Training Wheels

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Compliance training for front-line staff and boardroom directors becomes a priority

By Mary Thorson Wright

Effective staff training has long been considered an essential component of a sound compliance program, regulators report. However, the increasing complexity and breadth of compliance responsibilities for community banks have made that staff compliance training more important than ever, says Lindsay LaNore, executive vice president of Community Banker University®, ICBA’s comprehensive education program for community banks and community bankers. “The speed at which everything around banks is changing—technologies, payments, customer demands, etc.—is requiring banks to act more quickly and be nimble,” LaNore says. “In order to change effectively while remaining compliant, bank teams must be educated in compliance so that they can recognize where the compliance implications will result.” 

Training also has become part of a continuous process for banks to help their employees manage the risk and complexity posed by frequent regulatory changes, says Kelly Owsley, director of training services at Compliance Resource LLC, a regulatory services firm in Louisville, Ky. She says examiners often specifically look for whether staff-training activities adequately cover the latest regulatory topics and issues of the day.
LaNore cites the “usual suspects” that continue to require keen attention and periodic compliance training for staff—Truth in Lending Act, RESPA, data security, fair lending, Regulation E, Bank Secrecy Act, Home Mortgage Disclosure Act and others. The ongoing regulatory changes steepen the learning curve and keep many institutions engaged in fine-tuning their compliance processes and practices, she says.

Meanwhile, over the past two decades, regulators have placed an increasing value on community banks’ ability to assess, mitigate and manage risk. Certainly, the regulators advocate a risk-management approach to compliance. And the strength of a bank’s staff compliance training signals to regulators how effective the bank’s overall compliance program is likely to be.

These dynamics position staff compliance training as a lynchpin in the overall regulatory programs at community banks today.

All bank personnel, including directors, should have a broad understanding of bank compliance rules in general, but they also should receive targeted, comprehensive education in the laws and regulations directly related to their particular jobs and responsibilities. However, two groups that community banks must train for compliance are front-line employees and directors.

For all of these reasons, compliance officers frequently ask these three primary questions:

  • How are compliance training needs different for front-line employees and directors in the boardroom?
  • How much compliance training should each group receive and how often?
  • What compliance topics should their training cover?

Training for the front line
Because front-line employees meet face-to-face with customers and implement the technical steps involved with meeting the requirements of disclosures, bank policies and recordkeeping, they need to have “the competencies to know how to, when to, why to,” Shelton says.

That means front-line staff, particularly customer service representatives and loan officers, should have a broad foundation of knowledge of all the most important rules and responsibilities that all banks comply with. But, of course, that also means these employees must have in-depth knowledge of the particular laws and regulations they must follow as part of their daily work responsibilities, and they must be thoroughly trained in the bank’s particular policies and procedures to ensure compliance with those laws and regulations.

As regulators change their emphasis during examinations, community banks may need to adjust the frequency, depth and audience of their staff compliance training. Emerging and “hot button” issues should always be included in staff compliance training.
For example, the training topics important for branch service staff such as tellers, customer service representatives and new account representatives include the BSA/anti-money laundering and customer due diligence rules. Because customer interaction is critical to fair lending compliance, all branch service staff should have a high-level understanding of fair lending to raise awareness of the prohibited bases and the importance of fair treatment.

“The speed at which everything around banks is changing—technologies, payments, customer demands, etc.—is requiring banks to act more quickly and be nimble.”
—Lindsay LaNore, ICBA’s executive vice
president–Community Banker University

Loan officers and lending service staff need in-depth compliance training on fair lending to include the Equal Credit Opportunity Act and Fair Housing Act, Owsley recommends. If a bank is required to report under HMDA, annual training in those rules might be appropriate for loan officers, she says. A periodic review of flood regulations and Regulation Z also might be useful for that staff.

Most of all, compliance officers need to evaluate whether compliance training provided to front-line staff has been effective, consultants say. In addition to giving staff exams on their lessons, compliance audits of the work of employees should be carefully reviewed after training. Don’t wait for the next examination; that’s too late.

Training for directors
Regardless of their banking background, board members need to understand the essence of regulatory issues and their importance to their bank’s particular operations. They must be able to recognize the scope and implications of the laws and regulations that apply to their bank, including various potential compliance risks.

Overall, directors must have sufficient knowledge of regulations to ensure that their bank’s overall compliance strategies and policies are achieved. That includes providing the appropriate resources staff members need to fulfill their compliance responsibilities, and that includes effective training, adds Marissa Blundell, principal and chief operating officer at Bankers Advisory Inc., a mortgage compliance services firm in Belmont, Mass.

In the end, the most robust training programs for directors cover virtually all areas of compliance, but give more emphasis to those of the highest degree of risk, consultants say. In that way, the content and timing of that training would reflect the bank’s size and complexity and its activities, including the products and services it offers.

Lastly, for the purposes of their regulatory examinations, community banks should document their director training, including the dates of their training sessions, the topics those sessions covered and who attended the sessions.

Overall, directors should receive regular compliance training, consultants agree. Compliance officers also should routinely discuss compliance issues with directors during board meetings. A lack of regular direct interaction with the compliance officer can hinder the effectiveness of a director training program.

Meanwhile, compliance officers should regularly review board minutes for discussions and activities that might potentially signal the need for a discussion on a particular compliance topic.

Methods and timing
How training is presented can be as important as what is knowledge is taught. Putting together complete and accurate compliance training materials from scratch can be a daunting task, and creating materials that can be presented in a variety of formats is even more difficult.

Honey Shelton, president of InterAction Training Inc. in Humble, Texas, recommends using resources that offer a full array of compliance training topics, such as online compliance training subscription services and other compliance training vehicles offered by leaders in the industry. If a bank uses training materials from a third party, it should take steps to confirm presentations are accurate and kept up-to-date, Shelton says. External sources generally do not provide training in the bank’s specific products, services, systems, policies and procedures, so information to supplement training in those areas should be developed in-house.

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Certain staff compliance training must be presented at least annually or on some other mandated frequency. Some other topics carry no specific timing requirements, but they are beneficial to support a robust compliance management program and reduce regulatory risk.
Community banks can use a number of sources to determine compliance training needs for front-line staff and directors. That includes feedback from examiners, advice from consultants engaged for compliance services, compliance periodicals focused on training, and awareness of any new or revised regulation or areas in which the bank is not achieving compliance at the level it desires, even if it is not a typical higher-risk area.

Compliance training at all levels has become a major focus for community banks as regulations change frequently and become more complex, and as the penalties for compliance violations pose potentially considerable negative implications. As LaNore states, “The most successful banks are creating greater compliance depth by providing more compliance training to all business lines and at all levels of the bank, from front-line staff to the board of directors. This provides for more meaningful questions and thorough compliance analysis throughout the process.”

Today, community banks continue to find and then fine-tune the right balance of training—both in content and frequency—to ensure that everyone on their teams, including front-line staff and directors, is prepared for their compliance responsibilities.

Education Resources

ICBA recognizes that everyone has different learning preferences, so Community Banker University® continues to develop training for all functions and all levels, using multiple delivery methods, including online webinars and classroom instruction.

Among other programs, ICBA is offering a new Universal Banker Certificate curriculum and a Leadership Academy. An online library of more than 300 courses allows on-demand access to instruction covering regulatory compliance, workplace compliance and business skills.
For more information, visit www.icba.org/education.


Mary Thorson Wright, a former Federal Reserve manager, is a financial writer in Virginia.

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