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3 Proven Ways To Improve Your Banking Compliance Process

By Michael Deely

banking compliance processThe explosion of new banking compliance regulations has had a major impact on the way that banks run their businesses. Community and smaller regional banks don’t have the capital to casually throw more people and processes at the problem of keeping up with compliance.

In fact, capital efficiency is at the core of why process improvement for banking organizations is necessary in today’s market. Not only do you have to optimize your banking compliance efforts, but also precision in execution is a must to properly address both strategic and regulatory changes.

Before you put new compliance tactics into play across the board, you should prioritize the highest-risk regulations to tackle first. The penalties for not complying with these high-risk regulations include civil penalties, fines and reputation risk.

You must also look closely at the top banking compliance issues of an examiner’s priority list – fair lending, CRA, UDAAP, flood insurance, BSA, etc. – along with any regulation that has significantly changed or has received past criticism.

One you’ve prioritized your bank regulator compliance issues, you should then consider these best practices to successfully manage compliance costs:

“Bake” Compliance And Risk Management Into Workflow Improvement

At the first sight of significant changes in regulatory frameworks, many middle-market banks opt to add additional steps to the banking compliance process and bring more people in to handle the work of regulatory reform. This near-constant adaptation to ever-evolving regulations, however, does not help your bank grow or maintain profits.

If there’s a new regulation related to anti-money laundering, for example, creating a whole separate database for gathering this customer information is a waste of time and money. Rather, you need to build new regulation data gathering into your existing customer onboarding process.

The focus needs to be on designing nimble processes for your bank’s operations and compliance efforts that can easily accept new and changing requirements. The ideal process improvement for banking organizations involves creating a workflow that improves efficiency, customer service and risk management.  When these workflow improvements are “baked” into already existing processes, there’s no need to tack on extra staff or steps.

Use Technology To Automate Banking Compliance Data Processes

Incorporating new banking compliance regulations into the mix of your bank processes often requires automation. Banking systems that aren’t integrated create a disruptive barrier that prevents a necessary flow of information.

When a customer enters your bank hoping to get a mortgage loan, you have to capture a lot of information. If the same customer comes back a month later for a business loan, you could have all the information there and simply update and add to it accordingly, or you could spend time gathering the same customer data all over again for a separate system and database.

Use technology to automate your compliance data gathering, controls monitoring, data validation and risk monitoring. One cohesive platform for all information may also be set up to alert you of missing information, rather than requiring employees to comb through every data field to identify gaps.

Automated data processes create a triple win by benefitting your bank’s operational efficiency, ensuring regulatory requirements are met, and creating a satisfying customer experience.

Manage Banking Compliance Staffing Costs With New Sourcing Models

To truly improve the banking compliance process and manage costs effectively, you need a mix of in-house and outsourced resources.

Day to day, you need someone in-house. However, if your banking compliance process is implemented on a monthly or quarterly basis, it is a good idea to outsource. Outsourcing part or all of your compliance processes is a decision typically driven by one or more of the following challenges:
  • Coping with talent shortages
  • Sub-optimal compliance processes
  • Investing in technology infrastructure
  • Addressing global compliance needs
  • Increasing operating costs

Sourcing models such as new human resources technology and virtual banking compliance departments are growing in popularity. Another alternative is to leverage other departments or companies for banking compliance activities. This choice is especially beneficial when applied to the back-end of reporting compliance.

When you have the right compliance consultant, their talents help to improve the banking compliance processes that drive your efficiency ratios, benefit customer satisfaction and boost your bottom line. Your best bet is to partner with a consultant who has deep knowledge of middle-market banks, IT and operations to help meet your bank’s regulatory demands in a cost-effective way.

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