Banks Are Struggling to Find Compliance Officers

One of the hardest jobs in the banking industry keeps getting harder.

Chief compliance officers are largely responsible for helping banks navigate a plethora of legal and regulatory requirements. They are often the executives who must meet with examiners to discuss areas that need improvement.

The job’s demands continue to intensify as regulators step up oversight in areas such as third-party partnerships and overdraft fees, and as programs such as instant payments gain traction. These fast-moving developments have led some staff to quit their jobs and leave the industry.

Christopher Williston VI, the president and CEO of the Independent Bankers Association of Texas, recently shared a story on X (formerly Twitter) about a compliance officer who left an unnamed bank after she determined that it would be less stressful to work at the funeral home down the street.

“Literally, she would rather be around death and loss all day than deal with [the regulatory] burden,” Williston added in his post.

“It is an incredibly difficult job and sometimes there’s a lot of pressure put on those officers,” says Kristina Schaefer, chief risk officer for $4.3 billion Fishbank Financial Corp. and its subsidiary, First Bank and Trust in Brookings, South Dakota.

“There’s no shortage of work and you have to have a good compliance culture and support from management to keep those people here,” she adds. “There’s a lot of burnout and understandably so.”

A Demanding Role
Compliance roles are difficult to fill due to the job’s demands and required expertise in a myriad of rules and regulations.

“Given the ever-changing regulatory landscape that chief compliance officers must face, it is a role in high demand, requiring dedicated and highly competent talent, as well as a set of soft skills” to get people to communicate better, says Sean O’Neal, a partner at Chartwell Partners, an executive recruitment firm in Dallas.

Compliance teams are facing pressures that extend beyond the rising regulatory burden. The advent of a new October 2023 survey of 225 financial compliance officials conducted by compliance and risk platform Hummingbird found that 87% are constantly under pressure to increase efficiency.

“It’s clear that compliance leaders are under more pressure than ever to create a program that performs at peak efficiency,” Hummingbird’s research team noted in its report. “Given that compliance – as a rule – must balance program efficiency with effective and consistent risk mitigation, this is a decidedly difficult task. Being asked to do more with less isn’t easy when you must maintain a consistently high standard of quality.”

As a result, qualified candidates are in high demand. Bank Director’s 2024 Compensation & Talent Survey found that more than a third of banks polled are preparing to hire more risk and compliance personnel. Last year,  about a quarter said those positions were among the hardest to fill. More than half the respondents at banks with more than $5 billion of assets said they found it tough to fill those roles.

Banks can expect to pay to land compliance officers at all levels of the organizational chart, industry observers say.

Experienced chief compliance officers can command a roughly $229,000 annual salary, according to human resources consulting firm Robert Half.

Filling the Role
Banks should keep several things in mind as they look to fill risk and compliance positions.

It is important to consider the bank’s long-term growth trajectory, says Brian Love, the head of banking and fintech at Travillian, an executive recruiter in King of Prussia, Pennsylvania. Banks on pace to cross $10 billion of assets need to be prepared for direct oversight from the Consumer Financial Protection Bureau and more scrutiny under the Federal Deposit Insurance Corp.

Banks would be well-served to develop a deep bench. Replacing a chief compliance officer with someone in-house can be more economical than hiring from the outside. It is critical to make sure they are familiar with a complex framework that includes adherence to the laws and rules such as the Bank Secrecy Act, Know Your Customer and the Truth in Lending Act.

First Bank has promoted employees from other departments, including mortgage processing, retail functions, and fraud detection, to fill key compliance roles, Schaefer says.

Promoting from within requires “formal talent management and development plans to continuously train on evolving laws and needed policies, monitor effectiveness and promote junior compliance subject matter experts,” O’Neal says.

Another incentive could include giving a new compliance executive some autonomy to resource and compensate his or her team, O’Neal adds. That, too, will come at a cost.
Banks should also consider hiring from the regulatory agencies that are responsible for monitoring compliance.

The FDIC noted in its review of New York-based Signature Bank’s failure in 2023 that it might need to pay examiners more, indicating a potential opportunity for financial institutions. While the agency reached a new compensation agreement with its staff in 2022, the average annual examiner base salary was $135,000 (or roughly 60% of that of the average chief compliance officer).

There are also steps banks can take to ease the burden on compliance teams. One option involves retaining a part-time compliance officer. Doing so could help add capacity as needed.

“We have used an external firm to help with workload or with a technical area such as fair lending testing,” Schaefer says. “Sometimes an outside perspective is beneficial, but we still prefer handling the tasks internally because there’s a better interaction when you can walk down the hall to discuss a situation.”

Some banks are looking at artificial intelligence to take data-intensive tasks off the plates of their compliance teams. Grasshopper Bank in New York is using generative AI — predictive models that create content — to handle BSA-related due diligence and monitoring.

Nearly 90% of the compliance executives surveyed by Hummingbird said they were interested in automated compliance processes that they could build and customize.
There are several potential pitfalls with AI, including algorithmic bias, regulatory pushback and overreliance on the technology for decision-making. A human analyst is needed to make decisions based on AI-aggregated data.

It is important to realize that, regardless of hiring strategy, it could take considerable time to fill a vacant compliance post. Banks should draft a succession plan months or years in advance of retirement.