Hire a regulatory relationship manager

If you are not a big bank. You are unlikely to be able to afford a compliance office with experience at a regulator. The next best thing to do is not to hire a law firm with that experience. The next best to do is to hire someone to be a regulatory relationship manager.

The main reason to hire a relationship manager rather than an outside firm is because if something comes up, you want to be able to have a quick, immediate and candid contact with your regulator. Regulators are people. Even as an institution, it is made up of people. While all regulators have a way of prosecuting bad behavior, mistakes are not things they want to punish banks for. They don’t want to take down a bank. They want to keeps banks in compliance with the law, rules and regulations.

As people, regulators are less likely to look at big banks favorably because they see that big banks have the resources to implement changes required for compliance. Inversely, they are sympathetic to the smaller banks for the reverse reason. Big banks are indeed putting incredible effort to stay in compliance. But just look at their market clout and the profits they generate, regulators find it difficult to believe that more cannot be accomplished. Small banks are not failing at any great rate. Still, they lack diversity of products, services, clients and geographic reach to weather waves the big banks consider to be just a little splash in the bathtub.

Considering the help regulators like to provide smaller institutions, having a person who is dedicated to staying constant contact to keep the regulator abreast of the effort being made and the resources allocated to compliance helps a lot.

The reason not to outsource this function is simple: anyone facing the public is an ambassador to the firm. The US does not outsource diplomacy to Germany. Why should your bank outsource such an important face of the firm.

For that matter, a relationship manger need not be the most experiences but having experience is crucial to success. Just having someone with a decade of experience or more helps to give the impression that the relationship is important to them.

Will FATCA compliance strengthen the financial sector?

About the Author: M. C. Maltempo is a compliance professional with more than a decade of experience helping banks, law firms and clients manage investigations and regulatory responses.