Ethics and compliance programmes are the biggest revolution in corporate governance to have ever occurred, according to a recent panel.
This revelation came during a webinar – Future of policy and compliance management – which consisted of speakers from Clausematch, Fenergo, Roostify and The Volkov Law Group.
Rachel Woolley, Fenergo global director of financial crime, kicked off the panel by commenting on the push from US and UK regulators, such as the Department of Justice, on embedding compliance as part of the DNA of a firm. Woolley asked the speakers, what this means.
Roostify senior director of regulatory compliance Doreen Ghusar was first to answer. Ghusar stated that financial institutions are operating in a dynamic market that is influenced by a raft of factors, whether it is consolidation of the market, emerging technology or so much more. To maintain profitability and compliance, they have to continuously assess and modify products. This includes having an awareness of compliance developments and proactively addressing changes when they take place.
However, monitoring all these changes and adapting the product causes risk. If a financial institution wants to address these risks, they need a sound compliance management system that is integrated within the risk management approach. Ghusar said, “Ultimately, compliance should be weaved in the daily routine of management.”
Clausematch CEO and founder Evgeny Likhoded echoed this, emphasising the need of financial institutions having a strong culture of compliance in their daily lives.
He said, “I think we can all agree a lot of banks have failed at compliance in many aspects.” The reason for this is because institutions typically have a very static programme for their compliance. They are enforced via technical controls or operation controls that are tested in a period of time. However, regulators want compliance to be much more dynamic.
Likhoded added, “Compliance needs to be part of the culture and DNA of the organisation and that comes from the top.” He went on to state that firms need to implement technology solutions with a cultural enforcement from the top of the business. There also needs to be daily emphasis on compliance. People are more likely to change behaviour with regular nudges or questioning, compared to an annual training session where most people forget everything by the next morning.
This shift to embedded compliance and a change in culture is happening and will be crucial for financial institutions in the future. Volkov Law Group CEO Michael Volkov said, “This has been the culmination of a movement of over 20 years. We have seen aggressive enforcement coupled with demands for better compliance programmes and a commitment to ethics.”
He explained that the change in culture and improved risk management have come together to put ethics and technology at the centre of compliance. This is becoming a core part of how firms operate. “This is the biggest revolution in corporate governance that has ever occurred – I say that because stakeholders are demanding it. I call it the currency of business now as you better have a robust ethics and compliance programme that is not just paper or a set of rules, but it is demonstrated in the activity of every individual every day.”
He continued to state that this is only the beginning, with the Biden administration preparing to increase demands of compliance even more.
Another interesting thought voiced at the webinar was that the time has definitely come to “kill the spreadsheets” and move to dynamic compliance tools.
