Laundering Rules Top Compliance Expenses Survey

Article excerpt

Banks pay more to comply with money-laundering rules than any other regulations, though those concerning privacy are a close second, according to a survey released Monday.

A report on the survey, published by the American Bankers Association, ranked the compliance costs of 20 types of regulations and laws on a scale of 1 to 10 and found that the Bank Secrecy Act and other anti-laundering ones scored the highest, at 7.3.

Privacy (7.1), Truth-in-Lending (6.9), Real Estate Settlement Procedures Act (6.8), and Home Mortgage Disclosure Act (6.3) regulations rounded out the top five. The Community Reinvestment Act was ninth (5.7), and the Fair Credit Reporting Act was 12th (4.8) -- though it was first in spending by credit card banks.

According to the survey, small banks were likely to budget compliance as part of its audit function, whereas large banks tended to budget compliance as a separate function of the bank. The survey also found that over 12% of banks did not have any type of formal budgeting process.

The trade group said that 1,000 banks, including 792 banks with under $1 billion of assets and 44 with more than $5 billion, responded to its eight-page questionnaire.

Compliance remains as unpopular with bankers as ever, with 60% of banks assessing their stance as "reactive," which the survey described as when managers believe "compliance is a necessary evil and must be funded adequately to keep us out of trouble." Only one bank in five reported a "proactive" stance, in which "compliance has become a key customer service issue."

Regardless of the bank's size, the salaries and benefits of compliance personnel made up the largest portion of the expenses -- 44 cents of every compliance dollar spent at banks with under $1 billion of assets, and 63 cents at those with over $5 billion.

Auditing and monitoring absorbed about 9 cents of every compliance dollar. …