An Effective Compliance Management System for Bank and Non-Banking Institutions

Most Regulatory agencies are clear about what they are looking for during the auditing process, but what they are not clear about is the process or a system as to how you will achieve compliance i.e. What should be the components of a Compliance Management System (CMS) which helps you identify Why, What, How, Where and Who will achieve compliance.  They typically don’t regulate the “ How” i.e “the process” part in most cases, but they definitely regulate the “what” part i.e what is the regulation that you want to be in compliance with.

Although, the compliance management system is vital to the prevention of violations of federal consumer financial laws and the resulting harm to the consumers, I don’t think you should only implement a compliance management system just because of regulatory pressures, but a proactive approach to building a compliance management system can help establish culture of operational excellence and it should be an integral part of any organization.

As I had mentioned earlier, other regulatory agencies don’t govern and regulate the components of a compliance management system, FDIC, Federal Reserve and Consumer Financial Protection Bureau ( CFPB) have both provided guidelines and emphasized on the importance of having a compliance management system. Although CFPM does not require you to structure a CMS in any particular manner, they have set expectations on what objectives your compliance management system should be able to achieve and activities it should roll out. Not only these guidelines are for banking institutions but also for the non-banking institutions that they supervise.

Components of the Compliance Management System should include:

The What

1. Ability To establish compliance responsibilities
2. A compliance program
3. A consumer complaint management program
4. An independent compliance audit
5. Risk Management

The Who

1. Ability to Communicate Compliance Responsibilities to Employees
2. Board of directors and management oversight

The How

1. Ability to put in business process to meet the regulatory/legal requirements as well as the internal corporate requirements
2. Process to take corrective and Preventive Action

If “the What”, “the Who” and “the How” activities are integrated and well-coordinated, you should be successful at managing your compliance obligations and mitigating risks.

It’s been my observation that creating an effective Compliance Management System gets significantly complicated if the organization is complex with employees in ten of thousands, with multiple offices in multiple states subject to federal and local laws. As a result, the risks get higher and automation may be the solution to help mitigate the risks.

These regulatory pressures are creating more challenges for the Banks and financial institutions and driving them to leverage technology and embed some sort of automation within their compliance management system. With limited resources within the compliance departments, they can barely keep up with the day to day compliance with existing and new regulations. Building a compliance management system may be a huge undertaking.

Predict360 is an enterprise regulatory change management software and has configured a compliance management software for banks and financial institutions to help automate and streamline compliance obligations. It has a regulatory knowledge-base loaded with the entire CFR, a policy and procedure software module allowing you to author and manage policies and procedures, Internal Audit Management Software modules allowing reoccurring audits and reports, Enterprise Risk Management Software allowing you to prioritize your risk levels, training management software module as corrective and preventive action tool and a corrective and preventive action software that is streamlined into all the modules and each action is mapped back to regulations allowing your organization to predict future risks and even do some bench marking. All the components coordinate and communicate with each other allowing you to achieve compliance, operational excellence and build a risk based culture.

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