Financial Services Ireland

Thought Leadership

The Scope and Evolution of Compliance

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The nature of compliance in financial institutions is evolving, in response to the changing nature of the business and regulatory expectations. This presents both opportunities and challenges as the compliance function seeks to adjust and enhance its role.

Against a backdrop of significant conduct issues and major regulatory change, such as MiFID II, Market Abuse Regulation and the fourth and fifth Anti-Money Laundering Directives, as well as a growing number of codes of conduct, expectations for compliance functions have never been higher.

The availability of more complex data may allow compliance to adopt different ways of managing risks, for example, anticipating or predicting risk events more proactively. However, this is likely to result in broader demands and higher expectations from compliance’s stakeholders, with new skill sets required to maximise the resultant data and technology advances that ensue.

To address these challenges, our joint report with the Association for Financial Markets in Europe (AFME) considers the role of the compliance function within wholesale investment banks, and the potential challenges and changes it faces in its structure and approach.

The report also offers possible responses to these challenges, and discusses the optimum resource model for compliance.

For example:

  • There is an opportunity for compliance to transition from its traditional role into one that provides enhanced strategic advice to senior management. This includes increased oversight of 1st Line Control Function surveillance and testing as a 2nd Line Control Function, greater use of business data to analyse and provide insights to senior management on changing risks and controls, and a greater influence on the management of the regulatory risk framework as a whole.
  • Compliance will become more data and technology dependent as budget challenges and operating effectiveness encourage innovation-driven transformation. But, people and human judgement remain important.

There will continue to be significant debate about what the optimum resource model for compliance functions should be, given the challenges as well as the opportunities they face. If you have a question around compliance in your organisation, please do get in touch.

Thought Leaders

Lisa Kealy

Financial Services Markets Leader

Fergus McNally

Wealth and Asset Management, Sector Leader

Paul Traynor

FS Partner, Wealth & Asset Management Consulting Lead