One of the main objectives of regulations is to lessen the likelihood of criminal activity within the financial system so that it is possible to prevent, detect and eradicate criminal abuse of the financial system. Companies in the financial industry need to follow the applicable laws and regulations and also protect themselves against being used by criminals for illegal transactions and activities. For examples companies need to monitor transactions to spot if they intend to finance illegal activities, and even terrorist organizations.
Thanks to the “global village” and increased cooperation and dealings between financial markets across the world there can now be more standardized regulations shared internationally. Consequently many nations now share laws in common with other countries making navigation of international regulations more complex. Companies need to remain informed of current legislation in jurisdictions where they operate and where they are required to comply with the laws and regulations. Not only should businesses be aware or the laws which apply to them but also of the consequences and impact that non-compliance.
Non-compliance can lead to serious consequences including legal claims, fines, penalties and sanctions brought against the company and its directors and executives. In addition to the financial damage non-compliance brings with it a heavy loss of reputation.
In addition to setting up compliance staff which runs the company’s corporate compliance program businesses also need to make sure that all employees are aware of the compliancy requirements. Compliance with laws and regulations need to be second nature and embedded in the fabric of the organization as a constant part of the corporate culture. With a dedicated compliance program a company can better manage compliance risk. This can be done in-house or by outsourcing to a company which regularly monitors compliance within your company insuring that your business is operating according to the laws and regulations. The in-house or outsourced compliance staff must ensure that any deviations from regulations are reported appropriately and compliance risk managed in accordance with the company’s objectives.
The compliance program, function, method or system could involve anything from one staff member, a section in the overall risk management department or an entire team. Depending on the size of the company the compliance function should be appropriately staffed. There may be local compliance officers in large companies; separate units dealing with specific compliance regulations or issues like financial crime, money laundering or prevention of terrorist financing.
No matter what the size of your company’s compliance function it will need to play an important role in the overall risk management of any financial service company.
Corporate compliance is not limited to implementing and insuring compliance with laws and regulations. Corporate compliance also covers fiduciary principles, client management, ethical standards, internal policies, contractual obligations and ethical conduct. Among the functions of corporate compliance programs there is implementation of compliance monitoring policies, management of customer complaints, anti-money laundering, monitoring client transactions, filing of regulation reports, reporting non-compliance appropriately, and staff training and receiving non-compliancy reports.
To determine what kind of corporate compliance program you need in your business ask yourself these questions:
- Which areas of your business activities are most prone to risk?
- Do you have an implemented anti-money laundering and risk manager program?
- Does your business have an active compliance policy and procedure in areas of risk?
- Do you need to report to authorities?
- What is the company risk?
- Has compliance been sufficiently embedded in your company culture?
- Is compliancy a regular part of company activities?
- How is compliance monitored and tested in your company?
- Does your company have a policy laying down the procedure and consequences of non-compliance?