New Regulatory Problem: Filling Compliance Jobs
Stoneman, Bill, American Banker
When the Comptroller of the Currency hit First National Bank of Pueblo with an enforcement order in late 2003 for Bank Secrecy Act violations, executives decided to a hire full-time compliance officer.
Finding one wasn't easy, said Ray Herrick, the chairman and president of the $60 million-asset bank. He advertised in Colorado newspapers and asked people he knew at other banks, including former examiners, but came up empty-handed, he said.
"We were looking at $65,000 or higher for a full-time, talented, experienced compliance person," Mr. Herrick said. "They're not out there."
First National wound up hiring consultants from RSM McGladrey Inc. They conduct semiannual reviews of compliance operations and suggested that the bank hire a more junior person just for Bank Secrecy Act work.
Though the OCC released First National from its agreement in six months, the growing compliance burden is one reason that its parent, First Fowler Bancorp Inc., agreed last month to be sold to Sunflower Bank in Salina, Kan., Mr. Herrick, said.
That burden is also creating human resources challenges for other small-bank executives. Once they get past their reluctance to hire someone who will generate no revenue, many are finding that demand exceeds supply.
The USA Patriot Act and the Sarbanes-Oxley Act, signed in October 2001 and July 2002 amid terrorism and corporate scandals, have greatly added to banks' compliance burden. And regulators have stepped up enforcement of the 35-year-old Bank Secrecy Act, which requires that banks make sure, through documented steps, that new customers are who they claim to be.
Consumer protection laws and regulations also impose demands. A range of federal agencies are writing rules to implement the Fair Credit Reporting Act, signed in December 2003. And truth-in-lending, mortgage disclosure, and other consumer-related requirements continue to occupy staff time.
Banks of all sizes are committing additional resources to compliance, partly by hiring. But the change is more fundamental at community banks, where responsibility has typically been shared by several people or held by someone with other duties. (At First National, for example, the operations chief was nominally in charge.)
For bank officers with multiple responsibilities "the question was what was the highest priority on a particular day," said Michael Kus, a principal in the Auburn Hills, Mich., law firm Kus, Ryan & Schluentz PLLC. It was certainly not always compliance, he said.
Kathleen Marcum is the president of the $70 million-asset Millbury National Bank in Massachusetts. Three years ago she formed a committee of senior officers and assigned a regulation to each.
"It was their job to get familiar with that regulation, do a self-audit once a year and to make sure our policies and procedures were encouraging compliance," she said.
That helped, Ms. Marcum said, but the time she spent monitoring the committee took her away from customers too much. "It was becoming my full-time job."
Though Millbury National had just 16 full-time employees and five part-timers, Ms. Marcum decided by late 2003 that it needed someone dedicated to compliance, even if she had to hire one.
Millbury advertised on a Massachusetts Bankers Association job site and, unlike First National, got several good candidates. Last February it hired Elaina Kinosian, who had worked in compliance for a Texas credit union.
Ms. Kinosian, who splits her time between compliance and marketing, keeps the bank ahead of the regulatory curve, Ms. Marcum said. She updates her colleagues on regulatory and legislative developments, serves as the main contact point for examiners and the bank's auditor, and provides training on a range of issues - training that spells the difference between good and strained relationships with regulators. …