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Three Signs You May Not Be Running A Tight Compliance Ship

Is your compliance ship starting to take on water in these stormy seas of pandemic-induced market and economic turmoil? How would you even know for sure? Here are three things to keep a lookout for

Turbulent waters put ships to the test. A ship built to speed along safely through calm seas is going be under greater structural strain going the same speed in a storm. Risk of rupture is far higher. Currently, markets and the economy are as turbulent as they’ve been since the Financial Crisis, or even the Great Depression, but financial firms are speeding along and busy as ever—with compliance obligated to keep pace and make sure no cracks appear in any processes that might put the enterprise at risk.

In the spirit of helping you ensure safe, if not necessarily smooth, sailing in these stormy times, following are three signs to watch out for that may indicate you’re not running as tight a compliance ship as you thought you were.


Upon first inspection, this may seem a small thing. Sure, it’s a pain in the you-know-what to have to chase down employees at every level of the org chart to complete their certifications. And ultimately there can be regulatory repercussions for firms not having everyone’s signature on the dotted line by a certain date and time. But how exactly is this a sign your compliance ship is beginning to take on water?

The fact is, regulators more and more view certs completion as a general indicator for how well your firm’s compliance program is, or isn’t, performing overall. Regulators know the difficulty in getting to that 100% completion mark. They know a firm’s compliance officers must have a certain amount of determination to see this task through to the end. Thus their thinking is that if a firm is getting its certifications right, it’s likely getting the rest of its compliance program right.

The good news is, software has made this unenviable task more easily achievable than ever. A modern compliance platform can be used to send out automated reminder emails, set automated escalation points, and fully document your efforts and results. This makes for far less physical chasing in the chasing-down process—especially when your employees are working-from-home—but also helps you evidence your compliance to regulators. Everything related to your certs program is dutifully recorded in the platform, ready to show to an audit team.

It should also be relatively easy for a compliance platform to allow you to add extra alerts. And consider copying employee managers so they can pressure laggards to complete their certs. You could even arrange a competition, with the winners—teams that have completed their certs in the shortest amount of time—receiving a free lunch from the company or some firm swag.

From time to time, we come across senior leaders at big financial firms who boast proudly of having exceptionally low personal trading volumes, who then go on to say that, because of this, they have no need for automated compliance software. This is a common fallacy. What’s almost certainly happening is, there’s actually quite a high volume of personal trading going on but there’s no reliable way to capture it. This situation is more likely now than ever in the new normal of remote work. A recent study by Star showed that, overall, firms are reporting large increases in trade activity—on average three to four times more than normal, with some firms reporting five to six times more than normal.

The way to capture it, of course, is with a fully modern compliance platform, one built to make it convenient for employees to pre-clear trades and for compliance to get an accurate picture of exactly what’s going on in the firm when it comes to personal account dealing. But beyond the obvious—that sophisticated software programs automatically track potentially risky activity and catalogue every single employee trade—a fully modern compliance platform helps create what industrial and organizational psychologists call a culture of compliance.

Culture—whether you’re talking about corporate culture, national culture, family culture, etc.—is a mindset. When a culture becomes embedded it shapes behavior. It becomes the unconscious driver of activity. It can nudge people to do the right thing or wrong thing. So how do you embed a culture? To get people to do what you want them to do? To get them to make the right decision every time?

When it comes to compliance, one of the things you can do is put a system in place that helps people make the right decisions. With proper training, and an accompanying explanation that no one individual is being singled out for monitoring, that it’s a firm-wide expectation, a compliance platform that’s easy-to-use is the kind of risk control that’s perceived as fair, that builds trust, and that people come to expect to use on a regular basis. That is, at some point people stop thinking about using the platform and just use it. The culture has been embedded.

Gifts and entertainment spending is a part of doing business, of course. It’s expected in every industry, including finance. But not every industry is regulated as heavily as finance. And while G&E spending is likely lower now than it ever has been, there will eventually be a return to greater normalcy—with wining and dining and related activities back in the mix, and the need to capture that activity as important as ever. If your outward-facing teams aren’t pre-clearing or reporting their G&E spends as they’re making them—or if you’re only finding out about spends once credit card statements come out or expense reports come in—this is a sign your firm is facing more risk than it ought to, or has to.

This particular hole below the waterline is quite easily plugged, thankfully. A modern compliance platform should have the capability, somewhere in its suite of products, to allow employees to pre-clear their spends easily, and to receive automated approval or denial decisions quickly. Spend requests relating to specific individuals or companies can be automatically aggregated, to ensure limits for each client, supplier, or employee aren’t exceeded. And firms should be able to define pre-selected lists of companies and contacts for employees to choose from when making their gifts and entertainment spend requests. A system like this should also be able to leverage decision-making data from systems across your business, like expense systems and CRMs, with easy integrations.

Finally, consider the benefits a mobile app can bring. A good mobile app will allow employees to pre-clear G&E spends on-the-go. Such convenience means activity is more likely to be captured, lessening the chance something will be forgotten about. Activity also goes into the system immediately, increasing system accuracy. And a mobile app is especially useful now, in this remote-work environment. As already mentioned, personal trading is at an all-time high. Giving your employees the ability to submit trade requests, whether they’re in front of a computer or not, is a great way to help ensure trade activity is being logged. It also ensures approvals get back to employees quickly, so they can execute their trades before their pre-clearance window closes.

Putting better practices into place now will prepare you for the next storm that’s coming.