There are very few circumstances in life that The Life of Brian doesn't have a suitable quote for. The "What have the Romans ever given us?" scene sprang to mind recently when listening to not uncommon complaints that the compliance function was hindering business development or being otherwise obstructive or unhelpful. This scenario usually unfolds as a result of failures on the part of those involved in the compliance function as much as those in the front line, whether senior directors or more junior members of staff.
Too often the role of compliance is seen by the business as a "Can I do this?" check, or, alternatively a "Keep me either out of jail or under the regulator's radar" function. In other words, doing the minimum required so as to keep costs down and noses clean, breeding a culture of 'us and them'. In practical terms, the symptoms of such an attitude are usually obvious to an experienced external observer. The first is an obsession with rules and identifying breaches without explaining why a particular rule has been breached, offering recommendations of how failings can be remedied or providing training to allow staff to identify what is permissible and what is not. These deficiencies result in compliance and the business playing a game of cat and mouse, creating a sense that compliance is setting traps for the unwary client service team to fall into.
Secondly, the compliance function (or most likely the Compliance Officer) is more concerned about maintaining its standing and relationship with the regulator than getting answers to regulatory problems. In short, the compliance function takes refuge in rule books and an unnecessarily aggressive approach to getting its way.
While it is true that compliance is about making sure regulated firms stick to the laws and regulations which govern their conduct, there are also significant benefits beyond this immediate objective, if done correctly.
First and foremost, much of the legislation and regulation in force is designed to ensure that customers are treated fairly and with skill. The net result should be a customer who is satisfied, has trust in an organisation and who is keen to continue a (hopefully) profitable relationship. There are myriad regulations which seek to ensure that this is so and which should be the subject of compliance's attention: rules about conflicts of interest, competency and qualification, record keeping, requirements to ensure suitability of product and so on. Inevitably some operators seek to circumvent or ignore these requirements. It is unsurprising that those who do are frequently the ones subject to regulatory enforcement and/or client litigation.
Secondly, the compliance function should be a source of valuable information about the business and should help the corporate governance of a firm. Too frequently, this source remains untapped and ignored. Part of the compliance function's role is to monitor whether policies and procedures are being followed – be they in the areas of conduct of business, compliance with AML/CFT requirements or Codes of Practice, for example. This should provide a wealth of data which should be fed back up to the Board of an organisation to assess, in essence, whether what they said they would do is actually being carried out in practice. This should be part of a continuous feedback loop which allows a financial services business to either realign its objectives or reassess whether the policies and procedures are effective in achieving the objectives set.
Inevitably, there are factors which are outside the control of compliance – changes in legislation, market movements and other external factors but, at the very least, compliance should be able to monitor these and provide an informed view as to what impact these might have on how the business does and should, in the future, operate. Perhaps the right question isn't 'what has compliance ever done for us?' but 'why don't we let it do more?
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