Compliance in Responsibilities and Resourcing E-Money Institution

Introduction

As the new head of compliance for the E-Money Institution, to tackle the various issues that has previously affected this organisation’s relationship between its compliance function and the rest of the business, there is need to understand the following: First, as a manger, there is need to understand the key relationships which compliance functions need to develop in the organisation, why these relationships should be developed and the potential issues which will arise if the relationships between the compliance function and the rest of the business are not effective. Secondly, the new compliance head need to understand the main financial crime risks, why they are the main risks and how such risks can be monitored and mitigated.

Key Relationships between Compliance Functions and a Firm

As the new head of compliance to E-Money Institution, it is important to understand that one crucial function of compliance is ensuring there is an excellent customer experience. As the new head of compliance, it is crucial to understand how the organisation’s compliance approach currently being used affects customers’ experiences to maintain a good relationship with them Like Noe et al. (2017) points out, Customer experience is an accumulation of each interaction by a customer with the business, at every touch-point and comprises the rationale and emotional factors which combine to develop the whole impression about an organisation and a good impression from the customers is what the organisation needs.

Additionally, as the new head, it is important to comprehend that risk management and fragmentary compliance systems result in rigid, complex business processes. Therefore, this type of compliance should be avoided as it can lead to delays in the delivery of services as well as contribute to service or product complexity that is an antithesis of pleasurable or good experiences for customers. The new compliance head ought to understand that simplicity is the key trait to good customer experience and that customers need to access information and services when they want to and through their channel of choice.

The first thing that should be done to establish a good relationship with customers through compliance is to avoid broken systems of compliance which slow down, inconveniences or restricts its customers as this will cause a lack of loyalty and trust in the organisational-customer relationship rather than nurturing convenience and reliability that generates satisfied and loyal customers who add to a firm’s long-term success in the market. The new compliance head should be aware of the regulations and complexities that hinder them from meeting customer expectations as well as the fragmented system of compliance that adversely affect the entire business initiatives.

As recommended by Kroes, Subramanian, and Subramanyam (2012), the new compliance head should develop a holistic and systematic approach of compliance across the entire organisation that leads to a good customer-business relationship. Another relationship the new compliance head should give a critical thought to and establish is that between the compliance staff and the business. Establishing this type of relationship needs forward thinking as well as a thorough shift in attitude to bring the compliance staff into the company’s operations. The poor working relationship that was previously seen in the organisation could have been as a result of a barricade between the institution and the compliance staff, which affected the effectiveness of the firm’s compliance program tremendously.

The new compliance head should bring back the compliance staff to help it become successful. Incorporating the compliance staff into the operations of the institution and making them work together with other employees for instance those working in the human resource department will eventually lead to value addition (Stafford, 2002). As a new compliance head, it is prudent to keep in mind that in the modern global economy, a business can have a competitive edge when they integrate compliance issues within their business equation. Therefore, to accomplish compliance, she will need its compliance staff to have interpersonal skills.

Furthermore, the compliance staffs needs to be able to listen to and relate with others to advance the organisation’s compliance program (Malloy, 2003). Moreover, the new compliance head should also align other members of the company’s senior management to the firm’s compliance objectives especially the tone these individuals set for the firm’s compliance plans. The new compliance leader should always remember that when the senior management gives priority for the compliance team to show its capacity to operate with the business, the compliance message will get communicated (Padgett and Shabbir, 2005).

Actions to Improve Compliance Function in the Firm

Enforcing interaction and proper communication compliance

The new compliance head need to create an approach that enforces positive interaction and proper communication within the business. This kind of interaction and communication will be possible with the help of other department heads such as the Human Resource leaders who can play a significant role in communicating compliance efforts. In this regard, each new employee will need to be trained in the company’s policies as well as the existing workers must be kept aware of the same guidelines.

The head of compliance should however keep in mind that, it is not easy to have communication compliance in the organisation and to achieve success in this program needs sound policies and guidelines in place to start. Moreover, there is a need for effective and consistent communication. Together with the new compliance head, other departmental leaders especially the Human resource managers should take the lead in instilling this idea across the firm by using multiple channels of communication (Kirchler, Hoelzl and Wahl, 2008).

These leaders will need a message that is customised carefully to reach the targeted audience by finding the relevant mix of channels and messages for every employee, for example, using formal meetings to pass compliance message or using bulletin or newsletters to reach all employees about matters of compliance (Willson and McNamara, 1982). The firm’s top compliance leaders thus needs to have a list of all the communication channels at their disposal and begin sending targeted messages to its internal audiences. The leader also needs to remain accessible and consistent and to keep in mind that loading employees with policies might make them less likely to adhere to or retain information about compliance. Therefore, the compliance manager needs to keep things short and straightforward by breaking messages down to smaller parts and passing them along gradually over a specific period (Hulka et al., 1976).

For example, rather than devoting an entire newsletter to information about compliance issues like it was previously done, the compliance manager can give the human resource department a monthly column where they can raise awareness about compliance and remain consistent regarding compliance-linked messages. Like Davis (1968) claims, establishing an efficient plan of communication compliance is a significant part of a company’s compliance efforts. Therefore, this new leader should understand that it is possible to have the whole employees in lockstep when the compliance requirements and needs are consistent.

Moreover, the new E-money Institution compliance leader should designate an organisation point person that will manage the interaction between regulators and the business. This person should be a member of the compliance or legal department who when the regulators need to conduct an inquiry or exam, he or she will conduct a review of the evaluation’s requirements and develop a plan of response. Moreover, he or she will be involved in the inquiry process to ensure that the whole process goes smoothly. Borrowing from the advice by Puhakainen and Siponen (2010), it remains imperative for a compliance head to maintain a good relationship between the regulators by being organised and responsive and establishing clear response protocols.

Re-defining the function’s roles

The new head of compliance should re-define the responsibilities and roles within the department of compliance. This should include the responsibilities of the firm’s stakeholders in other departments that carry out business activities that could affect compliance. Depending on the risk, size and structure of the firm, reporting lines need to be structured appropriately to reduce the likelihood of conflict of the stakeholder’s interests.

Regardless of the firm’s structure, all its employees need a clear understanding of their responsibilities to ensure they all remain compliant with the FCA requirements. For instance, the leader should promote for best practise where workers who know of or suspects a compliance violation or issue to report their concerns to the individual who, they should report to directly. As it is argued by Rossi (2010), it is necessary that an organisation’s compliance department should be included simultaneously in any of such reporting to make sure the issue is appropriately addressed by an appropriate person or department.

Part 2: Financial Crime Prevention

The Main Financial Crime Risks

Financial crime is a reputational, monetary act or an attempt made against a corporation, an individual, a financial service firm or a government by an external or internal agent to manipulate, circumvent existing rules, defraud or steal (Raine et al., 1994). The chief of the compliance department within E-Money Institution need to know the key financial risks which their companies might experience. The first risk she should be aware of is Criminal acts which consist of real financial crimes and illegal acts like account takeover, illegal employee activity, insider trading, market manipulation and terrorist funding.

Another category of financial crime risk involve monitoring and compliance crime risks which include activities like sanctions and trading compliance, Know Your Customer requirements and suspicious monitoring activity that is driven typically by rules which are perceived as ‘just the cost of conducting business.’ Another category of risk the compliance leader should keep an eye on is intangible impacts or softer impacts including direct prevention impacts, the burden on internal activities or processes and the likely adverse effects such as extra resources to help support examinations or timely filings of regulation, increased need for data storage and the expense of enforcing supervisory or audit procedures. Like Taylor and Mayhew (2002) recommends, the leader should understand that usually, these softer impacts or opportunity costs are avoided and not calculated among the total incurred costs in a company despite being important, which is illegal.

Monitoring of Financial Crime Risks

To the new compliance head, it is crucial to know how to monitor financial crime risks to avoid their negative effects on the firm or on their customers. The leader should understand that these risks usually occur in faces and therefore need appropriate supervision mechanisms in place. The mechanism put in place should be able to detect the first phase in the financial crime risk lifecycle which are threats which are yet to affect an institution (Choo, 2008). Here, the activities and programs which are suspiciously non-compliant should be dealt with before becoming a problem. Monitoring at this level will require a lot of insight and resources as well as a balance between risky activities and legitimate activities.

Secondly, the new head of compliance will need to come up with strategies that can detect risks. Risk detection is the second category which deals with the next phase of financial crime risks and consists of finding and responding to on-going or active threats. The established monitoring systems need to be accurate and quick to stop an offence or suffering the impacts of compliance violation, data or financial loss or huge customer disruptions. In this category, the compliance department will need a myriad of sensors and systems for certain events and behaviours that can expose financial crime activities.

Like McDowell and Novis (2001) says, every business needs a model which can detect new risk patterns and which can allow understanding of vulnerabilities and the nature of these threats where they can easily separate anomalies or low-risk activities from the suspicious ones. With such monitoring systems, these firms will avoid overloading its employees with numerous alerts and disrupting customer experience unnecessarily.

Lastly, the new compliance head will need to adopt systems that can investigate risks. By investigating risks, the compliance analysts will be able to deal with the highest incidents or risks by taking quick action before significantly big issues emerge. The head of the compliance department will also need to keep all supervisors and managers aware of activities within the firm and when they are happening. Furthermore, workflow and processes where the analysts consider every incident similarly and resolving issues in the shortest time possible will be necessary.

Lastly, the compliance head need to streamline the activities related to the solutions they have developed to enhance problem-solving and decrease the overall costs incurred in solving these problems (Chaikin, 2009). These can be achieved by developing technology and processes which automate low-risk actions as well as offer insight on complex issues and suspicious incidents to the human investigators in the compliance department. This nee head of compliance should understand that managing financial risks has the potential to eliminate significant costs of operation and help avoid artificial barriers which exist between various information silos. Moreover, the knowledge about the stages of a financial crime risk, the capacity to develop skills and efficient strategies which they develop can help E-Money develop a comprehensive and effective management of financial crime risk program.

In conclusion, the new compliance head should adopt a holistic approach towards financial crime risk management to make their company become transparent as well as have a greater view of the risks associated with their financial systems and data channels, disparate groups and silos, which is essential in finding on-going threats or potential risks to the business. Furthermore, with an end-to-end strategy, detecting, preventing as well as investigating incidents of financial crime before they take place and affect a company and its customers will become possible.

References

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