Virtual Compliance Officer feature art

Going virtual

Bankers Alliance launches new program to outsource the heavy lifting of compliance and BSA/AML monitoring

By Scott Daugherty

Over the past decade, the financial services industry has undergone dramatic transformations. The ever-changing regulatory landscape has forced the industry to get creative. Financial institutions have been forced to do more with less throughout these changes and the load certainly isn’t lightening. So how are institutions handling some of these requirements while still watching employee overhead and regulatory costs?

Many institutions have taken to utilizing vendor agreements to accomplish many of these feats. For many years, institutions have had a difficult time finding knowledgeable individuals in their local communities as requirements have tightened. This has resulted in many duties being outsourced. Technology is a prime example of institutions going to a shared service provider to acquire adequate knowledge and understanding to reduce risk of exposure.

This allows for institutions to have strong oversight over the technology arena without needing to have technological knowledge on staff. While the institution must have someone designated for IT oversight, they do not have to be able to complete the more tedious and repetitive tasks. This allows for oversight without having to do heavy lifting.

New VCO program

The recently launched Virtual Compliance Officer (VCO) program, owned by State Bankers Associations across the nation, has adopted and reapplied this same line of thinking and operation. Bankers Alliance’s VCO program — a shared services company designed for compliance and BSA/AML monitoring and reporting — is the newest innovation to aid in the success of member banks.

VCO allows a bank to outsource the heavy lifting involved with compliance and BSA/AML. Monitoring of BSA/AML compliance, including CTRs and SARs filing, can be overwhelming due to timing and completeness requirements. Monitoring the new account, high risk, OFAC and additional BSA/AML requirements is a time-consuming task that can become inefficient for a community bank to attempt with onsite staff.

Not only can it be time-consuming, many times it is difficult to find someone knowledgeable of the requirements. Having a VCO to assist in this area brings value by freeing the internal employees to focus on operational demands while still having knowledge and oversight where required.

In addition to BSA/AML monitoring, the VCO is designed to monitor deposit and loan compliance as well. The Deposit Monitoring for Funds Availability, Privacy, Interest on Deposits, Truth in Savings and others is equally time-consuming, and this doesn’t even take the lending compliance monitoring into consideration.

When adding lending compliance monitoring for Truth in Lending, TRID, HMDA, Flood and others you can easily see how outsourcing monitoring can be beneficial and timesaving.

VCO shared services can be replicated to assist institutions with burdensome and time-consuming monitoring tasks. The key benefits to using shared services is that it allows for multiple areas of gains for the institution.

At the strategic level, adopting a shared service allows practices and processes to be duplicated for each institution. This duplication gives the institution comfort knowing the institution is being covered in a consistent manner. This also allows for the employees at the institution to focus on the core objectives of the operation.

Another strategic level benefit is the consolidation of information and reports for senior management to ensure strong oversight of the institution by adopting a holistic and integrated analysis of results. Due to the virtual nature of the program, institutions don’t need to worry about office space and equipment for the VCO. Electronic communication is a built-in component of the VCO program, allowing for limited to no interruption in services.

Working with the institution very closely allows the VCO to become a member of your team with a true understanding of your institution.

A member of your team

At the tactical level, the institution can depend on transparent and continuous improvements. Working with the VCO, shared service institutions will have direct access to the VCO assigned to their organization. This person will become familiar with the bank’s processes and assess them for potential improvement opportunities.

Working with the institution very closely allows the VCO to become a member of your team with a true understanding of your institution. This close relationship allows the VCO to assist with clearly outlined responsibilities allowing for more effective monitoring and reporting.

Operational level benefits are also apparent when looking at VCO shared services. With proven processes and procedures and an effective and efficient program, the institutions can quickly reach desired labor cost reductions. With operational consistency, an institution can exercise strong oversight. With constant reporting and monitoring, the institution will have a finger on the pulse without having to utilize internal staff to do all work.

The efficiency and effectiveness are paramount to the success of the institution. Again, the VCO shared service is designed to be operational even in the worst of times due to its virtual nature and the ability to accomplish tasks without having to be onsite.

The long-term benefits of the program include the ability to benefit from a certified compliance officer whose experience is not easily found locally — all through a shared service that is virtual in nature. Being able to rely on a dedicated external contact to assist with the ongoing oversight of programs gives institutions the ability to apply stronger focus on the everyday operational controls.

Keeping strong operational controls and focus will assist in obtaining the desired strategic outcome of the institution. With strategic, tactical and operational level benefits constantly on the radar, VCO shared services has adapted to help ensure the financial institutions have a competitive advantage. As a result, the institution will receive qualified professionals with a mastery of the area that allows for more standardized processes and procedures.

Scott Daugherty is president and general counsel of Bankers Alliance.