6 Ways to Avoid Compliance Complacency

In a perfect world, there would be clear-cut parameters and singular governing entities for all credit unions. However, a state’s division of financial services regulates state-chartered credit unions and the NCUA regulates federal credit unions. Additionally, there is more to consider in the governing details surrounding the credit union network. It’s an exceptional medley of federal, state and international laws that require great attention.

The NCUA issued its annual supervisory priorities at the beginning of February, and while much of it builds on established guidance from 2021, there are still new areas to focus on. It’s imperative that credit unions stay alert to accounting and regulatory updates and create a plan for implementation to remain compliant.

In addition to all these moving regulatory parts, there’s still one area of precaution outside of the governing agencies credit unions should be aware of: Overconfidence leading to complacency. Some credit unions may feel that because they have not been impacted by past risks, they can take more risks or simply get by without changing a thing.

Some of this complacency is due to a lack of awareness, or not knowing where to get help or how to find the expertise to reduce risk. It may be that the expertise is too expensive, but the cost of inaction could be far greater.

Here are six ways to circumvent compliance complacency:

1. Stay informed. Keep the information coming to you. As new regulations are established, criminals find new ways around them. As a result, regulations are added and amended on a regular basis. It is critical to keep your compliance knowledge up to date. Build your subscription base with reliable publications and industry leaders.

2. Engage in discussion. Utilize existing networks, and find peer credit unions to discuss views on compliance issues and learn how others have addressed them. Join local and national credit union leagues, engage in forums and join online groups that are focused on keeping current with credit union compliance issues. Keep the discussion going by hosting training sessions internally for all staff.

3. Automate. Many tools allow for automation of transaction monitoring, risk rating and member due diligence to support credit union AML and BSA requirements. This is a must have for a thorough and effective compliance effort.

4. Build partnerships. Partner with technology providers that are compliance-minded and will proactively update platforms to help credit unions stay compliant. It’s a critical function of these providers to understand the changes in compliance and create solutions that address them.

5. Be resourceful. Establish standardized solutions and procedures for recon and delegation. You don’t need to know it all, but you do need to know where to reliably source for information and implementation. Tap into your resources to help you find the answers you need.

6. Assess your risk appetite. Credit unions already have expansive risk management practices in place with set risk limits, but few take the steps to objectively think about their appetite for risk, or more importantly, determine if their current actions are consistent with their risk appetite.

Meeting regulatory expectations is no easy task for credit unions today. Keeping up with compliance is even more difficult when the guidance changes or conflicts with other regulations. It’s always only a matter of time before this happens, so credit unions need to view the full cost of impact as though it were guaranteed to occur. Take action, hold discussions, strategize and communicate.

Joshua Gideon Manager of Audit, Risk and Compliance Allied Solutions Carmel, Ind.