How the 4 Cs of compliance training protect financial institutions

Financial institutions need to be aware of the regulatory requirements as much today as ever, despite President Trump’s recent executive order to review many of the regulations and legislation passed during the Obama administration. Regulatory fines and penalties against financial institutions for compliance violations are still commonplace.

To avoid the unwelcome consequences of penalties or litigation, financial institutions need to implement a comprehensive compliance program and training that covers all the laws and regulations that affect their business.

Four Cs of compliance training. A strong compliance program begins with an investment in the professional development and training of employees. Studies show such training results in employees who are efficient, are effective, and have high morale. Plus, they also remain in their jobs longer and advance within the company. Highly trained employees also provide high-level service and add to the company’s sales success. 

Findings from a Pew Research Center Lifelong Learning and Training Report in 2016 show 65 percent of employed adults who participate in professional learning are most likely to say it expanded their professional network and 47 percent note it has helped them advance in their current organization or company.

While most employees see the value of keeping their job skills updated, Millennials, in particular, highly value training and career development when considering employment opportunities.  In fact, a June 2016 Gallup article “Millennials Want Jobs to be Development Opportunities” addresses this point.

The article reveals 87 percent of millennials affirm that professional development or career growth opportunities are very important to them and it is a key factor in retaining them as employees. The same article says this generation values development more than other generations do.

To determine if a compliance training program is robust, see if it meets the four Cs criteria: “Is it comprehensive? Is it cost effective? Does it create a culture of compliance? Does it foster a commitment to compliance?”

Is it cost effective? In recent years, many compliance training programs have been streamlined, becoming more affordable and contributing to their organization’s bottom line, according to training industry trends.

“Mandatory or compliance training continued to be done mostly online, with 73 percent of organizations doing at least some of it online and 26% entirely online,” stated the 2015 Training Industry Report.

To determine if a compliance training program is robust, see if it meets the four Cs criteria:
Is it comprehensive? Is it cost effective? Does it create a culture of compliance? Does it foster a commitment to compliance?

Compliance leaders must provide a consistent flow of information to their teams, positively influencing the accuracy and efficiency of day-to-day operations. They often achieve this goal through education and training, which is an investment in employees, the most valuable resource of any financial institution.

Despite the positive influence of compliance training, financial institution leadership often focuses on compliance departments as a growing cost of doing business and overlook the benefits they bring to the table. In addition to the obvious avoidance of litigation and monetary penalties often associated with regulatory violations, institutions should consider the more discreet, but impactful, effects of a better-trained team. Such teams operate with increased efficiency, effectiveness, and longevity, which can offset the cost of these programs as the following examples show.

Once a lending team completes fair lending compliance training, each team member will know how to properly market and respond to credit requests, effectively protecting the institution and improving the customer experience.

Retail bankers who complete funds availability training also will be able to easily and successfully communicate important information to customers, producing a pleasant customer experience.

Is it comprehensive? Regulators evolve their focus and approach as regulatory and economic environments change. Expectations also change as environmental risks and institutions evolve. A static training program is less than adequate for most institutions.

A comprehensive program is built from an assessment of an institution’s profile and operating environment. The first step in evaluating whether an organization has a comprehensive training program is to ensure staff receive all the training they need to do their job in an effective, efficient, and compliant manner.

Determining if employees are knowledgeable about the latest BSA and AML requirements, the most recent cyber-security threats, and best practices to protect personal customer information is the next step in evaluating the comprehensiveness of a compliance program. Having the institution’s compliance training program undergo a third-party review is also important.

Culture of compliance. Institutions that value compliance demonstrate the importance of it from the top down to the organization as a whole. Employees should be trained on how their actions affect others and how they could impact the organization.

Education on subjects such as discrimination in the workplace, appropriately communicating with customers, and recognizing potential fraud sends a signal to employees about the value of such training on all levels of interaction in the workplace and with the public. These examples play into the big picture of compliance. With properly trained employees, a culture of accountability and compliance is nurtured.

Commitment to compliance. With a few easy steps, commitment to compliance can be demonstrated to regulators, auditors, banks, employees, and other stakeholders.

First, establish a well-developed compliance management program after a comprehensive institution-wide compliance risk assessment is conducted.

Next, document compliance policies, procedures, and training programs. Schedule regular and systematic training for employees, and monitor the effectiveness to detect skills gaps before significant issues arise.

Last, keep abreast of changes in the regulatory environment and the institution’s risk exposures as products, services, and clientele evolve.

Final thoughts on compliance training. Even institutions with longstanding compliance and training programs face risks. Consider findings from a March 2, 2017, BCG report, “Global Risk 2017: Staying the Course in Banking,” which details how regulatory enforcement has brought cumulative financial penalties of roughly $321 billion to banks since the 2007-2008 financial crisis through the end of 2016. 

A well-established compliance management program will be comprehensive and cost effective as well as help create a culture of compliance and confirm an institution’s commitment to compliance. Keeping the 4 Cs of compliance front and center in all training and tracking efforts enables financial institutions to mitigate risk, empower employees, and provide an excellent customer service experience.

Jeff Kelly is Vice President Governance, Risk and Compliance of OnCourse Learning.