In the financial sector, the spotlight has recently intensified on non-financial misconduct, spurred by the Financial Conduct Authority’s (FCA) focused initiatives and investigations into issues like sexism, bullying, and discrimination.
The evolving regulatory landscape underscores the necessity for comprehensive record-keeping and advanced data analysis, stretching beyond the traditional bounds of financial wrongdoing to include non-financial misdemeanours.
Custodia, a RegTech platform that helps companies capture, secure and archive digital communication streams, recently delved into what the FCA’s latest developments mean for compliance teams.
The push towards a broader scope of compliance marks a significant shift from the historical focus on financial improprieties such as fraud, insider trading, and market manipulation, it said. Recent directives from UK regulators, demonstrated through consultation papers and surveys targeting the insurance industry and other financial services sectors, herald a new era of compliance. These measures aim to root out workplace behaviours detrimental to a positive culture and, ultimately, the integrity of the financial markets.
To align with these regulatory expectations, the expansion of record-keeping and data analysis is imperative. Compliance departments are now tasked with devising systems that not only capture but also scrutinize incidents of non-financial misconduct. This involves monitoring communication for inappropriate language, behaviours, and the misuse of non-disclosure agreements concerning such offences.
This expanded remit necessitates a significant enhancement of compliance departments’ capabilities, including the adoption of sophisticated tools and technologies and the training of personnel to manage a diverse range of data sources. To help firms meet this demand, Custodia’s CC1 solution, a comprehensive capture, validate, and archive service, ensures that compliance teams are equipped to tackle all forms of misconduct. The CC1 API facilitates the integration of advanced surveillance tools, which can pinpoint potential issues through the analysis of communication data, identifying use patterns of concern based on predefined criteria.
Moreover, the sensitive nature of non-financial misconduct data demands compliance processes that are respectful of privacy yet rigorous in investigation and reporting. Compliance must collaborate closely with human resources and other departments to establish holistic policies and procedures that address these issues effectively.
Adapting lexicons for compliance searches is another critical strategy for identifying non-financial misconduct efficiently. Compliance teams must continually refine their keyword and phrase lists to reflect the changing language surrounding misconduct, ensuring that surveillance tools remain effective across different cultural contexts. This adaptation is crucial for accurately identifying misconduct while avoiding the pitfalls of false positives, which could otherwise burden investigative efforts.
In conclusion, the regulatory push for greater oversight of non-financial misconduct within the financial services sector is a welcome development. While the expansion of compliance to include non-financial misconduct presents challenges, it also offers an opportunity for compliance departments to lead the charge in fostering a more inclusive and respectful workplace culture. By embracing CC1 technology and adapting internal strategies, compliance functions can make a significant contribution to the industry’s overarching goal of eradicating non-financial misconduct.
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