Compliance officers can avoid violations by taking decisive action during the months before new rules take effect, bankers and consultants say.
"Be proactive, not reactive," said Sai Huda, director of compliance at San Diego-based Advanta Mortgage Corp. "It's always prudent to have procedures in place early, so you can kick out any bugs that you may find."
A transition period comes with nearly every rule, but there isn't always enough time. Currently, bankers are wrangling with new Real Estate Settlement Procedures Act rules, which they must begin complying with in October. To avoid violations, officers must track the rulemaking process, involve all necessary departments in the planning process, and teach employees what to do until the new rule takes effect.
Once the final rule is released, compliance officers should turn their attention to planning. This process varies by the breadth of the regulation and the size of the bank, experts said.
Planning must include training so employees know what to do until the rule kicks in, according to Kate Barr, compliance officer at Riverside Bank in Minneapolis. For example, she said, when Truth-in-Savings rules changes came out in 1993 some employees got confused about which disclosures needed to be made.
"The key is to communicate so that everyone knows what their responsibilities are," Ms. Barr said.
With a more narrow rule, such as one governing management interlocks, a compliance officer may only need to make a phone call or two, and then release a short memo describing the changes. But the release of a complicated rule, like the Community Reinvestment Act, requires much more work.
Stuart J. Lehr, corporate compliance manager at $12 billion-asset U.S. Bancorp in Portland, Ore., said large banks should create task forces to implement rule changes. The groups, including officials from compliance, systems, and other relevant departments, should meet to determine what each must do to ensure compliance.
These groups are especially helpful when banks must alter computer systems to stay in compliance, as in the case of CRA, Mr. Lehr said.
"Anything where systems changes are involved can take a long time to change," said Mr. Lehr. "Getting organized in this task force can help."
In smaller banks, the process is rarely that formal, said Andrew Zavoina, compliance officer at First National Bank of Killeen, Tex.
Mr. Zavoina said compliance officers should immediately contact heads of departments that will be affected by the rule and brief them on the changes. Then, if needed, planning meetings can be held to get input on what should be done. However, he said, the compliance officer should be responsible for creating the plan and establishing training procedures.
