Compliance Management Systems: Overview

Compliance is essential for any business. It ensures that your company remains compliant with all established guidelines that are of concern to your specific industry.

As compliance continues to become more complicated, businesses are taking advantage of automation to streamline their compliance-related tasks. One of the automation tools that is regularly used is a Compliance Management System (CMS). CMS makes it easier and more cost-effective for businesses to manage compliance. However, as compliance continues to incorporate cybersecurity, information security has become an essential component of any CMS.

Understanding How a Compliance Management System Works

A CMS is essentially an integrated system that can be used to manage legal requirements and mitigate risk when it comes to compliance. In some businesses, it incorporates a series of policies, processes, and procedures that govern compliance-related tasks.

A CMS can also be used for the following tasks:

  • Employee training
  • Operational review
  • Corrective action, and much more

A CMS can protect against various compliance risks

Compliance regulations are important for your business to follow, especially in the finance industry. Indeed, being non-complaint can result in financial risk for your business.

Many different fines can be imposed if found to be non-compliant with various regulations. These fines can be imposed for exposing consumer data to risk from inadequate internal controls or having insufficient data monitoring tools in place for your financial institution.

A CMS provides a streamlined and dependable system that can limit your liability to various risks. Some of these risks include:

  • Federal banking system risks

The federal banking system faces four key risks that were outlined by the Comptroller of the Currency (OCC). These risks include:

Operational risks: which are caused by a vast and complex operating environment

Compliance risks: which occur due to changes in the customer protections

  • Anti-money laundering risks

A CMS can prevent your risk of being non-compliant with FDIC rules aimed at preventing money laundering. The FDIC recently put in place guidelines for implementing strategies and technologies aimed at better preventing money laundering activity.

As a result, managing compliance risk with regards to these new regulatory requirements is essential.

  • Risks related to consumer information access

Recently, there has been a push to provide consumers with more access to financial records. However, the use of artificial intelligence and other related techniques increases the risk of data being compromised- mainly because of a company having insufficient controls in place.

Such risk (and lack of controls) can lead to fines. The CFPB emphasizes data integrity and customer access to data; while also imposing penalties for non-compliance.

What goes into designing a functional CMS?

A CMS will play many vital roles in your business. From streamlining customer data protections to preventing money laundering, financial institutions can rely on a functional CMS to limit risk exposure in multiple ways.

More importantly, your CMS should be designed to keep up with your current data protection activities. It should focus on all embedded technologies that can unintentionally result in customer complaints at any given time.

There are four crucial steps you should follow when creating a functional CMS.

1. It starts with the Board

When it comes to compliance and information security, it starts at the top. Your board of directors will set the overarching goals of the business, after which relevant compliance efforts will follow.

2. Developing a compliance program

For many years, compliance in the finance sector has been with regards to fair lending practices, mortgage servicing, and other operational-related tasks. However, compliance is now incorporating cybersecurity controls due to the use of various technologies.

From Software-as-a-Service (SaaS) to other systems that handle customer data or communications, you need a program that doesn’t expose you to any data privacy risks.

3. Addressing consumer complaints

The next step is to establish a system where you can respond to consumer complaints quickly and reliably. You should be able to do this while also tracking and monitoring all complaints that your business receives.

Besides, all third-party vendors and business partners should have systems in place that protect data integrity, confidentiality, and availability.

4. Regular compliance audits

Finally, your CMS needs to incorporate the perspective of outside auditors. These auditors will provide an independent review- a review that affirms your business and IT suppliers are compliant with all established regulations.

External audits are particularly crucial for the CFSB’s Supervision Manual. The CFSB manual covers GLBA (the Graham-Leach-Bliley Act, which highlights privacy provisions with regards to IT systems) and the Electronic Funds Act. These guidelines are important because they include the transfer of funds across electronic channels.

3 Important Elements of a CMS

With the four crucial steps that are required to create a CMS, you also need to involve the right personnel during this process. Both internal and external stakeholders play an essential role during CMS creation. And, you should include the following three critical elements as part of the CMS creation process.

1. Senior level management

It first starts with the board establishing what overall business goals will be, and then it comes to senior management. The senior management team will evaluate vendors who will work in partnership with your company moving forward.

As part of this process, vendor risk management should be carried out. Each vendor should align with your controls so that you can remain compliant with various regulations.

2. Enrolling a compliance officer

A compliance officer is the primary resource person who handles compliance-related issues. You should appoint a person who will primarily oversee the entire CMS, research any relevant updates, and provide insights into how the business handles vendors and other relevant data.

3. Choosing front-line employees

When it comes to customer data safety in financial institutions, your employees are at the front line. From loan officers who process data to customer service representatives who address customer concerns, you need a robust front-line defense against any potential data breaches.

This means that you should select properly trained employees for such roles, emphasize the importance of strong passwords, and limit customer information only to relevant personnel.

Properly designing a CMS is vital for your daily operations. Besides, data security has become an essential component of an effective and efficient CMS platform.

To ensure the safety of customer information while remaining compliant with all relevant regulations, you need a GRC system that simplifies all CMS-related tasks under a single tool. The GRC system should also make compliance, risk management, and workflows easier to execute as required by your business and its vendors. In this way, you’ll have real-time insights into your IT infrastructure and data privacy performance.

Sonia Kukreja

I am a mother of a lovely kid, and an avid fan technology, computing and management related topics. I hold a degree in MBA from well known management college in India. After completing my post graduation I thought to start a website where I can share management related concepts with rest of the people.
Sonia Kukreja