Compliance plays an important role in a financial institution’s relationship with its customers. Bankers need to do it right.
As banks evolve to a digital-centric operating model, one of the laments Cornerstone often hears from our clients is, “Compliance won’t let us do that.” It’s true – kind of. The reality is that both financial institutions and fintech solutions providers can drive better customer experience and still be compliant in a digital world.
So, how do financial institutions offer competitive services quickly and efficiently while meeting complex regulatory guidelines? The following are steps we have noticed successful organizations taking:
1. Give Compliance a Seat at the Table – Early
Whether an institution is evaluating technology solutions or internal processes, the compliance department should not be at the head of the table. But it also shouldn’t be at the kids table. Too often, line of business owners include compliance after decisions have been made and processes already built. Compliance adds a few extra steps here, slaps on a review requirement there, and “poof!” – the process is now compliant. Unfortunately, it’s now neither efficient nor customer friendly.
While the compliance department cannot drive solution or process decisions, it can and should work with other lines of business to achieve a balance between business and regulation and assist in delivering services to customers quickly. Small teams of subject matter experts working together can help the institution implement this “embedded compliance” approach.
2. Think of Compliance as a Partner
Although business leaders may wince at the thought of “partnering” with the compliance department, this group can be the institution’s best friend during exam or external audit season. These people know the rules better than anyone else, and for this reason, bankers should practice candor from the start. Asking a question like, “How can we accomplish X in a customer friendly and compliant way?” gives compliance experts an opportunity to use their expertise to help develop and build new offerings. When compliance is viewed as a partner and not the cops, banks get better solutions and execute faster.
3. Encourage the Right-Brained Compliance Officer
It’s been said that all compliance officers were born with checklists in their hands. “When in doubt, create a manual log” is surely a key compliance school teaching. However, Cornerstone has found that business creativity can be unleased in every compliance officer with a little encouragement. Here are a couple applications we are seeing:
Technology controls – If, in every new customer experience and efficiency project, bankers show compliance officers how technology and automated workflows can deliver controls better than a checklist, they will buy in.
A few ways they can do this:
Design for automated workflows that notify associates when activity should occur
Build in system controls that require information or have a default field to speed entry
Use technology to perform reviews and notify users of errors
Compliance officers may want to use their Excel checklists until the business proves that the process is bulletproof, but when a track record of fewer exceptions can be achieved, the bank is off and running. It is a win-win for everyone when technology takes the checklists out of our daily lives.
Technology tools – Bankers have a love affair with paper. This isn’t just a compliance thing; it’s also rampant in bank operations. While bankers complain that a compliance review involves retrieving stacks of files, they have every opportunity to change the game with documentation imaging with strong indexing and automated workflows. What compliance team wouldn’t like to track a document down in two minutes versus four hours? Best practice banks give examiners user friendly terminals and tools instead of boxes of paper. The key is to show examiners how the bank can make their lives easier.
4. Remember: Third Parties Have Compliance Departments, Too
Whether the bank is exploring new technology or adapting to a changing regulation, it should expect its vendors to provide best practice compliance expertise and capabilities. All too often, compliance teams don’t take the extra step to push their vendors for this.
All vendor due diligence should include specialized discussions and reviews of the tech company’s compliance team. Is the salesperson going to know if the disclosures are all there? Probably not. Will she know how the solution complies with CIP rules? Unlikely. But oftentimes, the vendor’s compliance area has evaluated and interpreted the rules and can not only describe in detail how their system supports the rules but also can make best practice recommendations to implement compliant processes.
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While compliance sometimes seems like a huge speed bump on a bank’s freeway to the digital world, the irony is that engaging compliance professionals proactively and creatively can drive agility and speed up execution. One of an insured financial institution’s biggest differentiators is the safety and security that builds trust with customers, and compliance is a meaningful contributor to that differentiation. Now is the perfect time for bankers to start heading down the road to a friction-free digital experience with their compliance buddies riding shotgun.