Detect Issues and Violations Early Through Compliance Monitoring

The importance of compliance controls cannot be overstated. Having the right compliance framework is important not just to management, but to the regulatory bodies as well. The biggest compliance penalties are usually levied on banks which did not have the proper controls in place, because it represents a structural failure. That is why compliance monitoring is such an essential cornerstone for any compliance program that aims to be as effective as possible.

What is compliance monitoring?

The meaning of compliance monitoring is a bit different in the context of the financial department than it is in a broader context. Generally, it refers to when an independent body monitors an organization to ensure that they are complying with regulations and standards, like the EPA doing on-site tests to ensure that there are no harmful emissions. In a financial business context, it refers to internal compliance monitoring. In internal compliance monitoring, the organization introduces monitoring and tracking measures that help it detect and elevate compliance issues early.

Every organization has some level of compliance monitoring going on, but it is often not codified or is not being carried out using the right tools. In many organizations compliance monitoring is handled manually. Middle managers are responsible for monitoring the work of people in their teams and ensuring that compliance is being adhered to, and the compliance department does the rest of the work. They periodically test sample data to detect any problems in the compliance framework.

Compliance monitoring gives management a live view of all compliance related activities throughout the organization. This gives the management insights and real-time analysis which would not be available otherwise. Click To Tweet

Delays in issue detection

The biggest issue with manual monitoring compliance is not one of accuracy – it is possible to detect almost all compliance issues manually; the problem is when the issue is detected. If the person working with a client makes a mistake, whether they are a bank teller or a mortgage expert or any other such position, when and how does their mistake get detected and corrected?

The role of compliance monitoring in early detection

Compliance monitoring gives management a live view of all compliance related activities throughout the organization. This gives the management insights and real-time analysis which would not be available prior. Think about the delay that occurs in detecting compliance problems in the absence of any such monitoring. A bank branch may have certain issues which are being compiled in reports, but these issues will only be elevated and corrected once the periodic report is submitted to the management. Until they get that report, they have no way of knowing about any problematic trends or rising complaints about the organization.

When there is a compliance monitoring system implemented within the compliance framework, it sends out information as soon as the information is available. Our compliance solution, the American Bankers Association endorsed Predict360, has a dashboard which shows compliance data in real-time. This means that if there are any worrying upward trends (complaints going up, violations, or any other key risk indicators), the trend is immediately visible to the management. Since the trends are immediately visible, corrective actions can also be taken immediately.

Better, easier, and faster corrective actions

Here’s something industry insiders know well – corrective actions are much more important than the compliance violation itself. There are banks which deal with hundreds of thousands of customers and perform millions of different actions every single day; it is natural that there will be a few mistakes made. The regulatory bodies do not simply look at whether a mistake was made or not – they look at when the mistake was detected and what corrective actions were taken. We don’t say that an organization has excellent compliance controls and a strong compliance framework when the employees make no mistakes – we say it when they do make a mistake and the system catches it.

Compliance monitoring provides to the management a visibility not just for the compliance issues, but compliance activities and corrective actions as well. Management can see the progress on corrective actions and intervene wherever required. This ability is appreciated by regulatory bodies, because they can see that the bank or financial institution has the capability to quickly detect and eliminate compliance problems.