Compliance - Page 2

What Is GDPR?

How financial institutions are affected by the EU’s General Data Protection Regulation.

By Keith Monson

While community banks specialize in serving their local community, the reach of global regulations can still have a significant impact on a bank’s business plan.

The European Union’s General Data Protection Regulation took effect on May 25, and although it isn’t a U.S.-based regulation, it is important for banks to understand how the scope of GDPR will change usual business functionality. The law will be one of the more significant regulations to hit financial institutions in quite some time, bringing changes for them as well as all other businesses — and their customers.


A “No Data Entry” Way to Comply with Customer ID Regulations

By Thomas Curley, Sageworks

May 16 — The Customer Identification Program rule, or CIP, implements section 326 of the USA Patriot Act, which requires banks, savings associations, credit unions and certain non-federally regulated banks to have reasonable belief that they know the true identity of each customer. These laws were established with a goal of preventing money-laundering and terrorist activities. On May 11, the Financial Crimes Enforcement Network (FinCEN) reminded financial institutions that the final rule, “Customer Due Diligence Requirements for Financial Institutions” officially became effective. Financial institutions, more than ever, are being watched and held to these higher standards as technology has made illicit activities more common.


Four Steps to Implementing CECL

By John Voigt

The Financial Accounting Standards Board’s new Current Expected Credit Loss standard brings a significant change to credit loss accounting in the United States, and the road to compliance presents many challenges for financial institutions. While today’s allowance process is commonly operated within a Microsoft Excel-based framework, the additional complexity of the CECL standard will strain this type of approach and make it difficult to maintain the required transparency and controls from quarter to quarter.


The New ‘Beneficial Ownership’ Rule

FinCEN-mandated changes take effect in May.

By Valerie Baxendale

The May 11 compliance deadline with the new Financial Crimes Enforcement Network Customer Due Diligence rule is fast approaching. This new rule adds yet another obligation for banks to know just who their actual customer is, including determining who really owns limited liability companies and other common forms of business entities.


Regulations: Preparation vs. Procrastination

By Mark Anderson

It’s been said that the one constant in the world is change, and that is certainly true when it comes to the financial services regulatory environment. From the repeal of Glass-Steagall up to the implementation of Dodd-Frank, lawmakers and bankers alike have witnessed multiple regulatory overhauls during the past 20 to 30 years. The regularity with which federal and state regulations are introduced and applied to the industry can cause even the most experienced bankers unease.

Most recently, prognosticators are indicating that the pendulum is swinging toward a more lightened regulatory environment for banks — community banks in particular. The current arbiter of many banks’ ire, the Consumer Financial Protection Bureau, has already seen a major change to its leadership structure that may alleviate some of the regulatory burden that institutions currently face, but even this is not final as the issue plays out in court. Similarly, other banking reforms that were expected in 2017 have been slow to gain traction, including changes to systematically important financial institutions and asset thresholds.

It’s fair to say that many of the regulatory reforms that bankers expected going into 2017 will still likely take years to come to fruition and have a meaningful impact on the industry. In light of this reality, bankers would be better served to focus less of their time and energy on the politics around existing laws, and instead shift their attention toward creating the infrastructures necessary to ensure that their institutions are well-positioned to more easily meet any new regulatory requirements when and if they are enacted. In other words, bankers must provide the tools and training necessary for employees to maintain current compliance standards, while also being flexible enough to respond to legal and regulatory changes.

Oftentimes for banks, the first step toward achieving regulatory compliance is establishing an effective training methodology that creates and reinforces a culture of preparedness amongst employees and leadership. However, considering the state of industry consolidation and the scale and size of those financial institutions dealing with hundreds of employees across several regions, bankers will now have to look beyond their culture and processes and consider the tools they use to maintain and update their compliance training programs.

When it comes to training processes overall, web-based portals have proven their effectiveness for quite some time. Technology, however, has continued to evolve and now delivers more options to bank staff in a simpler, user-friendly manner. From creating personalized training courses for employees, to tracking and managing employee checklists and training progress, to the real-time reporting required for auditing, training portals enhance an institution’s ability to quickly respond to changing regulations and ensure proper delivery of new standards to all employees.

Regardless of any law or bill that’s passed, if a bank leverages a training portal or intranet, it has a resource that can easily distribute the news across the entire institution. At the same time it can utilize that resource to require employees review a policy or conduct a training exercise before being allowed to go back to their work. For leadership, this decreases performance anxiety on regulatory audits by offering a less-pressurized environment for archiving and presenting information to auditors, while creating a systematic approach for each of the disparate branches to follow.

There are also ancillary benefits in utilizing a web-based portal as part of a bank’s compliance management and training program. Significantly reduced costs and less use of other resources including time, paper and mail delivery services are indirect yet powerful advantages for banks that leverage portals and intranets. In particular, the decrease in time spent by employees searching through documents or duplicating efforts is a quantifiable cost savings.

As an example, consider a bank with 150 employees. On average, up to 20 minutes is lost per employee, per day, searching for information within a shared drive or network. That equates to approximately 12,500 hours (or an average of 250 workdays) within a calendar year. To translate that into dollars, at $12 per hour, that’s $150,000 in lost revenue because employees did not have direct, efficient access to the information they need to properly do their jobs.

All of this talk around the politics of laws and regulations has certainly not distracted bankers from maintaining compliance, but it has shifted the focus towards an area where they have little to no control. While it is important for bankers to lobby and make their needs known in Washington, it’s all the more important for them to be prepared regardless of the political outcome.


Mark Anderson is CEO of Johnson City, Tenn.-based Banc Intranets, a leading provider of secure, web-based intranets and directors’ portals for financial institutions. For more information, visit

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