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Determined Fraudsters And The Compliance Renaissance

Five key takeaways from the Star US User Conference

Well attended by our nationwide user base, participation in all the sessions at our 2018 US User Conference was robust and the interactions lively. Guest speakers provided unique insights into many topics of macro and micro concern to those in compliance. Star’s new CEO—Jennifer Sun—also took the stage to formally introduce herself and discuss where the company is now and where it’s headed. This, the first of two StarBlog posts inspired by the 2018 US User Conference, gives you five key takeaways.

“How and when are new hires first exposed to compliance?” Star kicked off Considering The Human Factor In Your Compliance Program with this incisive question. The responses were wide ranging. “We give our new hires 10 days to get critical information back to us,” said one compliance officer. “They’re notified via email.”

Another compliance officer was pointed in the fact he gets face-to-face with all new employees within the first few days of hire. “I want them to see me as a resource, a friendly figure to turn to when they have questions or concerns. And I want to establish that relationship as quickly as possible.” By session’s end, the consensus was that personal relationships matter as much as they ever did when it comes to building a culture of compliance, and that technology must be viewed as part of a bigger picture.

Another insight that emerged from Considering The Human Factor was that it’s not very realistic to think you can treat all employees the same when it comes to, say, ensuring certifications and attestations are completed on time. “When things are coming down to the wire,” said one STAR Platform user, “emails with stern warnings in red all-caps might be fine for the general employee population, but not necessarily for upper management.”

One Star client goes so far as to have a special team of “white glove” handlers for dealing with upper management compliance issues. “For our top level executives, if certs need to be completed and important deadlines are looming we make a friendly but firm phone call, or even pop into the office. ‘Listen,” I say, ‘this will only take you five minutes.’ I make a point of holding everyone in the firm, ultimately, to the same standard, though methods may vary as to how we get them there.”   

“A savvy and determined inside trader will always find a way around a compliance system—or any system—to do whatever she or he is bent on doing.” So said Dr. Alexander Stein, founder and managing principal at the psychodynamic management consulting firm Dolus Advisors, to an all-ears group of Star staff and clients at Monday’s Human Factor session.

Keying off that theme, a compliance officer offered the following: employees who ask you how this aspect or that aspect of compliance work could be gathering intelligence under the guise of innocent inquiry. While there are bumblers, then, there are also schemers. Again, Dr. Stein: “I differentiate between negligent insider trading and malicious insider trading. And there will always be both. I don’t advise people to be suspicious all the time, but in the financial sector being alert and skeptical are useful traits.” 

As previously stated, discussions at the Star US User Conference were lively, with some more lively than others. One compliance expert, known for his years of experience in the industry and big personality, kicked off Monday’s The Compliance Team Of The Future session with the following: “Who here thinks compliance has worked over the last two decades? One person? Okay. Any employee can do something wrong. And when emotions run high, cognition runs low. People get blinded by emotion.”

He then offered his solution, a mix of philosophy and practicality: “It’s our job as compliance officers to find the breadcrumbs. We’re ultimately investigators. Yes, the tech is getting there, and the data is already there, but you still have to have your head in the game. And when it comes to the tech, we need to get closer to real time tracking capabilities. By the time you receive a broker report—whether by feed, fax, or mail—an unacceptable amount of time has passed, in investigative terms.”

Happily, our Compliance Team Of The Future expert had more to offer on the future of financial compliance: “Right now, when you use an app to pay to park at a meter, the app talks to your bank, the bank confirms you are who you say you are, the bank authorizes payment, and then tells the parking app to complete the transaction. Then, the parking app sends out an email breaking everything down for you—almost instantaneously. Apps talking to apps. This is where compliance needs to go, and I believe it will.”

“Compliance officers will also need to become more like technology officers, while technology officers will need to become more like compliance officers,” he continued. “Tech will change compliance. And yes, some jobs will be lost. But most compliance professionals will be able to devote their time and energy to doing more productive compliance work, rather than just managing the data.”