Regulatory compliance has become a dreadful task for banks after regulators across the globe set stricter norms in the aftermath of the 2008 financial crisis in an effort to prevent financial crimes such as money laundering. Rules have been changed to make a bank a co-conspirator susceptible to litigation if it willfully refrains from filing a SAR on a client and benefits from that client’s actions. In fear of huge fines and litigation expenses, banks have started aggressively hiring compliance personnel, who are supposed to make sure that the business is conducted in full compliance with local and international laws and regulations.
A prevalent misconception about the compliance officer’s job is that it is about risk. Risk points to where problems might be, whereas compliance programs go beyond risk and are actually intended at preventing, investigating and resolving issues. In this era of stringent regulatory norms, compliance officers are supposed to go beyond their traditional job description of handling risk. The wider roles of compliance officers in an organization are discussed below.
Information management and reporting: An area to be handled with care
Internal and external reporting forms an essential part of the compliance task. Effective management of critical information can keep a business compliant and risk-aware. In turn, poor management of information can lead to regulatory hurdles, including enforcement action. At the same time, compliance officers must ensure that the risk and compliance management information at hand is of high quality and backed with reliable sources to take up that to senior management and then to regulators with consistency and clarity. Information management is critical to any business as it functions as evidence in front of regulators, explaining it has done the right things in the right ways.
Know-how of new and emerging financial crimes: Prevention is better than cure
The way that banks managed money laundering, KYC, sanctions list, PEPs and ultimate beneficial ownership proved ineffective following the Panama Papers revelations. Some banks have later created separate functions or departments to manage these risks in a better manner. However, it is the duty of a compliance officer or team to have a unified view of financial crimes to prevent them. They should have the required knowledge of how criminals are making use of loopholes in compliance systems to avoid detection. For example, structuring or smurfing is a common technique used by money launderers to cheat compliance systems, especially rules-based systems. Here, criminals bifurcate what would otherwise be a large financial transaction into a series of smaller transactions, typically over a long period of time, to avoid scrutiny by regulators and law enforcement. Each of the smaller transactions is executed in an amount below some statutory limit that normally does not require a financial institution to file a report with a government agency. Compliance officers should undertake periodic financial crime risk assessments, highlight risk areas and evolve remedial plans for the organization.
Staying Update With Technology: The Need of the Hour
While compliance officers need not be technical experts, they need to be well aware of the technological developments and innovations happening in the industry. There are sophisticated financial crime cells that can develop schemes, the identification of which may not be possible with human intelligence or rules-based compliance solutions. Modern technologies such as artificial intelligence and machine learning can bring more efficiency and effectiveness to compliance functions and ensure the sustainability of compliance programs. Compliance officers should have the required knowledge about the functioning of these modern technologies. A number of financial regulators, such as FinCEN in the US and MAS in Singapore, are encouraging financial institutions to test these new technologies these days.
While it has become essential to have a compliance management system in place at financial institutions, the role of a compliance officer in these institutions has become critical. Now, the role of a compliance officer stretches beyond risk management and involves process management, information management and continuous learning and skill enhancement. Smart technologies such as those provided by Tookitaki can make their lives and work easier with tools for automation, effective work assignment, decision making and information management and reporting, along with significantly reduced risk.
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