Rutherford is proud to introduce its Leadership Series, a series of interviews with key players within the compliance, financial crime, legal, and cyber security sectors. These informal conversations will serve as an opportunity for professionals in the professional and financial services industries to get insights into what topics are trending within their field.
In this series, we are talking about thecompliance rolewithin organisations and stigma that often surrounds it. It’s important for businesses, especially those with a compliance function, to have professionals who understand what compliance is and what the role entails.
What is a compliance officer?
In a compliance officer role,the professional will lead the regulatory compliance function and will have to internalise conflicts and exercise supreme judgment in balancing the need to allow its business to flourish in an increasingly complex regulatory environment, whilst avoiding the potentially devastating consequences of non-compliance.
How Compliance Departments function?
Every year, new regulations and rules are being introduced, meaning the compliance function must always be on top of the ever-changing sector to properly assess how any regulatory update can affect a business and its activities.
What Does a Compliance Officer Do?
Many people wonder what a compliance officer does, the key duties within a compliance rolemight change from one type of firm to another, however, its core responsibilities will usually include, but are not limited to, the following:
Fostering an ethical culture at the firm
Avoiding fines and other penalties from the regulating body (FCA in the UK, SEC in the US)
Creating, monitoring and reporting on internal policies and processes: IT, Strategy, OH&S (Occupational, Health & Safety), KYC (Know Your Customer), PEP (Politically Exposed Person) and Sanctions
Legal research and anticipating future changes
Leveraging future changes in regulation
Reviewing marketing material and disclaimers
Training sessions for staff
Answering “can we do X?” questions from the C-Suite and front office
Conducting internal audits
Assisting with disciplinary proceedings
Reporting to the regulator
Make sure that advice considers business objectives
Prepare and file regulatory reports with the FCA
Recently, when we sat down with a top Head of Compliance in the asset management world, we discussed the perception of the compliance department within a financial services firm, and more importantly how it had traditionally been viewed as a simple box-ticking exercise.
In the financial services world, often people forget that they operate in a regulated environment - they focus so much on the P&L that they lose sight of what they can or cannot do.
From your experience, how is the Compliance function viewed internally in financial services firms?
I think a lot of traditional asset managers tend to think about compliance as a tick box type of exercise. From my perspective, the compliance officer role is much more about engaging with the business to try and convey the importance of going about things in the right way.
What would you say to these people? What is your approach to railing against the box-ticking mentality?
The reality is that there are going to be certain aspects of compliance roles within the industry that are more "tick box" than others. So in some ways, it can be appropriate.
But I also believe that thought leadership - particularly for a Compliance Officer that holds the SMF16 function - should not be a box-ticking exercise in any way whatsoever. At that position, you must ensure that you are managing upwards, and that you are providing guidance and advice to the business about setting expectations. But you also have to manage downwards by communicating what these expectations are.
At the end of the day, your typical CEO won't spend hours of their time reading literature from the FCA about culture and organisations - they have better things to do. It is the compliance department's responsibility to be able to interpret regulation in a way that suits the business, but also clearly convey what the regulators' expectations are.
Do you believe educating members of staff can help address this?
Absolutely. I once worked for a small asset manager in a Head of Compliance capacity and realised early on that the team had never heard of compliance training. Part of my
Head of Compliance role was to help members of staff understand what it meant to work in a regulated environment.
In such businesses, people sometimes forget this crucial aspect, as they focus so much on the P&L and on how they can drive revenue. They tend to not think about the fact that they are in a regulated environment and that they won't necessarily be able to do whatever they want.
The financial services industry is ever-evolving, with traditional practices being constantly challenged and disrupted to better serve the end customer.
We have seen in the last decade an increasing number of start-ups and fintechs introducing new types of services to personal and professional consumers.
These changes have caused compliance roles to boom in recent years. Because of this increased action in the space and the introduction of new players in the financial services world, more firms are starting to expand their compliance departments to cope with their critical business needs and to prevent potential compliance issues. For help or more information on best practices to build out your own compliance function download Rutherford’s ‘Building out your compliance team’.
Over the years, the result of changed consumer habits has led to the introduction of new regulations. They are constantly evolving to keep up with the pace of increased financial products that are now on offer to better protect the population.
Financial services firms have therefore expressed the need for increased activity in compliance professionals recruitment, as they help businesses navigate through a constantly changing regulatory landscape.
For more information on the state of the compliance sector, hiring trends and its current salaries read Rutherford’s ‘Compliance/financial crime salary survey.'