Compliance Management System – What is a Compliance Testing and /Monitoring Program?

This session provides compliance officers with a clear understanding of how to design and execute an effective Compliance Testing and Monitoring Program within their Compliance Management System (CMS), aligned with a risk-based approach and the Three Lines of Defense model.

Participants will learn how monitoring and testing function as critical tools for identifying compliance risk, validating controls, and supporting regulatory expectations—while clearly distinguishing these activities from internal audit.             

An effective CMS relies on strong monitoring and testing to ensure compliance risks are identified, measured, and controlled. This session explains how compliance programs translate risk assessments into structured oversight activities, and how responsibilities are divided across the organization using the Three Lines of Defense framework.

Without clearly defined monitoring and testing programs:

• Risks may go undetected
• Controls may fail without notice
• Regulatory expectations may not be met

This session helps institutions:

• Build a defensible, risk-based compliance program
• Clearly define roles across the Three Lines of Defense
• Strengthen oversight without duplicating audit functions
• Improve regulatory exam readiness

By the end of this webinar, participants will be able to:

Understand the Compliance Testing & Monitoring Program

• Define the purpose of monitoring and testing within a CMS
• Understand how these activities validate compliance with laws, regulations, and internal policies
• Recognize how monitoring and testing support ongoing risk management

What You’ll Learn

1. Learn the Three Lines of Defense Model

• First Line (Business Units): Own and manage compliance risk through daily operations and controls
• Second Line (Compliance Function):
  • Develop policies and procedures
  • Provide oversight and guidance
  • Perform independent monitoring and targeted testing
• Third Line (Internal Audit):
  • Provide independent assurance to the board
  • Evaluate the effectiveness of the overall CMS, including compliance

Participants will clearly understand that the compliance function resides in the Second Line of Defense, acting as both advisor and independent oversight (but not audit).

2. Differentiate Monitoring vs. Testing

• Monitoring
  • Ongoing, routine reviews
  • Typically performed by the first line and supported by compliance
  • Focused on real-time or near real-time control effectiveness
• Testing
  • Periodic, independent reviews performed by compliance (second line)
  • Sample-based and more structured
  • Designed to validate whether controls are working as intended

Participants will learn when to use each approach and how they complement one another.

3. Connect Monitoring & Testing to Risk Assessments

• Use compliance risk assessments to:
  • Determine what to monitor and test
  • Define frequency and scope
  • Prioritize high-risk areas (e.g., Fair Lending, Deposits, TPRM, CRA)
• Understand how risk ratings directly drive:
  • Monitoring schedules
  • Testing plans
  • Resource allocation

4. Understand How Compliance Differs from Audit

• Compliance (Second Line):
  • Ongoing oversight
  • Risk-based monitoring and testing
  • Advisory role to the business

• Internal Audit (Third Line):
  • Independent and objective assurance
  • Periodic audits of the CMS and compliance function
  • Reports directly to the board or audit committee

Participants will gain clarity on maintaining independence while avoiding duplication of effort.

Participants will leave with:

• A clear understanding of monitoring vs. testing
• Defined roles of the first, second, and third lines of defense
• Practical guidance for building a compliance testing and monitoring plan
• A framework for linking risk assessments to oversight activities