MARGARET McKENZIE IS ONE of those people whom bankers formerly loved to hate -- a compliance officer.

Bank employees, she said, used to look at their colleagues from the compliance section and grouse, "Oh, look at these people. They are creating all this paperwork for us and we have to follow all these procedures because Margaret McKenzie wants us to."

"But now, at least at my bank, they are starting to realize it is in their best interest," said the 42-year-old senior vice president for Old Point National Bank in Hampton, Va.

Having prevailed on her home turf, she is using her role as head of the American Bankers Association's compliance committee to proselytize the rest of the industry.

"I try to get the message across to the CEOs, particularly of community banks, to say this is no longer a back-room function," she said. "Compliance really happens on the front line. It does not happen in the back room."

At the ABA conference on compliance in June, Steve Cross, the Officer of the Comptroller of the Currency's deputy comptroller for compliance management, said the biggest problem regulators have with banks is that management is not taking compliance seriously and working it into its everyday operations.

"I thought it was interesting for him to make that comment because he is right on," she said.

Ms. McKenzie has headed the ABA compliance committee since October 1991. Her term ends in September.

Under her guidance, ABA compliance seminars changed from a lecture format to a serious of shorter, interactive discussions.

Ms. McKenzie joined Old Point -- a 13-branch bank in northern Virginia with 270 million of assets -- in 1969 as a teller. She later moved into lending.

That experience gave her the background necessary to step into compliance in 1981, because she had been wrestling with regulations almost every day.

Compliance departments have changed radically since then because of an avalanche of new laws. Gone are the days of a lone person working in a tiny back room.

A Function 'All over the Bank'

"You can't just appoint a person and put them in the back room, shut the door, and say, 'Deal with compliance.' It is now all over the bank, and everybody must have that as part of their job description," she said.

She added, "You have to manage this process like you do any other function in the bank."

Old Point, on Ms. McKenzie's recommendation, set up a committee system to implement new rules and procedures. She retains advisers from the trust department and from the computer division.

The tradeoff is that more people are spending time trying to comprehend the regulations.

"It seems to work quite well instead of having her take all the responsibility," said Old Point president John Sebrell. "The difficulty is providing people with the information to keep them abreast of everything."

Mr. Schoenke writes for the Medill News Service.

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