5 Mistakes That Will Sink Your Compliance Training Program

Imagine a mortgage lender who works closely with a real estate agent. The agent sends a lot of business the mortgage lender’s way because they do a great job taking care of the agent’s clients. When the holidays roll around, the mortgage lender gives the real estate agent a gift card as a thank you for the referrals.  

On the surface, this gesture appears to be a simple act of professional gratitude. However, those well-versed in the Real Estate Settlement Procedures Act (RESPA) and its implementing regulations might see it differently: a potential violation of RESPA rules against exchanging fees, kickbacks, or anything of value.  

Compliance mistakes like these happen when employees aren’t familiar with or don’t understand the importance of relevant laws, regulations, and organizational policies. Mistakes like the one above aren’t deliberate violations. They are inadvertent mistakes that happen when someone either doesn’t know the applicable rules or forgets them. It’s easy to see why this happens. Financial institutions are responsible for complying with a huge number of ever-changing laws, regulations, requirements, and prohibitions – and more are added every year. 

Ignorance is no defense against noncompliance. Financial institutions must ensure employees know and understand relevant rules and regulations – making training and education one of the most powerful preventative compliance controls available. Without effective training, it’s guaranteed that staff will violate regulations and harm consumers. 

The focus of compliance training is educating and familiarizing employees with the legal, regulatory, and ethical obligations and limitations of their role with the goal of minimizing compliance violations and preventing consumer harm. It is all about teaching people the ABCs of compliance so they are aware of issues they might encounter as an employee, director, or even third-party provider of the institution. 

Related: How to Get a New Risk or Compliance Officer Up to Speed 

Compliance training is a supervisory expectation

Compliance training isn’t just a best practice. It’s a regulatory requirement and a mandatory component of a compliance program. Examiners expect to see compliance programs designed to prevent compliance violations. Some laws and regulations, including the Bank Secrecy Act (BSA) and the Fair Credit Reporting Act (FCRA), even list training as a regulatory obligation. 

What are examiners looking for? The answer can be found in your regulators’ examination manual, which typically includes a list of questions for examiners and/or auditors to ask to assess your compliance training program.  

Examples include:  

• Is the training comprehensive enough to cover the institution’s compliance risks and risk controls? 
• Does it include accountability for attendance and achievement?  
• Does the timing of the training align with the training objective?  
• Is the training appropriately tailored to specific job responsibilities and compliance risks? 

Common failings of compliance training programs 

It is not enough to simply provide compliance training. Financial institutions should ensure the program is effective.  

Here are five common criticisms of financial institutions' compliance training programs:

1. Unscalable. An unscalable program is often the result of tasking one compliance officer with generating and delivering all the compliance training and programming for the entire institution. This makes training a production that can only be provided a few times a year. Some employees can wait months after starting to receive compliance training. Think about ways to scale the program without losing hands-on discussions and activities.
2. Generic. When an institution chooses to employ automation in its training program, sometimes it will use out-of-the-box content from a third-party without making changes to explain its institution's method of maintaining compliance. This leaves employees with a checklist of what they can and cannot do without providing detailed insights into how the institution specifically handles these issues.     

Related: TPRM training designed exclusively for financial institutions 

3. Lacks practical examples. When compliance training is simply a laundry list of requirements and prohibitions, personnel lose the ability to connect it to their day-to-day jobs. This reduces the effectiveness of compliance training as a control because staff doesn’t have the context needed to make better decisions.  
4. Repetitive. Generating compliance training can be time consuming. To save time, some compliance officers dust off the same compliance presentation year after year. Repetitive training can make people tune out – especially if there is no assessment of the attendee's recollection. While reinventing the wheel isn’t necessary, freshening up presentations to ensure they remain engaging and reflect the most-up-to-date regulatory obligations and best practices is a good idea.  
5. Lacks accountability. If a training program is lax and people rarely complete mandatory sessions, compliance training isn’t a preventative control. There should be follow-ups and repercussions for skipping or incentives for completing training.  

Related: 9 Fair Lending Compliance Training Essentials 

The power of effective compliance training

Compliance training is an expense and a time commitment, but it’s also one of the strongest controls a financial institution has for mitigating compliance risk.  

People will always make mistakes, but when compliance training initiatives are developed by attentive compliance officers and supported by a board and management that believe in cultivating a culture of compliance and accountability, it reduces the risk of noncompliance.  

Effective compliance training programs are comprehensive yet tailored. They require some degree of assessment. They are technical but also entertaining (or at least not bone dry). Most of all, they are up to date.  

Financial institutions must continuously evaluate and refine their compliance training programs, ensuring they remain responsive to regulatory changes and organizational needs. It is through this ongoing commitment to education and improvement that financial institutions can guard against compliance risk, protecting their institution from costly violations that can harm consumers, the institution’s reputation, and the bottom line.  

Want an in-depth look at how to build a compliance training program? 

It’s in The Upside of Compliance, now available on Amazon.