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The right support

11 December 2016 by Dean Curtis

The right support - read more

Banks must help staff with the SMR compliance workload, says Dean Curtis


The debate around effective culture has existed for a long time in the financial services industry. However, after the financial crisis the tone of that debate shifted. Having recognised the need for increased personal accountability and accepting that cultural change starts from the top, new regulations were implemented to alter the levels of individual liability.

Six months on from the Senior Managers Regime (SMR), it is clear that firms are taking this responsibility seriously. In fact, Andrew Bailey, CEO of the FCA, recently published an article broadly commending financial services firms for their efforts. Undoubtedly, expectations of banks’ powers over the actions of individuals are growing – as are the penalties for failure to comply. The

SMR is designed to help clarify and enforce individual accountability among those responsible for controls, aiming to end the age of irresponsibility for financial services firms.

The scope of the SMR is set to expand to cover non-executives, insurers and UK employees of overseas banks, and make prominent the whistleblowing services offered by the FCA and PRA. In short, it is now easier to hold individuals to account for poor practice and failing to flag problems, and easier for employees to raise concerns.

It is the role of banking leaders to set the tone they want to instil within their organisations. Sitting at the top of the chain of command, their actions provide an example for all to follow, and they are reliant on having strong middle management and teams to carry out their mandate and disseminate their message. A strong team provides an extended network of people throughout the organisation who are able to address front-line issues and who can act as a first line of defence to manage risks.

A degree of personal accountability, particularly within senior levels, is critical when pursuing the right business and regulatory outcomes – this helps to establish the correct ‘tone from the top’.

Banks therefore need to continue bolstering their leadership and compliance departments with well-trained professionals who are able to meet and maintain these best practice standards. That said, there is no silver bullet when it comes to changing an organisation’s culture and it takes time.

Inevitably, following an increase in personal liability, many competent professionals have been discouraged from following a career path in compliance. This problem is not restricted to new recruits, but is a concern for many already working in these roles.

There is strong demand for qualified compliance people across the world’s financial centres, giving experienced professionals new and well-remunerated career options in jurisdictions that do not subject them to criminal liability. This has created a skills gap in Western banks despite the supply-side demand and rising salaries. According to the LexisNexis 2015 Future Financial Crime Risks Report, 54% of compliance professionals would choose another career path if given the opportunity in light of increased personal liabilities.

Rendering individuals liable when a firm fails to meet regulatory standards also has the potential to create an excessively risk-adverse culture. Banks must therefore support their senior management to ensure they have a proper understanding of the risks they manage across the organisation.

By leveraging technology, risk analytics and reporting, bankers can access broader and more powerful management information and compliance intelligence to ensure the best decisions are made. With the correct information, banks will be able to efficiently evaluate customer risk, protect their employees and help to enhance the standard of compliance.

Proper oversight of the risks across the organisation is no easy task with changing, disparate information in various silos. Yet oversight enables fast, quality business decisions to be made and risks to be managed effectively.

The greater use of risk analytics is fundamental to raising compliance insight. These reports give senior managers access to the granular level of information they need to gain a holistic view of a customer’s risk and install agile, risk-based protocols that will raise the standard of compliance and offer a frictionless customer experience.

Although the SMR covers all areas of the business, compliance, governance and financial crime teams are feeling a heavy burden. In an environment where financial institutions in the UK have to comply with some conflicting regulations, these teams must develop a cohesive approach to manage their obligations. Those who fall under SMR require greater control to fulfil their responsibilities; a clearer understanding of the potential risks associated with compliance is vital to achieving this.

Dean Curtis is Managing Director at LexisNexis Risk Solutions UK

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