Compliance officers cannot prevent all violations, so they should concentrate on the rules that carry the largest penalties, according to bank consultant Lucy Griffin.
"You can minimize your exposure to risk by focusing on certain regulations that are the most troublesome," Ms. Griffin said during the American Bankers Association's regulatory compliance conference here this week. "You have to determine what contributes the most to cost and reputation-risk exposure."
Ms. Griffin, president of Compliance Resources Inc. in Falls Church, Va., said many violations result from minor paperwork mistakes that cannot be caught in a cost-effective manner.
Yet, she said, compliance officers often try to stop these smaller mistakes, opening the door for larger errors to slip through.
The key, Ms. Griffin added, is to focus efforts on combating the biggest problems - discrimination, money laundering, finance charge disclosures - while catching as many small problems as possible.
Ms. Griffin said Federal Deposit Insurance Corp. data supported her recommendation. The FDIC examined 2,814 banks in 1995, and only 100 had no violations, she said.
More than 90% of banks examined by the FDIC last year had at least one violation, she said. Truth-in-Lending caused the most troubles, snaring 80% of the banks. The Real Estate Settlement Procedures Act was a close second - 74% of banks were found to have violations. The Fair Housing Act was next, tripping up two-thirds of the banks.
Few bankers were surprised by the numbers. Dennis L. Algiere, compliance officer at Washington Trust Co. in Westerly, R.I., said many banks don't have the resources to eliminate every mistake.
"There are just so many regulations out there, and there's many of those that bankers just don't understand," said Mr. Algiere. "A lot of smaller banks just don't have a single person specializing on a certain regulation like some larger banks do."
Pat Patrick, compliance business manager with Banc One West Virginia Corp. in Huntington, W. Va., said competition is a contributing factor.
"Many banks are so sales-driven these days," she said. "Staffs have sales quotas to meet. ... Sometimes i's don't get dotted and t's don't get crossed at the front line."
