Elements of a Strong Compliance Management System (CMS)
A Guide for Compliance Officers: Introduction
If you're a compliance officer at a U.S. bank, credit union, or FinTech startup, you know regulatory scrutiny is more intense than ever. Financial regulators have made it clear: a robust Compliance Management System (CMS) isn’t just a best practice—it’s a business necessity.
In the last year alone (2024-25), we’ve seen significant enforcement actions related to BSA/AML deficiencies, redlining, UDAAP violations, and data security breakdowns. These aren’t limited to large banks—FinTechs and smaller institutions are firmly in the spotlight too. This article breaks down the core elements of a strong CMS and links each piece to recent regulatory trends and authoritative guidance.
Let us help. A well-structured CMS is essential for navigating regulatory requirements and mitigating risk. From governance and policies to monitoring and reporting, we help financial institutions build and maintain effective compliance frameworks. Learn what makes a CMS strong and sustainable.
Why a CMS Matters More Than Ever
Recent enforcement actions offer a clear message: compliance failures lead to real consequences.
- In late 2024, the Office of the Comptroller of the Currency (OCC) fined TD Bank affiliates $450 million for long-standing anti-money laundering (AML) program deficiencies (OCC, 2024).
- The CFPB and Department of Justice (DOJ) settled a redlining case with a mortgage lender, reinforcing the agencies’ focus on fair lending (CFPB, 2024a).
- UDAAP enforcement continues to escalate. Wells Fargo, for example, faced over $150 million in penalties in 2023 for charging illegal fees and misrepresenting account services (CFPB, 2023a; OCC, 2023).
- FinTechs aren’t exempt either. In early 2025, state regulators levied an $80 million penalty on a digital payment app provider for severe BSA/AML failures, demonstrating that tech-forward platforms must meet the same standards as traditional banks.
Add to this increased scrutiny around data privacy, consumer harm, and third-party risk management, and it’s clear: a proactive CMS is your best defense.
Detailed below, the CFPB (2022) and FDIC (2023) both outline the core components of a sound CMS.
Key Elements of a Strong CMS
1. Board and Management Oversight
Strong compliance starts at the top. The board of directors and senior management must:
- Clearly support and understand compliance obligations.
- Provide adequate resources (people, systems, training).
- Act on compliance reports and audit findings promptly.
A weak “tone from the top” is often cited in enforcement actions. For example, a 2024 enforcement order against a regional bank cited poor board engagement as a root cause of ongoing violations (OCC, 2024).
Pro tip: Ensure your board receives regular CMS updates, and that management documents all compliance-related decisions, risk assessments, and remediation plans.
2. The Compliance Program
A functional compliance program should include:
a) Policies and Procedures
These should be clear, current, and tailored to your institution’s products, services, and risk profile. New guidance or laws—such as changes to privacy rules or AI-driven decision-making—must be reflected quickly.
b) Training
All staff should be trained regularly, with content tailored to roles (e.g., lending staff should understand ECOA and fair lending, while developers need privacy and security training). Training records should be retained for examiner review.
c) Monitoring and Testing
You need both routine monitoring (e.g., frontline checks, call reviews) and independent testing (via internal audit or third-party consultants). These are critical for catching problems early—before regulators or class-action lawyers do.
d) Complaint Response
More on this below, but in short: every complaint is a chance to find and fix risk.
3. Consumer Complaint Management
Complaints aren’t just customer service issues—they’re compliance signals.
Regulators, especially the CFPB, mine complaint data for patterns of consumer harm and use them to launch investigations. If your complaint logs show repeated issues with a certain product or process, you should be analyzing and remediating proactively (CFPB, 2024b).
Document your complaint-handling process. Make it easy for customers to escalate issues, and route complaints to your compliance team for trend analysis.
4. Third-Party and Vendor Oversight
Outsourcing doesn’t outsource responsibility. Whether you’re partnering with a FinTech or using a third-party service provider, your institution is still accountable for compliance.
The 2023 Interagency Guidance on Third-Party Risk Management laid out clear expectations: due diligence, contractual protections, ongoing monitoring, and exit planning (Federal Reserve, FDIC, & OCC, 2023). Examiners will expect to see vendor risk ratings, audit rights, and documentation of oversight activities.
What You Can Do Now
If you’re looking to strengthen your CMS:
- Assess your CMS components against regulatory guidance.
- Update policies and training to reflect current risks.
- Conduct or schedule independent testing for high-risk areas.
- Engage the board through reporting and education.
- Evaluate vendor risk management practices, especially with FinTech partners.
A strong CMS not only helps avoid regulatory action—it builds trust with customers, partners, and investors. As regulators continue to raise the bar, so must we.
Ready to strengthen your CMS?
Contact us today to discover how we can help you create or improve your organization's CMS.
References
- Consumer Financial Protection Bureau. (2022). Examination manual: Compliance management review – overview. Retrieved from https://files.consumerfinance.gov/f/documents/cfpb_supervision-and-examination-manual_compliance-management-review_2022-10.pdf
- Consumer Financial Protection Bureau. (2023a, December 20). CFPB orders Wells Fargo to pay $3.7 billion for widespread mismanagement of auto loans, mortgages, and deposit accounts. Retrieved from https://www.consumerfinance.gov/about-us/newsroom/cfpb-orders-wells-fargo-to-pay-3-point-7-billion-for-widespread-mismanagement/
- Consumer Financial Protection Bureau. (2024a, February 6). CFPB and DOJ redlining enforcement action against Park National Bank. Retrieved from https://www.consumerfinance.gov/about-us/newsroom/
- Consumer Financial Protection Bureau. (2024b). Consumer complaint database. Retrieved from https://www.consumerfinance.gov/data-research/consumer-complaints/
- Federal Deposit Insurance Corporation. (2023). Compliance examination manual: Compliance management system overview. Retrieved from https://www.fdic.gov/resources/supervision-and-examinations/examination-manuals/compliance/index.html
- Federal Reserve System, Federal Deposit Insurance Corporation, & Office of the Comptroller of the Currency. (2023). Interagency guidance on third-party relationships: Risk management. Retrieved from https://www.federalreserve.gov/supervisionreg/srletters/SR2305.htm
- Office of the Comptroller of the Currency. (2023, December 20). OCC assesses $250 million civil money penalty against Wells Fargo Bank, N.A. Retrieved from https://www.occ.gov/news-issuances/news-releases/2023/nr-occ-2023-147.html
- Office of the Comptroller of the Currency. (2024, October 2). Cease and desist order and civil money penalties against TD Bank N.A. Retrieved from https://www.occ.gov/news-issuances/news-releases/2024/nr-occ-2024-98.html
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