Many institutions already have a strong compliance management system (CMS) in place. They simply need to find ways to enhance their existing systems to keep pace with the rate of change.
When compliance officers more efficiently manage the day-to-day details of compliance management, it frees them to focus on more strategic initiatives while being exam-ready.
While there are many ways to design a strong CMS, compliance officers and their staff should prioritize four key elements to streamline the process:
There’s not enough time in the day for compliance officers to track and ready every regulatory change—and then still find time to implement them.
To streamline a CMS, it’s essential to have tools in place to monitor, review, and interpret new rules to understand which ones will affect the institution. Once applicable rules are identified, affected areas of the FI should be informed and plans for developing new or updating existing policies and procedures should be developed using a standardized process.
What happens in compliance doesn’t stay in compliance. Every employee at your FI plays a role in ensuring policies and procedures are followed and the FI remains compliant.
This works best when there is a culture of compliance that starts at the top with the board and management. When the board and management make it clear that compliance is a high priority, it motivates everyone to contribute to compliance efforts.
For example, vendor management is a team effort involving every business unit or department that depends on a critical vendor or other vendors. Vendor management compliance also overlaps with other areas of compliance, such as data security, business continuity management, cyber resiliency, and enterprise risk management (ERM).
Rather than duplicate each other’s work, a streamlined CMS will centralize information and provide ways to leverage each other’s efforts. Ideally, it will make it possible to:
Compliance officers once went crazy for a t-shirt we handed out. It read: If you didn’t document it, it didn’t happen.
A streamlined CMS takes this maxim to heart, making it easy to document the compliance management process. Systems, including task management, should be standardized and centralized so it’s easy to show the board, management, and examiners what’s being done, when, and by whom.
An audit trail, including a centralized repository, is also a must. Mistakes are inevitable, but they shouldn’t be a surprise. Careful documentation shows where an institution is following policies and procedures, testing for weaknesses, and working to remediate problems as they arise.
Too many compliance officers waste hours tracking down individuals, cajoling them to complete and log activities instead of relying on systems that can oversee the task. It’s a high-stakes activity that can call into question the entire CMS if examiners find errors—and result in enforcement actions and fines.
Board and management oversight is a regulatory requirement of a CMS, making it crucial that FIs are able to demonstrate that the board and management oversaw the development and update of compliance policies and procedures and that they’ve signed off on them. A streamlined CMS makes it easy to stay on top of and document this process, ensuring that policies and procedures are up-to-date and that every employee is working off the most recent version.
Failure to track policy changes and approvals may result in compliance violations, with FI employees providing noncompliant products and services.
Does your CMS embrace these four key elements? If not, think about how you might better streamline your CMS to increase efficiency and reduce compliance risk.
To learn more about creating an effective and efficient CMS, download our whitepaper: What Is A Compliance Management System (CMS) & Why Your FI Needs One?