By Ray Birch
DES MOINES, Iowa–COVID has created a different kind of long-term issue and challenge for many credit unions—big gaps in compliance skills in their staff.
The issue is playing out in both a lack of people to fill positions and a lack of knowledge among those who filled vacancies created when veteran compliance people retired and took all their knowledge with them, according to one person.
“We expected to see a turnaround in this situation after COVID, but it hasn't happened,” said Darron Dunn, chief service officer at governance/compliance firm ViClarity. “Many of the credit unions ViClarity works with are struggling with compliance resources.”
Dunn told CUToday.info many of the skilled veterans who worked in compliance opted to retire during the health crisis, and it’s a loss that can be particularly costly, he said, noting compliance is one area where having tenured employees who understand the law, regulations and a CU’s policies can pay big dividends.
“Yes, retirements are a big part of the problem, but so is a lack of talent deciding to pursue compliance these days,” Dunn added. “During COVID we saw a lot of people retire, and we saw a lot of the compliance and staff within the credit unions transition to other roles, or just leave the industry. We worked through that during COVID. But as COVID wound down, credit unions went about looking for compliance staff again to fill those roles.”
But what they have found, Dunn said, is an absence of bench talent to step in.
The Exodus
“I'll call it the exodus of knowledge and experience. That kind of left during COVID,” he said. “Credit unions are bringing in new people and they're getting people trained on those roles. But that compliance person, the one who has been there 20 years, had so much knowledge and experience under her belt, there aren't many of those types of individuals out there anymore.”
As a result, many credit unions are rebuilding that knowledge and experience within the staff they have today, asserted Dunn.
Darron Dunn
“They're starting to be able to find people again to move into those roles, but they're green,” he said. “What credit unions are often finding is the people they are hiring now don't have the vast array of compliance experience in many fields—maybe they've just been versed in BSA, or they've just been on deposits or loans. The more well-rounded full compliance officer isn't there in large numbers.”
Minding the Gap
Not surprisingly, all of those factors have combined to create something of a knowledge gap at many CUs.
“To fill in the gaps some credit unions are outsourcing this work while they're trying to build up their staff, and build up departments again,” he said. “It’s just like in advertising and communications, we're seeing credit unions outsource a lot of this work.”
Dunn described what he believes makes for the ideal compliance person.
“I think you have to have a passion for compliance. People who are in compliance love compliance,” he said. “So, it’s finding the people who have the passion. The compliance role within credit unions is extremely important. It plays a part in in most everything and anything the credit union does. Sometimes, it doesn't feel like the most glamorous role, right? You get to be the guy who says, ‘No, have you considered this or that first? You’ve got to watch out for this because…’”
Consistency Issues
Dunn said some of the issues arising from the staffing shortage is new compliance officers lack the experience to ensure policies and decisions are consistent.
“There's always risk and risk management,” he said. “Every credit union has their own tolerance. Every credit union has their own structure on how they evaluate and look at risk and compliance, and make those decisions. The key is you have to be consistent in your policies that you have written, and the way you interact and make your decisions is key to making sure you keep yourself out of trouble, particularly with the regulators…
“You've always had your regulators that come in and do your audits, whether it be state or federal,” he continued. “They come in for their annual exams and they want to make sure you're following your policies and procedures, that you're fair and equitable as you work with all your members within the credit union, and you're consistent. And, if they do find issues that you resolve them quickly.”
Looking Forward
When it comes to compliance issues for the rest of 2024, what should credit unions be thinking about?
“Take a step back and evaluate what you have for resource and processes today,” said Dunn. “Be forward thinking as to where you want the credit union to be in the future. What steps do you need to take to get there? For some, it could be simple. Maybe it's more training for existing staff. Maybe it's hiring additional staff. Maybe it's finding a partner to outsource pieces of the of the compliance and regulatory management responsibilities. Regulation is not going away. There's going to be more of it all the time. It gets more complex all the time. You can’t fall so far behind that you're playing massive catch-up in the future.”