.
Scenario 2: A Bank Secrecy Act (BSA) officer at a medium-sized credit union is tasked with training all departments on BSA and anti-money laundering (AML) laws and regulations. The credit union is looking to purchase a new BSA training module for the front office staff to ensure the BSA officer can focus on implementing the customer due diligence rule at her credit union.
Even though at the moment the BSA officer is not able to train the front office staff herself, it makes sense to ensure that she has the opportunity to examine the BSA material that will be presented to the front office staff. Keeping compliance staff in the loop to vet the training modules allows them to assess whether the training appropriately represents the credit union’s BSA requirements and trainees’ responsibilities. The compliance and BSA staff are also in a good position to identify whether certain staff may need to be retrained before a new product or service that increases the credit union’s exposure to money laundering or terrorist financing is introduced. Ensuring the credit union’s employees obtain the appropriate training and knowing when to consult with BSA and compliance makes the planning and implementation phase of a project more risk-focused and holistic.
Scenario 3: A credit union is interested in working with an automobile dealer as its newest indirect lending partner. The dealer operates near a military base and sells add-on products like warranties and guaranteed auto protection coverage.
Third party relationships can pose reputational and compliance risk for credit unions. Given these risks, regulatory guidance indicates that indirect vehicle lending relationships require both an initial assessment and ongoing due diligence to manage risk, including compliance risk. For example, rules like the Military Lending Act have steep penalties; noncompliance with the rule can mean the credit union may end up with a voided loan agreement. Compliance can help the lending team and other stakeholders understand the regulatory requirements so they can proactively audit loan files and correct any errors made by a third party lender before the loan is closed.
When compliance is brought to the table early and included in new projects, a credit union is more likely to avoid operations that could put it at risk. Some credit unions even cross train business units’ staff in compliance which can help them prevent noncompliant activity.
Credit union executive management and employees across the organization, especially those responsible for compliance, risk, auditing, legal, lending, operations and finance can attend NAFCU’s upcoming fall session of its Regulatory Compliance School. This training is a great way to hone your expertise in compliance – whether you’re new to credit union compliance or need solid refresher of your core knowledge of credit union regulations.
Regulatory Compliance School also offers the opportunity for any credit union professional to become certified as a NAFCU Certified Compliance Officer (NCCO). Currently, there are over 1,000 credit union professionals who have earned this award-winning designation and demonstrated their compliance knowledge by successfully passing four exams to become NCCOs. More will join their ranks in San Antonio, Texas, this October.