The Hidden Risks of Compliance Gaps in Trust Organizations
For trust organizations (trust companies and community bank trust departments) operating in complex regulatory environments, the importance of comprehensive compliance testing and policy reviews cannot be overstated. Compliance is not just a box to check, it is a strategic imperative that safeguards reputation, client trust, and operational integrity. Yet, many trust organizations still treat compliance testing and policy reviews as an afterthought, only addressing weaknesses once examiners have uncovered them.
Neglecting to conduct regular policy and procedure reviews introduces significant hidden risks to the trust organization.
“A single outdated policy or procedural gap can lead to regulatory action, loss of client confidence, and expensive remediation projects that consume valuable internal resources,” said Jamie Schupp, Director, Risk Management & Compliance, Pohl Consulting. “The ramifications of publicly disclosed regulatory action or litigation as a result of non-compliance can drive clients away, negatively impacting the trust organization for years.”
Firms that want to maintain their regulatory standing must implement an annual compliance policy review for trust organizations.
- Many firms are reactive, not proactive. Without proactive oversight, compliance gaps can go unnoticed until discovered during a regulatory examination. This reactive approach leads to failed audits, reputational damage, and a heightened level of scrutiny in future reviews.
- Find and fix issues before an audit. A comprehensive compliance testing and review process identifies and addresses policy and procedural gaps before regulators find them, revealing inconsistencies and outdated policies and providing time to update them before an audit. This helps ensure trust documentation supports compliance efforts and compliance policies adhere to state and federal regulations affecting trust operations.
- Streamline and integrate compliance into day-to-day operations. A well-executed compliance policy review for trust organizations focuses on integrating compliance into everyday operations without introducing bureaucratic bottlenecks. Compliance policies and procedures align with core business workflows, ensuring efficient operations.
- Make policy reviews the norm. A strategic compliance policy and procedures review ensures policies and procedures avoid both over- and under-compliance. Policy reviews evaluate what procedures exist, why they exist, and whether they serve current business and regulatory needs.
At Pohl Consulting and Training, our Compliance Support Program allows trust organizations to tap into our expertise as needed, without the high cost of managing compliance reviews internally. We work collaboratively with internal teams to conduct comprehensive compliance testing and policy reviews that reveal blind spots, recommend practical updates, and align current practices with evolving regulatory expectations.
Be Prepared for the Next Exam Cycle
In today’s regulatory climate, trust organizations cannot afford to take a reactive approach to compliance. A comprehensive compliance testing and policy review for trust companies and trust departments should be a central component of every trust organization’s annual risk management strategy. The cost of waiting until an exam uncovers a gap is far higher than the investment required to conduct a proactive review.
Now is the time to assess whether your policies and procedures are current, effective, and operationally aligned. Contact us today to schedule a review and ensure your compliance program is ready for the next regulatory challenge.
