Creating a culture of compliance can help mitigate conduct risk.
Decades ago, the word “culture” referred to the customs and beliefs of a particular society. Today, it also refers to the way of thinking within an organization. While the concept of culture is relatively new to the workplace, its significance is more prevalent than ever. For some companies, it means staff amenities and flexible hours; for financial institutions, it means a compliant and ethical way of conducting business while protecting the consumer and the financial system.
In 2014, FinCEN made it clear that shortcomings seen in AML programs confirmed that the culture of an organization is critical to its compliance. Predating the FinCEN guidance was the significant shift in how examiners viewed BSA/AML compliance when it was moved under the Management component of the CAMELS rating system. Regulators see certain areas of compliance as a safety and soundness concern, as well as a direct reflection of the strength of the institution’s management team, including the Board.
Lately, the notion of conduct risk is moving to the forefront of every compliance officer’s mind. How can I ensure that our employees are conducting themselves in a way that will not harm the customer nor the institution’s reputation? How can I ensure my first line of defense is operating within our Board-prescribed risk appetite and limits? The answer: organizational culture.
A Strong Culture Starts at the Board and Filters Down
Your institution’s culture, like strategic initiatives, starts at the Board level. The tone starts at the top. If your Board prioritizes compliance by allowing for adequate human and technological resources and remains engaged in monitoring and audit activities, you are off to a great start!