Compliance

12:45 PM
Andy Greenawalt
Andy Greenawalt
Commentary
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Why Your Next Compliance Hire Should Be a Software Programmer

Hiring dedicated software programmers to automate processes is the key to staying compliant at a low cost.

We all know that the regulatory pressure on banks continues to rise. The Banking Compliance Index supports this, and anecdotal evidence is everywhere.

In watching many banks wrestle with this reality, I’ve observed that 95% of banking leaders jump to the same conclusion within 15 minutes of thinking through their alternatives. They decide that they’ll need more staff to help them. They'll need to grow their compliance team to keep up. The effects of this conclusion are evident in the increasingly bright career outlook for compliance officers, who continue to see their salaries rise as it becomes more difficult for banks to find professionals with their skills.

This isn't an unreasonable perspective. If bankers find themselves with more work than they can handle, then they need more workers. The logic holds.

But, in my line of business, I watch a lot of banks -- the number flirts with 1,000 -- and from this chair I get to see patterns an individual banker likely wouldn't see. Whenever I’m confronted with a conclusion that seems foolproof, my contrarian brain always goes to the same place. If 95% of bankers are doing the same thing, what about the other 5%? What are they doing? The answer, as it turns out, is quite interesting.

[For more of our compliance coverage, check out: Time for a Fresh Look at Anti-Money-Laundering Strategies.]

The other 5% are using a different math. When confronted with extra work, this group doesn’t think about how many workers it will require. Instead, they think first about how it should get done. To their minds, how the work gets done is the critical variable in the equation.

For example, if you were to ask, “How many people do we need to dig a swimming pool?” The 95% would assume that the pool is being dug using shovels, and they will start to think about how many shovels of dirt one person can move in a day. The 5% will respond with their own question: “Can I rent a backhoe?” If the answer to that question is yes, then the job will require only one person. The question’s unstated assumption is the relative leverage each person enjoys against the task. The 5% know to seek advantage in leverage.

The best example of 5% thinking that I’ve seen is by one of our community bank clients in Florida. Their CEO shared, "If we want to handle compliance more easily and for less money, then why would we want more people doing the work? As a community bank, I want to focus my team’s energy on our community, not compliance. We're committed to investing in our community, so we need to figure out the most efficient and effective means of managing compliance if we hope to do that."

With that clarity, logic, and rationale, the CEO drew a startlingly simple conclusion: Hire a software programmer to automate the work. Instead of hiring more people to do more work, he could hire one person to make the work smaller. "We want to automate as much as we can,” he said. “If people are touching work they don't need to, that's bad."

This client has hired a dedicated software programmer who is working every day to connect processes and use technology to streamline the flow of compliance activities across the bank. The logic of the 5% is always to seek advantage by doing things differently, to pursue all cost advantages. 

After interest expense, staffing is the biggest expense most banks have, and compliance is an increasing component of every staff member’s time. Utilizing your team well -- and, by that, I mean maintaining their focus on your customers and community -- is the key to performance, and performance is the key to being in the banking business in 2020 and beyond. To do this, think like the enlightened 5%. Rethink your compliance staffing strategies and all of the ways that technology can help make the work easier for everyone.

Andy Greenawalt, is a co-founder and the CEO of Continuity Control, a compliance management system for community financial institutions (http://www.continuity.net). He can be reached at 866-631-5556 or andy@continuity.net. View Full Bio

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Nathan Golia
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Nathan Golia,
User Rank: Author
10/19/2014 | 10:59:47 PM
reporting
With reporting a major component of compliance, of course software developers are key — someone has to figure out a way to get the right data out to the regulators quickly.
AndyIGreenawalt
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AndyIGreenawalt,
User Rank: Apprentice
10/19/2014 | 11:26:24 AM
Re: Automation
Thank you both for your comments.  Kathy, you're spot on that insight still plays a huge role, but that's why automation needs to find it's way out of the last decade and into this one.  We see smarter systems emerging for personal financial management, tax preparation and other areas.  Scenarios where, to use the over used, big data is brought to bare to shead the light of context on a problem.  Previous generation technology was fairly primitive in it's decisioning support with basic if-then logic, but today we have the data, the technical architecture and the examples to faciliate far more nuanced logic - in real time.  It's this gap between last generation solutions, and current state of the art that is the opportunity for our industry.
KBurger
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KBurger,
User Rank: Author
10/13/2014 | 3:53:21 PM
Re: Automation
Absolutely -- still, I think there is a need to understand the business problem. Ideally these programmers get education about banking as well as specific compliance issues, as this is not just "any" kind of automation issue. Much can be automated but there is still a need for analysis and investigation. The automation needs to account for that, not just volumes handling.
Jonathan_Camhi
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Jonathan_Camhi,
User Rank: Author
10/13/2014 | 3:49:31 PM
Re: Automation
If you look at a lot of the big compliance fines over the last few years, especially around AML and sanctions screening, they really have to do with meeting the most basic requirements in monitoring and compliance. It's just that the volume of trasnactions that have to be screened is too much for many banks to keep up with. So there seems to be room to leverage automated processes and better deploy staff to get a handle on that volume and gain compliance.
KBurger
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KBurger,
User Rank: Author
10/13/2014 | 2:25:12 PM
Re: Automation
Your argument makes sense, Andy. I would argue, though, that domain knowledge still matters -- that is, the programmer or developer may have great insights into how to automate or change processes, but of course compliance (or lending, or account opening, etc.) is not just about transaction processing. Insight, context, analysis and problem solving also need to factor in, especially where banks are involved in a new or evolving area (think, subprime loans). That said, by taking an automation (software) approach to compliance, many of those people hired to push paper could perhaps be doing the necessary analysis and investigation into compliance issues.
Byurcan
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Byurcan,
User Rank: Author
10/13/2014 | 9:28:07 AM
Automation
Interesting article, Anfy. It's surprising that "only" 5% of the banks think the way you describe, but I suspect that's tru in very industry. It's why the Google's, Amazon's etc of the world stand out.
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