How?
How?
Compliance has undergone an enormous change. Or, if you prefer, a significant evolution. It is the change from "what" to "how."
In the days of yore - compliance-wise - the art of compliance was the ability or necessity to read Regulation Z and similar tomes. What happened after the reading was not the focus of attention. For CEOs, the compliance challenge was met when someone was assigned the fun task of reading the regulations. The knowledge then existed within the bank and all was well.
The compliance manager was the manager of knowledge and information. This lucky individual had the responsibility of distributing this knowledge around the institution, hopefully to the right places. Think of this as a knowledge-share plan. In fact, compliance officers were often used as regulatory mail rooms because the compliance officer was the most likely person to know where various forms of regulatory mail and information should be sent. In a way, the compliance manager was the ombudsman of the incoming.
Over time, compliance regulations have become more complicated and the job of complying with diverse and detailed regulations has become significantly more difficult. Things are no longer hand-held and questions about what to do next are not easy to answer.
Compliance has changed from "what" to "how?" The job of compliance management is the job of getting compliance done - wherever and however. In fact, the biggest challenge for compliance managers today is figuring out how to get compliance to work in their institutions. There is a great deal of material that explains what the rules are - and much of that information is right on the money. But knowing what the finance charge definition says and applying it to the many activities and fees that occur in the institution is more easily said than done. Capturing data items correctly for the HMDA LAR is not easy either.
Implementing the multitudinous features of the FACT Act is a daunting project because it involves every activity in the institution. One implementation team or project won't do the trick. And this, at the core, is the real challenge of compliance. The question is not simply what has to be done but how to do it. Too often - in fact almost always - no-one deals with "how" until the project lands on the compliance manager's desk.
Compliance laws and regulations have laudable goals. But until the details are worked out, that's all they are - goals. The compliance job is to transform these goals into reality. This is not usually easy. In fact, for most compliance - including the FACT Act - the goals have been dealt with without dealing with the realities.
Whose fault is that?
In large part, it is the fault of the institutions affected by the new rules. Why? Because they sat back silently, said nothing, and waited until the rule was final to begin work. For example, who commented on the FTC's proposed rules on identity theft and active duty alerts? There were a total of 49 public comments. Most came from trade associations and consumer advocacy groups. Did anyone provide the FTC with information about how this proposed process would actually work?
The time to think about how a rule will actually work is before the rule is final. The time to have thought through details about the FACT Act was when it was in Congress, or later when it was enacted. If financial institutions and others affected by the FACT Act had given serious thought to the implementation of the laudable goals when the concepts and rules were being drafted, the implementation might be less difficult. In fact, the act's goals might be more reachable.
But an industry that sits back and let those who do not do the job write all the rules, the industry is left dealing with the consequences. You can make your job easier if you participate in the process. Next time, get involved earlier!
Copyright © 2004 Compliance Action. Originally appeared in Compliance Action, Vol. 9, No. 13, 11/04
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