First Bank System makes compliance every employee's concern.
The Minneapolis-based bank spreads the burden of day-to-day compliance among all its employees. Michael Maher, regulatory compliance manager, said this helps it put more eyes on the watch for trouble.
"Compliance happens in every single area of the bank," Mr. Maher said. "It's all-encompassing, and a lot of banks are realizing that. We're no longer laboring under the delusion that it can all be done in a back room."
Line compliance has become increasingly popular among cost-conscious banks since First Bank helped pioneer the idea six years ago. Sessions on the topic at several recent conferences have been jammed.
Management appears to be embracing line compliance because it averts the need for large, centralized compliance staffs. Instead, banks rely on tellers, managers, and other front-line employees to handle most compliance tasks. Traditional compliance officers monitor these employees and run training programs.
First Bank uses a detailed duty roster to ensure that all its employees - from board members to tellers - know their responsibilities for complying with 28 laws and regulations.
The roster includes an outline of each rule and a description of which employees are responsible for complying with it.
For example, the Expedited Funds Availability Act outline enumerates 22 duties for bank employees. Compliance officers must ensure the proper notices are sent to branches, provide training on request, and monitor compliance to make sure it meets regulatory muster.
The duty roster requires tellers to make deposits available on time or to fill out a notice explaining why the customer's funds are being withheld.
"Our people know exactly what they're accountable for," Mr. Maher said.
That makes plans like First Bank's effective, said O. Tom Thomas, president of Thomas Compliance Associates in Chicago. It spreads know-how throughout the bank and lets officers concentrate on devising better policies.
It also keeps costs down, Mr. Thomas said. Larger companies, like $36 billion-asset First Bank, could save 10% to 20% a year. A smaller bank with one or two compliance employees can cut annual costs in half by spreading responsibilities throughout the bank.
Wayne Barnes, a consultant at Professional Bank Services in Louisville, Ky., said his firm is advising banks to decentralize compliance.
"It's just too big a job for one person," said Mr. Barnes. "It has to be a team thing. Not even Michael Jordan can win a game by himself."
But in order to make such a program work, "banks need a commitment from top management to make compliance duties a requirement in every job description," Mr. Thomas said.
First Bank does just that. Mr. Maher said the bank rates employees annually on compliance activities. Too many mistakes can cost employees a promotion, pay raise, or even their job, he said.
Penalties like that make a program more effective, Mr. Maher said. "Having disincentives is important," he said. "It makes it very real. It's not an academic concept once you have real penalties."
