What Does Compliance Do?
Compliance may not be the first thing you think about when you think of big investment banks, asset managers, private equity firms or hedge funds, but it remains an important part of the operations of any financial institution.
Without a compliance team, a financial institution cannot operate at all and would be shut down by the relevant regulator, like the Financial Conduct Authority (FCA) in the UK or the Securities and Exchange Commission (SEC) in the US.
What are the key duties?
Some of the key duties that a Compliance Officer may undertake daily are listed below:
Fostering an ethical culture at the firm
Avoiding fines and other penalties
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 to staff
Answering ‘can we do x?’ questions
Conducting internal audits
Assisting with disciplinary proceedings
Reporting to the regulator
Making sure that advice considers business objectives
Compliance Officers’ jobs can be very stressful because they act as internal police. This raises obvious problems with conflicts between the Compliance Officer and their employer. For example, they may wish to be more rigorous in relation to a compliance project but come up against resistance from traders or the executive. To illustrate, here is a graph depicting what Chief Compliance Officers said in a survey to the International Compliance Association about what keeps them up at night:
The stress and conflicts inherent in the work, sometimes leads to high attrition rates for Compliance Officers who can no longer operate efficiently in a financial institution. In the recruitment market, this means that Compliance Officers are given a bit more latitude when explaining shorter stints at an organisation. Turnover is higher on average, relative to the legal profession.