The Trials and Tribulations of a Compliance Professional

What does the role consist of?

Traditionally, the compliance professional’s role was set up as the enforcement arm within the legal team. Their role was limited to focusing on identifying risk and risk management.  But as the Chief Compliance Officer’s role continues to evolve, compliance will become more integrated with business performance, and CCOs will assume a more strategic role. Not only must they have an excellent understanding of their business, but it is critical they possess the skills and human qualities which allow them to lead, strategize and impact change internally with regards to business ethics and compliance.  Robert Walters, describes the role of a Compliance Officer, “to make sure that a company is conducting its business in full compliance with all national and international laws and regulations that pertain to its particular industry, as well as professional standards, accepted business practices, and internal standards.” The compliance team is essentially a sensor that monitors and anticipates what is necessary to deal with, and anticipates future risk, which is why it is important for them to follow ongoing regulatory activity and news. Ultimately, because of the growing number of regulations and requirements, having a trained, in-house compliance team is a non-negotiable line item in every regulated industry.

“Compliance, in its broadest form, is the combination of all processes which enable a company to ensure respect for the values and ethics as installed by management.” –Blandine Cordier-Paliasse, Co-founder Compliance Circle

Compliance in the Financial Services Industry: Why it’s hard and important.

As Spiderman’s Uncle Ben has always said, “With great power comes great responsibility,” and this motto can be seen within every compliance team. The Enron (2001) and WorldCom (2002) scandals were the catalysts to a new age of corporate accounting followed by new financial regulations that gave birth to the Sarbanes-Oxley Act.

a Compliance officers job responsibilities
Source: Boston Consulting Group

In the 2017 Global risk report by the Boston Consulting Group, the number of regulatory changes has nearly tripled since 2011 to an average of 200 revisions per day, which equates to a regulatory change every 12 minutes.  To make matters even more complex, the United States is one of the only G10 countries where the banking industry is regulated by more than one regulator at both the Federal and State levels. It is because of this complexity that compliance professionals are finding themselves spending nearly 20-30% of their day chasing after regulatory changes.

Not only are compliance professionals tasked with following the behemoth of financial regulation, they are also charged with protecting the reputation of their organization.  Depending on the complexity of the firm, there could be tens of thousands of rules and regulations pertaining to their business that a compliance team must understand and interpret.  Just a single scandal can cause a firm’s reputational demise in the eyes of consumers as experienced by many firms these past few years during the American Banker/Reputation Institute’s survey.

A Compliance officers job responsibilities
Source: American Banker

The need for a Compliance-centric Culture
Since 2008, the banking industry has reported investing billions of dollars into compliance. In fact, the Economist’s Intelligence Unit found that banks stated that “responding to regulatory requirements” is their top business priority for the foreseeable future.  Not to mention, regulators wouldn’t view a bank favorably if they noticed them lowering the amount of spending  on compliance related activities.  

Unfortunately, there is always push back when change is on the horizon. In the 2016 PWC State of Compliance survey, it was stated that 66% of compliance teams considered their compliance technology systems to be basic and the most common tools used were Excel spreadsheets and Google Search.  David Zalman CEO of Prosperity Bank is quoted in Herman Cain’s “The Right Problems,”:

I’ve been in banking since 1978, and today, probably over half of my time is spent with regulatory requirements. The regulatory burden is a threat to traditional community banking. It is troubling that we don’t always know what the regulators are going to want.”

To patch up areas that are at risk for noncompliance, banks have been spending billions on external consultants, while also searching for a more permanent solution to their compliance woes.  During this time, many financial institutions have been following an emerging sector called Regulatory Technology or better known as RegTech.  Total spending on regulatory compliance technology is expected to rise from $50 billion in 2015 to $118 billion in 2020.  A major goal for financial institutions is to to automate how they can stay ahead of new regulations, and improve their effectiveness with compliance and control.  

The regulatory environment is mandating transparency and risk reduction, but with the current tools available,compliance teams are finding it very difficult to cope.  With the number of financial regulation growing and a consumer focus on corporate governance and reputation, compliance teams are becoming more and more in the spotlight.  Using this newly obtained power, compliance teams need to promote a new compliance-centric culture and evolve their existing arsenal to better equip themselves for the changes to come.  

Compliance.ai’s mission is to simplify the lives of compliance professionals. They do so by providing a solution that notifies users when regulatory changes occur while also, streamlining regulatory research through focused filters and search capabilities.  The company provides access to a comprehensive collection of highly curated financial regulatory content available on a single-view online dashboard.  Compliance.ai’s AI-based platform is focused on financial and insurance services topics, insights, and personalized notifications.  The SMART platform offers compliance professionals a fast and simple way to search, monitor, access, research, and track regulatory content.  

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