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Compliance: A Condition of Employment

By Chuck Lewis

Most financial institutions have policies in place for specific areas setting limits that, when exceeded, can lead to suspension or the termination of employment (e.g. too many teller differences, overstepping one’s loan authority, even poor attendance and other general employee behavior issues). But why is the expectation of compliance not included in most institution’s policies? Why omit such an important element when ultimately its absence could be the downfall of an effective compliance program?
The Office of the Comptroller of the Currency’s former Bank Secrecy Act (BSA) Handbook stated that senior management is responsible for ensuring an effective system of internal controls for BSA and must demonstrate its commitment to compliance by, among other things, “making BSA compliance a condition of employment” and “incorporating compliance with the BSA and its implementing regulations into job descriptions and performance evaluations of bank personnel.” The FDIC’s Compliance Examination Procedures state: “Key actions that a board and management may take to demonstrate their commitment to maintaining an effective compliance management system and to set a positive climate for compliance include demonstrating clear and unequivocal expectations about compliance.”
All financial institutions are expected to establish a formal, written compliance program. In addition to being a planned and organized effort to guide the institution’s compliance activities, a written program represents an essential source document that will serve as a training and reference tool for all employees.
It is expected that no two compliance programs will be the same and that the formality of a program will be dictated by numerous considerations. However, one element that should be included in every compliance program – regardless of institution size – is the expectation of compliance by all employees. This can be accomplished by:
Incorporating compliance into each job description as an identified accountability for the particular function;
Including a statement of compliance and the consequences for non-compliance in the bank’s compliance policy/procedures, and having the employee review and acknowledge it; and/or
Preparing a separate statement, signed by each employee, indicating his/her individual commitment to comply with all regulatory requirements.
There was a time when managers tended to wash their hands of poor-performing employees. When they became sufficiently tired or fed up with them, they simply fired those employees and replaced them. Today, there are certain constraints on managers in dealing with poor performance. If you do not have sufficient documentations indicating that the employee was informed of the consequences, provided with adequate training, and counseled on unacceptable performance, you may find yourself facing an expensive legal action. In addition to employment legal issues are the potential risks to the institution for poor exam results, possible fines and civil money penalties, the inability to grow or expand the bank’s market, and the damage to the institution’s image in its community.
As the regulatory agencies have migrated to a “risk-based” focus for compliance examinations, lack of commitment to compliance by senior management – as evidenced by the absence of holding employees accountable – may be seen as increasing the level of risk for non-compliance at your institution. Simply providing periodic compliance training is not enough anymore. All associates need to understand that failure to comply could mean the end of their employment with your institution.


Chuck Lewis is director of RSM McGladrey, a national business consulting, accounting and tax firm.


Posted on Wednesday, July 04, 2007 (Archive on Wednesday, July 04, 2007)
Posted by Scott  Contributed by Scott
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