Focus on compliance culture
THE BENEFITS OF FINANCIAL SERVICES REGULATION REMAIN AS CONTENTIOUS AS EVER – DESPITE IMPROVED INTERACTION BETWEEN REGULATORS AND MARKET PARTICIPANTS. PAUL GOLDEN REPORTS
W
hen Aidan Paddick, chair of the CISI International Regulation Forum, first became involved in compliance
in the late 1980s, it was seen as an add-on to the role of internal audit. “It started to become a stand-alone
function closely aligned with legal in the early to mid-1990s with heads of compliance reporting to general counsel,” he says. “In the early to middle part of the next decade it started to become more autonomous as issues such as conduct and ethics started to come to the fore.” This was a result of the global financial
crisis of 2007–8, which set into motion ongoing regulatory change and increased compliance demands, both of which continue to be big compliance challenges globally, according to the Thomson Reuters’ Cost of Compliance 2022 report. Further indicators for change in the
compliance sector include widespread digital transformation, a global pandemic, and an increased focus on firms’ culture and operational requirements, balanced with competing priorities “compounded by tightening budgets and potential shortages of skilled professionals”, says the report, concluding that for 2022, “it appears that at least some compliance functions are
50
expected to do more with less”. Just 35% of the 500 worldwide
respondents expect their compliance team to increase in size in 2022, a slight increase from 31% the previous year, while 50% predict an increase in their compliance expenditure compared to 52% the previous year. “Culture and conduct risks still require focus,” says the report, which notes that culture and conduct risk frameworks “were found to lack sufficient effectiveness to manage the many implications of the pandemic”. A focus on compliance culture is
important because, says David Moland, Chartered FCSI, former chair of the CISI Compliance Forum and head of financial crime and MLRO at Arbuthnot Latham, the changes and increased costs – “from self-regulation in the 1990s to principles- based regulation at the turn of the century and then back to a rules-based regime following the global financial crisis” – over the past 30 years have not necessarily resulted in better client outcomes. This point is taken up by Camille
Blackburn, chief compliance officer at Legal & General Investment Management, who says that principles-based regulation is easy to understand but difficult to enforce because it can mean different things to different people.
THE REVIEW SEPTEMBER 2022
// COMPLIANCE HAS BECOME MORE AUTONOMOUS OVER THE PAST 30 YEARS //
IMAGE: IKON/ALICE MOLLON
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