Part of the Problem or Part of the Solution?

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One of the great things about compliance is that you get to assist licensees in creating and maintaining a suitable compliance framework. It is not just about meeting the regulatory requirements, part of the role is to also make a compliance framework that is suitable to also achieve the aims and objectives of the licensee’s business. I have worked as a compliance consultant, compliance officer and MLRO in the Regulated, Prescribed and Registered sectors of our financial services industry and each Licensee I worked for or provided advice to, was unique in its aims and objectives as were their products and services. For a Licensee to be successful in their business, aims and objectives as well as adherence to regulatory requirements, make up a bespoke compliance solution.

We are in an ever-changing business and regulatory climate, it’s not just the rules and the regulations that are changing but the approach the Commission takes in its supervision to Licensees. This leads to a real business problem for Directors in ensuring that their business meets the requirements and expectations of the Commission as well having to meet its own business aims and objectives. Compliance professionals can assist Licensees through their greater exposure to changes in industry practice and their exposure to the Commission and an understanding of the current supervision expectations. It’s really a no brainer having a compliance professional on tap and this will take away the worry of ensuring you are meeting the regulatory requirements and expectations while having a compliance framework that meets the aims and objectives of your business, or is it?

Having worked in many sectors of our financial services industry undertaking various roles to do with regulatory compliance and anti-money laundering and countering financing of terrorism does not mean that I am the font of all practical or theoretical knowledge in this area to be paid homage to and worshipped, I can assure you all I am not always right! Like everyone I am strong in some areas, adequate in others, and weak in a few (well maybe one or two). I always ensure that anything I undertake is something I can do well, and I believe it is refreshing to Directors when I turn round and tell them that what they are asking is out of my remit and refer them to compliance professional’s or experts who is more suitable. It is what compliance professionals and experts are there to provide isn’t it?

For compliance professionals contracts are their bread and butter.  This can lead them to grab everything that comes their way, with potentially their financial security coming at the expense of the quality of service and relations with a Licensee.  There is also the potential to obtain contracts for the financial security of the compliance professional rather than the financial best interest of the Licensee, leading to conflicts of interests.  I have previously advised Licensees to keep projects in-house due to the cost involved and more importantly that they were actually best placed to do the work themselves. It was great to be contacted later to be advised by the Licensee that they had decided that they were actually best placed to do the work and offered me a smaller contract which they did not have the expertise to undertake on their own.  Honesty means that Licensees will come back to you and also recommend your services, trust is a currency of the highest value.

Part of any compliance professional’s work is in writing and producing compliance documents and programmes to facilitate the Licensee’s compliance framework. It is all too easy for Licensees, who do not have the necessary compliance expertise in this area to unknowingly engage and pay for an all singing all dancing document that meets the regulatory requirements and some more, but won’t easily facilitate the achievement of the businesses aims and objectives. I once assisted a Licensee on review of the suitability of their compliance procedures that had been previously provided by a compliance professional. Their manual was at a very high level having a multitude of committees and quangos written into their procedures that would not be out-of-place in a global financial institution but totally unworkable for a firm that employed less than ten people locally and had a Board of six directors (inclusive of two employees). Though this document showed the theoretical prowess of the previous consultant, the manual was unworkable for the Licensee’s business and showed a lack of understanding of the regulatory framework. The Licensee had abandoned trying to follow the draconian requirements of this manual and had instead reverted to good industry practice, leading to the corporate governance headache of not following their own procedures. In this case the Licensee ended up paying twice to ensure that they had a suitable compliance procedures for their business.

Unfortunately there are compliance professionals out there who take on business they can’t service or do not have the expertise to manage effectively and/or facilitate adequately. There are compliance professionals who gold plate policies and procedures to impress their knowledge on the Licensee and obviously fail by not tailoring the policies and procedures to the business, leading to further costs being incurred by the Licensee. Unfortunately some compliance professionals negatively portray the Commission as a Vlad the Impaler archetype to scare Licensees into taking on unnecessary work due to potential misunderstanding of the rules or regulations or work the licensee would be best place to undertake themselves.

What can a Licensee do to minimise getting something that they do not require and ensure that they get the service they have paid for? It is all about doing your due diligence and I believe that the following points will be able to help a licensee.

  • Understand what knowledge and qualifications a compliance professional has.  They should be able to provide qualifications and a resume.
  • Get references or speak to previous customers of the compliance professional to get a feel of the suitability of the compliance consultant. The benefits of Guernsey is that it is quite easy to find out about people.
  • Talk to the compliance professional get a feel of their experience and knowledge, are they just about enhancing themselves, are they financially independent and are they interested in actually providing something that will enhance your business.
  • Is the compliance professional informing you as to potential or actual the regulatory issues or are they about scaring you into using their service.
  • Has the compliance professional got the capability and capacity? If it’s a firm is the actual person that will be undertaking work for you qualified, suitable and have the time?
  • Shop around with other compliance professional’s to see what they have to say about the work you need to be undertaken.

At the end of the day it is the Licensee and its Directors who are responsible for the suitability of their compliance framework and adherence to it, the Commission will hold them accountable for any failings regardless of who undertook the work. A compliance professional can be part of the problem if you do not do your due diligence on them or understand the needs of your business but, if you have done your research and you are aware of the requirements that you need to meet, they can definitely be part of the solution in achieving a suitable and sufficient compliance framework that meets the regulatory obligations, expectations and the business aims and objectives of the Licensee.

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