Compliance Management According To Allan Kraemer

After years as a bank examiner and then as a bank compliance manager, Allan Kraemer has mastered some fundamental principles of compliance management. First, always set your own agenda based on your institution and what you believe to be its risks. Compliance managers make a major mistake when they let the regulatory agencies set their agenda for them. He strongly advises that you don't ignore things that are temporarily out of the examiners; scope. For example, in the mid-eighties, CTRs were perceived as a low priority. Ignoring this requirement came back to haunt the banks that dropped their compliance efforts.

Second, watch what each agency is doing. Don't get tunnel vision and only watch what your own regulatory agency is doing. The procedures or emphasis of one agency may influence another. In fact, that is what usually happens.

Kraemer advises that there are some areas that will certainly receive close scrutiny: these include fair lending and the retail sale of non-deposit investment products or "NDIP." Banks should pay close attention to customers' perceptions about sales practices and the product.

A third area for close attention is state law. State law activism tends to be greater than at the federal level. The number of banks that are headquartered in a state is declining. This trend is causing an increase in legislation at the state and local government level. States tend to focus on areas that have revenue, such as taxes and escheatment, as they look for ways to make up lost revenues.

Fourth, prepare to broaden your horizons. Financial modernization may make a major difference in how we relate to our regulators and who our regulators are. Regulatory techniques differ. For example, the FTC or the SEC identifies a single case that will make the most impact to deter other companies from doing the same thing rather than routine examinations.

And then there is always CRA. There is enough dissatisfaction with CRA in its current form that it is already a likely target for reform. Both banks and consumers have objections to the current regulation. Data collection and Internet commerce are significant CRA issues. The agencies also need to resolve questions about how to determine the assessment area for Internet banks and Internet banking.

And issues that are out there but coming soon to a consumer advocate near you are customer service issues including fees and charges. Kraemer predicts that any abusive practices will generate legislation. So stop it now or stop it later.

Allan Kraemer is a co-principal in the firm of Kraemer and Walters, LLC., a firm that provides risk management and compliance management advice to mid-sized banks. Kraemer was formerly the compliance manager for Bank of America. He teaches at ABA's National Graduate School of Compliance Management and recently addressed a general session at ABA's national Regulatory Compliance Conference.

Copyright © 1999 Compliance Action. Originally appeared in Compliance Action, Vol. 4, No. 9, 7/99