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Changing the thinking on compliance training


Financial institutions face more rules issued by regulators each year, and that means ever more compliance training to make sure those rules are known and followed. Adding to this training burden are educational efforts to try to counter the cybersecurity threats that these firms increasingly face.

The cost of compliance for the industry is already staggering—upwards of $250 billion per year, by most estimates. And still, it’s rising: A survey from Duff & Phelps forecasts that financial institutions could spend as much as 10 percent of their total revenue on compliance by 2022.

BAI Banking Strategies managing editor Terry Badger recently sat down with Ed Marcheselli, managing director of BAI’s Learning and Development product line, to discuss the current state of compliance training and how banks and other financial institutions can get more bang for their big bucks.

Terry Badger: The trends seem to indicate that the compliance burden for financial institutions is going to keep growing at a brisk pace. Is there any reason to think that it won’t?

Ed Marcheselli: While it may slow down at some point, there’s no reason to think that the upward trend in compliance requirements is going to reverse. New challenges are emerging fast and furious, like fraud and cybersecurity, how to deal with digital currencies, and how to deal with cannabis as more states legalize it. This raises many questions for banks, credit unions and other FIs on how to train their employees on all of these things.

Compliance is a necessary spend, but there’s also a payoff. Banks and credit unions profit when they avoid fines for violations and when they reduce fraud—this amount can be much more than their compliance costs. So they have more issues and regulations to deal with and more training programs to implement, but they still want to manage their costs in terms of finances and employee time.

I would think that giving workers back some of their time spent on compliance training is a good thing, all else equal.

Less training time would probably lift employee morale, but banks have to balance that against institutional reputation risk and regulatory exam risk. For that reason, a lot of our customers go into the LMS (learning management system) and assign the same courses as last year—they’re not looking to do anything new.

But for the employees, that can mean launching the same courses and seeing the same instructional content year after year. Sure, they click the buttons and they get their passing certificate. But a lot of the time they’re going through the motions—they’re checking a box, not necessarily picking up new skills.

That raises questions like, “What new things did they miss? What rules got changed?” And it makes them vulnerable to something falling through the cracks or attracting unwanted attention from regulators if it’s thought that a bank’s compliance standards are slipping.

With all of the new rules and issues, have we reached a point where the “everybody learns everything” approach to training is asking too much?

Of course, it wasn’t that long ago that “everybody learns everything” was really the only option. Now, we have better tools for customers to do better targeting at the right level, with the right training for the right people that also meets all of the legal and regulatory requirements that protect the bank, its customers and its employees.

Role-based training, for instance, has been around for a few years—it keeps the training curricula from growing exponentially, and from a practical standpoint, it also makes sense for the users. If I’m a bank teller, for instance, I need to know KYC (Know Your Customer), but I don’t need to know all of BSA (the Bank Secrecy Act). My boss may need to know it all, but I don’t. If the training material is more pertinent to your role, you’re more likely to commit to learning it instead of just focusing on passing the course exam.

More people are asking about how to reduce training time to get the same impact and how to measure behavioral change. We tell them that our studies show that they likely would see the benefits of fewer training hours using a more targeted curriculum.

Tell me more about these benefits.

We’ve been taking our course updates in a more targeted direction, and by that we mean more targeted training modules that focus on day-to-day skills.

We’ve been creating scenarios more relevant to specific role responsibilities—for instance, a teller may really need only 15 minutes of BSA training. It doesn’t make sense to give them an hour’s worth of training on the broader aspects of the BSA regulation just for the sake of doing it.

With one of our clients, this targeted training cut their average time commitment per employee from 23 hours per year to eight hours. We saved them 15 hours per employee—that’s essentially two full workdays that these tellers, deposit operations staff, mortgage loan originators and the like can use in getting their job done.

We’re not saying all financial institutions can achieve these same results, but we do feel confident that they can gain time efficiencies with more targeted training, and that their employees may feel more engaged with the training if they view it as more relevant to what they do day to day.

It sounds like you may have a bit of an inertia issue when it comes to adoption—or do you think there’s something else at work here?

There’s a broad spectrum of philosophies and priorities in the industry. Some organizations are risk-adverse and would rather over-assign courses, regardless of the cost and time involved. This is what they’re comfortable with, and they don’t see a compelling need to fix something they don’t think is broken. Some change is under way—M&A (merger and acquisition) activity in the banking space is contributing to that.

You hear the term “culture of compliance” tossed around a lot—it usually means a tone or an attitude about compliance that’s set at the top of an organization, and it means a lot. Getting true buy-in at the top about the importance of staying current with the rules and the trends—how it protects the bank and its customers and employees—this is critical. And part of demonstrating that commitment is through stressing the importance that proper training plays.

Where do you see training going from here? What’s the next frontier?

If the current trends continue, we will see a more intensified move toward role-based training for all of the reasons that we discussed earlier. In BAI’s case, we’re seeing big growth in role-based courses being taken, though it’s from a relatively small base—we had more than 400,000 role-based courses taken in 2019, which was about double the number taken in 2018. For microlearning courses, we went from pretty much zero in 2018 to more than 70,000 courses last year.

We also see wider use of microlearning in the future — not only for regulation updates and hot topics, but also for foundational education. For that, we’re developing more microlearning courses. The people who have adopted them want more, and we see a good opportunity to make more of them work as foundational instruction. The research shows that learning in bitesize pieces makes the information transfer 17 percent more efficient.

That means taking existing courses and breaking them down into smaller chunks. It also means integrating more multimedia into the scenarios, like audio clips and video, and interactive exercises. We started down that path a few years ago, and we expect adoption to increase going forward

Training that’s more engaging has its rewards for all involved. Compliance training is probably never going to be fun, but there are ways to make it less of a burden, content-wise and timewise—and I think most everyone involved would welcome that.

Edward Marcheselli is the managing director of BAI Learning & Development. Terry Badger is the managing editor at BAI.