Compliance Transformation

Compliance functions are increasingly in the spotlight for non-financial risk management failures. As the interface between the business and regulators, the compliance function is required at times to manage conflicting goals. On the one hand, compliance must meet ever-changing and more demanding regulatory expectations, which often differ across operational jurisdictions. On the other hand, there are internal pressures to reduce costs whilst managing these regulatory risks more effectively. Therefore, having a lean, efficient and effective compliance organisation is increasingly being seen as a competitive advantage among FSIs.

In order to achieve this, compliance functions must evolve to take on the role of oversight and challenge. Under the three lines of defence model, the business (first line) must assume greater ownership of the risks they take, whilst the compliance function (second line), looks to divert efforts from repetitive, manual tasks to important advisory services. As part of this role, compliance should use suitable tools and risk detection technologies to assist with addressing risks and ease the burden of manual controls. Moreover, the compliance functions will need to ensure that the policies and procedures within the first line of defence (1LoD) are effective and adhered to, through the targeted use of surveillance technologies. 

Compliance must also continue to take an active role in converting regulatory change into internal policies. This can be best done through a collaborative approach with 1LoD and the help of RegTech solutions. Once implemented, business functions must adhere to these policies under compliance supervision.