Guardian angles: Teaching talent the fine points of compliance
For banks that teeter on the brink of a compliance chasm, it’s a fine line—as in the hefty fines that regulators mete out to banks that can’t meet their legal obligations.
Faced with such a potential fate, financial institutions can and often do tell employees—all of them, not just compliance officers—about how the violations of other banks led to an emptying of the coffers.
But is that enough?
Often, teaching compliance requirements in the abstract amounts to the financial equivalent of lecturing a teenage driver about what happens in general when other teens run a red light.
And so experts agree that when banks dig into the nitty gritty of compliance—whether with existing talent or new hires—they must teach best practices in a way that foregoes compromise, fosters understanding and commits to ongoing training.
Kevin Kane, founder and president of Financial Regulatory Consulting Inc. in New York City, says the best kind of training for bank employees is “deficiency training”—that is, “Employees pay attention when the training focuses on their own mistakes.”
As an example, staffers need to hear actual, real-world examples about how people can launder drug money within their accounts or the issues that arise if the mortgage department fails to lend to every creditworthy customer—no matter their race, gender or zip code. Bank staff might learn even better if they correct their own mistakes, assuming some gaffes don’t create nasty consequences.
Training that reigns
For Bank Secrecy Act compliance (BSA), it’s important to discuss what’s come to light via suspicious activity reports that trigger investigations, says Tim Tedrick, a partner in the Sterling, Ill. office of Wipfli LLP CPA and consulting firm.
Banks can point to a law enforcement agency’s recent award from the U.S. Treasury’s Financial Crimes Enforcement Network (Fincen). The honor recognized a successful investigation that started with a single suspicious activity report (SAR), Tedrick says. The bank noted that after significant cash deposits, withdrawals took place at ATMs nationwide.
“From that information, the investigation discovered that the crimes were much broader and that a large organization was doing this repeatedly to sell drugs,” he says. “The bank spotted it first, and turned it into a report.”
For online training, the best kind is customized by the bank, Tedrick says. For example, if the training centers on currency transaction reports, a bank could include an additional component that explains how its automated teller platform will prompt staff to input certain information.
If a bank can’t incorporate specific information into the online training, then it must find another way to communicate that to employees, he says. The options can run both passive (an automated Power Point slide show) and active (in-person training).
“Some trainers at banks go from branch to branch to branch,” Tedrick says. “It takes a lot of time, but they feel it’s important to have direct face-to-face interactions with employees, who might be more inclined to ask questions in smaller settings.”
Dan Huston, managing member of D.L. Huston LLC in Portland, Ore., says training should also be customized for particular jobs and conducted face-to-face as much as possible. Training should include real-life examples, such as triggers for SARs for all types of possible crimes, not just money laundering.
“For example, if a customer wants access to his safety deposit box, and mentions to the teller that he’s trying to avoid his ex-wife from knowing how much money he has –or that he doesn’t want to pay taxes on it—these may be red flags that he’s illegally hiding money,” Huston says.
If tellers aren’t quite sure whether a customer’s up to something nefarious, they should at least alert the compliance officer.
Board trainers often grab the most attention when they highlight the fines other banks received for violations. But they must also let trainees know the specific tasks they need to perform, Kane says.
“For example, boards need to make sure that when they approve a BSA policy, it reflects the products and services the bank actually offers,” he says. “The same is true of a BSA independent test: Does it reflect the risks a bank faces and does it adequately cover them in its scope?”
Roll their eyes … or eye their roles?
Senior leaders need to model the importance of compliance to their staff; “It’s not helpful if everyone rolls their eyes when they hear there’s going to be training,” says Barbara-Ann Boehler, regulatory compliance consultant in the Waltham, MA office of Wolters Kluwer.
Compliance officers must be trained not only on the regulations, but also on soft skills, including leadership skills: “They need to be seen as leaders with a voice and a seat at the table,” says Boehler, who also teaches compliance practice skills at Suffolk University Law School and Boston University School of Law.
Compliance staff should also be trained on the bank’s products so they actually understand the business that they’re in and what it sells. This also helps them to have “strong relationships with business stakeholders and to be taken seriously,” she says.
Mark Miller, Wolters Kluwer’s senior manager for regulatory compliance and analysis, says that in-person training is always optimal, but not always practical, particularly when a bank runs global operations.
“However, the job of training is not just owned by the compliance officer,” says Miller, who is based in Minneapolis. “Frontline managers and those in the first line of defense should have some responsibility for training staff and modeling good behavior.”
Compliance staffers want freedom to proactively seek the guidance they need, he says. In many cases, external learning sources such as conferences allow them to hear direct from industry leaders and regulators themselves.
“At those kinds of events the atmosphere is electric,” Miller says. “People get the opportunity to share challenges, learn from their peers and come home with ideas for solving some of their problems.”
Many banking industry compliance experts “absolutely love” what they do and are dedicated to improving the foundation of compliance in their organization. That level of commitment “is what separates them from their peers,” he points out.
“It’s important that banks recognize, embrace and support them by providing the tools, technology and opportunities to learn their profession,” Miller says. “Failure to support them might mean they leave to find an organization that will.”
And in an ever-shifting compliance climate, the last thing any bank needs is an ever-shifting compliance team.
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Katie Kuehner-Hebert has more than two decades experience writing about retail and commercial banking products and services; payments systems: mergers and acquisitions; and security/fraud issues. She is based in Running Spring, Calif.