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Probably six of the most feared words that a compliance officer might hear during the course of an exam and the one phrase that keeps me up at night is—“Why didn’t you know about this?” The biggest challenge compliance teams face today is the confluence of innovation and regulatory requirements and expectations. Banks, fintechs, and service providers are all rapidly finding new ways to deliver products and services to consumers across the country and around the world. Whether it’s a part of a strategy to make things easier for today’s consumer and gain market share, an effort to be more efficient and enhance shareholder value, or an initiative that has been pushed due to conditions outside of our control (pandemic, anyone?), our technology partners are continually pushing forward to develop the next thing: from automated text alerts, online applications, contactless payments, digital loan closings, to virtual customer service. All of these things were straight out of science fiction when most of us started our banking careers with paper tickets, 10-key tapes, and closing early on Wednesday afternoon. Now not only do most companies have these, but the race has shifted to who can do them better, faster, cheaper, and with less overhead. During this time of unprecedented innovation, it is absolutely crucial that not only does compliance have a seat at the table, but that they have input into the menu. Opening up online accounts is incredible customer service! We’re using all of the same documents as in a banking center, so we’ll just roll it out.
It is absolutely crucial that not only does compliance have a seat at the table, but that they have input into the menu
Fast forward to the next BSA exam. “Did you include this new channel in your risk assessment?” No? Well, there’s a mark against management and an MRA (Matter Requiring Attention) in your exam report. Or the question: “Have you done any digital fair lending reviews?” After the awkward silence, you find out that your residential lending team has offered a rate discount for anyone that applies online because it costs less for the bank to originate. You weren’t consulted because its “fair,” as anyone that applies online would get the discount. After frantically sorting your loan data, you find out that 90 percent of the applicants through that channel are non-minority, while 70 percent of your market is Hispanic. You sit in stunned silence, hearing terms like “file review,” “disparate treatment,” “disparate impact,” and knowing that all of this could have been avoided by you being on that committee you’ve been talking to the CEO about joining for the past two years. Compliance has long since passed the stage of checking the box and making certain disclosures are completed correctly. While that is still important, today’s compliance professionals should be well-rounded business partners with varied backgrounds that provide valuable level headed guidance to the rest of the management team on what potential risks they could face by enacting a new strategy; product; or a new delivery channel. Business leaders, technology professionals, and product developers bear the burden of coming up with the concept, putting together the menu, and delivering it to customers. But if you don’t have your compliance partners at the table, actively contributing ingredients to your recipe for success, you could very likely find yourself being asked the question…”Why didn’t you know about this?”