The Short Shelf Life Of Compliance

Credit unions need to stay on top of compliance challenges to maintain their competitive positioning.


By Q2


With the increased attention that is now placed on regulatory requirements, how credit unions handle the issue of compliance has changed drastically – and with good reason. Credit unions simply cannot operate the way they did as little as five years ago. With the proliferation of new and changing regulations, credit unions must raise their standards, and their operations, to new levels. While credit unions might be exempt from some of the requirements and expenses outlined by the Dodd-Frank and Basel III rules, they will also face higher relative costs for compliance. In today’s complex legislative environment, credit unions must seek to gain the scale of their larger peers and competitors. They can measure success in this regard by one key baseline: technology.   

Five years ago, credit unions could elect to implement just a few of the many technologies available to improve their systems and services. However, given the current volume and speed at which compliance requirements emerge, it is no longer an option to move forward with technology, it is a necessity. Dodd-Frank alone introduces 387 rules from 20 separate federal agencies. These rules translate to major operational modifications for credit unions, as each regulation requires several steps to accomplish.

Manual Methods No Longer Suffice

Credit unions can no longer rely on traditional, manual methods to keep up with and track compliance activities. Following countless steps and procedures from an oversized, three-ring compliance binder can leave a credit union at risk for missteps and significant errors.

Today, compliance is extremely time-sensitive, leaving no room for most manual procedures. An employee in the back office charged with reviewing each and every wire transfer and ACH file against routine transactions is no longer sufficient. Instead, such vital responsibilities should be automated through technology that determines typical transaction types and effectively monitors for fraud. When it comes to compliance, credit unions cannot simply rely on what has worked for them in the past. There needs to be an immediate shift to technology that can support the overwhelming number of required actions present in today’s financial environment.

Identify Progressive And Capable Solutions

IDC Financial Insights expects financial institution technology spending in North America to increase by roughly 2% in 2012, to about $53 billion. This rate may now be considered the industry’s new normal and a rise in technology spending indicates acknowledgement of the efficiencies that modern technology affords. While credit unions have been hesitant to pursue such investments, they are now realizing that in the long run these improvements will allow them to accomplish more with fewer resources and better meet immediate regulator demands.

Credit unions should keep in mind that technology service providers are also under the same compliance scrutiny. Therefore, an outside vendor is inherently prepared to adapt to the regulatory landscape and may be able to better assist credit unions with meeting their own compliance objectives. The ideal third-party technology partner will account for risk and compliance requirements, stay ahead of the regulatory curve, and update its solutions in a timely manner.

For example, one updated FFIEC supplement issued in June 2011 focused on the Internet delivery channel and the need for multi-factor authentication (MFA). Forward-thinking credit unions were able to leverage vendor expertise regarding preparations early on and as a result, ensured proper controls were available in advance of the January 2012 deadline.

As with any business partner selection, due diligence is essential. Choose a technology provider that makes security and compliance responsibilities a priority and has its own fraud mitigation technique. By leveraging the compliance measures a vendor already has in place, a credit union overwhelmed with government oversight and lacking resources can eliminate part of its burden.

In addition to managing required system updates, technology providers and solutions should enable credit unions to fulfill one of the largest components of compliance: reporting. Automated systems create the reports required by examiners, eliminating the need for credit union employees to document every step for every activity. Credit unions can streamline their compliance workload, while still verifying to management and outside examiners that they consistently follow standard, established guidelines.

New Channels, New Responsibilities

While Javelin Strategy & Research suggests that mobile technology is now a must have service, many financial institutions remain hesitant to move forward with a mobile offering due to security and compliance concerns. Mobile clearly exemplifies one service that, five years ago, was not the imperative decision for financial institutions that it is today. With rising pressure to keep up with large banks and retain a competitive edge, credit unions cannot ignore new and developing channels that will allow them to progress. Instead of disregarding certain services, a credit union can entrust its mobile technology partners with managing any legislation changes around its solution.

Compliance is now a moving target – and it will not slow down. The volume, as well as the velocity, of regulatory change is forcing credit unions to not just acknowledge the benefits of technology, but to act on them. Credit unions should not limit themselves, or their service offerings, to what they can manage through spreadsheets or by hand.

Evaluate how your own credit union has changed in the last five years. If improvements and advancements for the next five years are not already underway, you may be underwater. Falling behind on compliance demands not only risks regulatory repercussions, but can also damage a credit union’s reputation. Make the move to properly invest in technology tools that will support your credit union’s health and competitive position in an evolving marketplace.

Suzette Junier is vice president of Compliance at Q2ebanking, a privately-owned technology company that enables community-focused financial institutions with electronic banking software and services including secure online, voice and mobile banking applications. Q2ebanking is part of CBG Holdings and is proudly based in Austin, Texas. Suzette can be reached at



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