Rethinking compliance for creating value

Business development and compliance teams must understand that in the new world they are part of the same game, says our AML and KYC expert in his latest blog.

Too often in the recent years we have heard expressions like "it's impossible to get new business; our compliance is creating too many problems”. Business and compliance teams have to understand that in the new world they are part of the same game. Good compliance can help business development in getting good and profitable business - but the business and compliance teams need to understand each other from the beginning.

Compliance must comprehend that they do not exist if they don’t have the support of the people who get the clients. On the other hand, business people must understand that they will not stay in the market without a good internal control system.

How can we create confidence on this unclear aspect? In my view, creating only strict rules is not the solution; we need to have good understanding of the rules, proper policies and procedures and last but not least sensible education. The solution is always there: in the education. What better than to start working together before getting the clients? Together, both teams have to understand where the good business is located, and where the company has to head towards.

Contrary to common beliefs, the compliance department is one of the most important in maintaining a firm’s success, integrity and reputation. Accordingly, it is primordial to set up its strategy and organisation. Pre-compliance is the first stage and sets the process up with all elements needed to carry out the next two stages related to on-boarding the client and then post-compliance activity. The pre-compliance stage is about studying the market, collecting all information, searching, meeting with clients and understanding the common goals. The second move is to ensure compliance with all applicable laws, rules and regulations in monitoring trading activities, preventing conflicts of interests, anti-money laundering, and so on.

However, the work does not end here; post-compliance is just as important as the previous two steps. We are living in a difficult and competitive environment, where clients doing good business can rapidly change in perspective and become potential risks for the company. 

We can see how the extended scope of the fourth anti-money laundering and terrorist financing directive (4th AML Directive) - adopted on 20 April 2015 to update and improve the European Union framework for ensuring confidence in the the financial system as a whole - shows the inclusion of new cases such as tax crimes within the list of predicate offences to a money laundering.

The evolution of all this will need to be monitored properly, and cross-border activity will create some problems considering the 4th AML Directive does not provide for an harmonised definition of tax crimes. It will be incumbent on member states to define under national law which tax offence should amount to a predicate offence.

A lot of work is still to be done from both compliance people and the sector as a whole until they are accepted by the business people, but we are now travelling down a one-way road!

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