On compliance: Do more than check the box

by. Michael Berman

Create compliance awareness among staffers and don’t forget to consider third-party vendors.

Credit Union Management magazine’s Web-only “On Compliance” column runs the fourth Thursday of the month.

Many credit unions view compliance as a necessary evil. They spend money on compliance reluctantly, as a means of passing an exam. If they do not get penalized, the credit union assumes everything is fine. But when compliance is handled in this fashion, neither the results of a safety and soundness exam nor a compliance exam can provide any guarantee of safety or that the credit union is operating appropriately.

If a man was going to see his doctor to get his heart examined, one might expect him to eat sensibly the day before. In contrast, it would seem very inappropriate for the man to take a pill right before the exam. Instead, most people who see a doctor want to learn new information—in particular if there is a problem. With this new information, they may change their behavior and live longer. Credit unions need to view their compliance exams with the same mentality; they should go into exams with the idea of gathering information and using it to make their business safer and more profitable.

A few key questions: In addition to wanting to able to check the box “compliant,” would the personnel at your credit union perceive themselves as responsible for the security of protected information? Does the credit union promote a culture that respects the interests of customers, shareholders, and other constituents? Would the credit union’s senior management team provide a good example in their activities regarding the importance of privacy and security? Does senior management seek out and identify potential gaps?

If the answer to any of these questions is no, then the credit union staff is putting themselves and members at risk. If the only motivation is to avoid a write-up or fine, then the true exposure is not properly understood.

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