The role and function of the Compliance Officer
by Giorgos Stylianou
As mentioned in a previous post, there has recently been a dramatic increase in demand for specialists in regulatory compliance. This can be attributed to many reasons, namely companies’ risk aversion after the crisis, a change in the ethos of modern business, and probably a new wave of entrepreneurs that have learned from the mistakes of the past.
It is however argued that a huge role in this huge increase in demand and the advent of The Era of the Compliance Officer is the huge number of upcoming regulations that will govern the financial and professional services sector in the next few years. Regulatory regimes like MiFID II, Basel II, Financial Transaction Taxes, AML 4th Directive, Payment Services Directive II, Instant Payments, Data Protection, Insurance Standards, are all being implemented in 2017 and 2018, and companies need an army of people to take care of that. But the Compliance Officer is a role that is heavily misunderstood, even by colleagues in their own firm.
The role of the compliance function
The basic function that the compliance role does is to promote ethical conduct and compliance with rules, regulations and standard processes that govern how these organisations should conduct business. Staff in the compliance function must stay on top of the latest laws, regulations and business trends and should be able to translate these into requirements and procedures for the operation of the organization. Broadly speaking the following are the major roles within the compliance function.
- Develop and maintain the appropriate compliance culture
One of the most difficult roles of the compliance officer is to transform compliance from a burden to a benefit. A Culture of Compliance should be an integral part of the organization’s ethics and it is the role of the compliance officer to implement the elements of compliance that should be evident throughout the organization. By ensuring a correct implementation of such compliance elements, a correct compliance culture they can produce efficiencies, maintain consistency, improve reliability and assurance, and result in increased stakeholder confidence.
- Advise on regulatory issues
The Compliance officer is the regulatory expert of the firm, and it is their role to not only be up to date with all regulatory issues relevant to the sector they operate, but be able to identify potential threats of non-compliance and take measures to alleviate them. These threats can be from non-adherence to specific laws and regulations throughout the firm’s operations, from launching and marketing a new product, to employing new people and changing internal procedures. Regulated entities are especially prone to hefty fines in case of non-compliance, so this role is important for the firm’s profitability
- Monitoring
Compliance monitoring is a key component of any effective compliance function, as appropriate and focused feedback to all levels of the organisation comes from timely implementation of measures to become compliant with upcoming regulations. As mentioned before, especially in the financial services sector, the next year is filled with the transposition and implementation of relevant directives and regulations.
- Communicating
The Compliance Officer is the way the Regulator communicates with the firm. It is the Compliance Officer’s job to communicate all requirements emanating from the law to the firm so measures should be taken and changes to be made for the company’s compliance and adherence to this regime. At the same time, the compliance officer can also communicate the sector’s requests and requirements to the regulator, either directly or via questions and suggestions to upcoming laws and consultation papers.
- Handling Issues
It is their role to take action should issues arise, whether that is employees’ concerns on anti-money laundering suspicions for clients, or circulars issued by the regulator that affect the firm’s operations, or any issue that might leave the company vulnerable to sanctions and fines.
Who is up to the task?
The Compliance Function is generally internally facing, in that compliance officers do not interact with external clients, as their role is to support, educate and advise internal employees. In more senior roles, external facing duties include liaising with regulators in compliance and networking with other compliance officers in their industry to stay current with regulatory issues and leading practices.
Generally, being responsible for the compliance function is usually a tedious and stressful job. Successful Compliance Officers enjoy some similar characteristics:
- Patient and composed
- Have a strong sense of responsibility and making the company’s problems their own
- Extremely organised and able to strictly prioritise tasks
- Ability to control stress and pressure
- Ability to think outside the box and strong common sense and rationale, superb problem solving, analytical, and technical skills
- Very good business intuition
- Risk averse
Most importantly, the Compliance Officer should be highly trained, knowledgeable, and continually developing themselves. It is no coincidence that Compliance Officers that are employed by Investment Firms need to – by law – obtain training every year for their trade. Furthermore, starting next year, their professional competence and knowledge will also governed by the law, dictating their level of expertise.
The European Institute of Management and Finance, being the utmost specialists in the provision of training in the Finance and Professional Services sectors, offers a full range of training courses that cover the needs of all Compliance Officers, whether you are just joining the sector or if you are a hardened professional. The EIMF specialist trainers are professionals with many years’ experience; a comprehensive list of subjects can be found on the EIMF online calendar.
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Giorgos Stylianou is a Regulatory Compliance Expert for the Financial Services Sector, and the Programmes Manager of the European Institute of Management and Finance.