Exploring the personal qualities which help shape the most effective Compliance Officers
I met my first Compliance Officer in 1998. Both the industry and sector were new to me as an ex-Army Officer. Since then and for the next 22 years, I have interacted daily, met with and advised what must be well into the ‘000s of Compliance specialists. I am struck by how the traits, personalities, career experience and mindsets of Compliance Officers have evolved over the last two decades, and how much more visible and integral both their role and the function’s responsibility are within financial services firms.
To that end, I wanted to explore how Compliance Officers assess themselves on a peer-to-peer basis and to bolster this with some of my own observations from two decades of working together with Compliance functions. All to ultimately explore which personal qualities help shape the most effective Compliance Officers. Before we take a look, I would like to thank a number of senior management Compliance figures in the City who have been kind enough to take the time during lockdown to share their views and thoughts with me for this article.
The world of Compliance is a broad universe, which encompasses a wide range of disciplines and skill sets. Whether you are a Compliance officer in say investment banking, wealth management, retail banking, asset management, private equity or hedge funds and whether you work in an advisory capacity, a technical specialist role, conduct, surveillance, monitoring or work in a central Compliance team role, there are a number of essential traits you should demonstrate to be an effective Compliance officer. There are both elements which become more important as an individual takes on a more senior role in Compliance, and those relevant in other ways if one is working in a central team as opposed to a business advisory team.
From the research undertaken and my own experiences working on behalf of both Compliance clients and candidates since 1998; successful Compliance professionals will demonstrate these skills attributes and traits to a greater or lesser extent:
Know your business
Irrespective of the role you perform you must have a good understanding of the business you support. You must understand the products and services your company provides to its clients. You should understand how and where your business generates revenues and what the strategy is. A good understanding of the workings of the business you support is an essential requirement to be able to provide commercial and practical Compliance guidance.
- What are the main commercial drivers and objectives of the business?
- Are some parts experiencing performance difficulties, why and what are the possible consequences?
- Are some teams/individuals key to the business(es) and how are they performing?
- What are the conduct risks?
- What are the franchise/reputational risks?
Understand the purpose of the rules
Understanding rules and regulations is an obvious requirement of any Compliance role, but it is more nuanced than that. Sure, there are many rules that are formulaic and simply need to be followed, but many regulatory requirements are framed around principles, rules, and guidance, which require practical interpretation and good judgement. Understanding the regulatory objective behind a rule is essential to providing sensible Compliance guidance on how to comply. It is not simply black and white – good Compliance officers exercise good judgement. A commitment to improving the business by ensuring it works within the spirit, ethos and requirements of the regulatory environment, including where relevant, broad international developments, within which the business operates.
Collaborative approach to teamwork
In most Compliance roles, you are part of a team and need to leverage the expertise and skills sets of Compliance colleagues in other teams. For example, if you are a trading floor-based Compliance officer you will need the support from other technical specialists, policy experts and surveillance colleagues.
Understand and get along with all the people around you:
- Build relationships with Compliance colleagues based on teamwork (“walk, talk, email” in that order).
- “No surprises” – don’t let Compliance management and business/control partners get blindsided.
- Get to know the business people (again “walk, talk, email”).
- Get to know the control partners (and again “walk, talk, email”)
- Build mutual trust but remember you are part of a control function for the business – not part of the business team itself.
- Talk to business and control function contacts about business developments and challenges to build a sense of how the business is progressing and what challenges it is facing.
- Discuss with them how the regulatory environment is developing and changing.
Working in any control function requires a proactive approach. You need to build relationships with the employees you support and in turn, help educate and train them on their Compliance obligations. Whilst your role is to challenge and advise, you do need to be proactive and engaging while remembering that your role is to help control the business. Do not sit behind your desk – get out there, walk and talk, build the relationships. Think proactively, be an influencer, be visible, be part of their team – you are a business partner helping navigate the regulatory landscape. Knowledge of – and interest in – the regulatory environment goes without saying. Interest in the commercial environment is equally important as understanding the responsibilities of each of the three lines of defence.
Resilience and courage
Working in any control function requires resilience and courage. You must set the Compliance standards, enforce them, say ‘No’ when necessary to the business, deliver difficult messages and operate in pressurised situations. You must stand by your decisions and actions. Do not display doubt or weakness. Handle conflict with a cool head, assert your influence and show your knowledge. Remember that moral courage is a vital attribute.
Be assertive, display integrity, be inquisitive. Look for verbal and non-verbal indicators, do not ‘backdate’ and cite others’ failings, instead look ahead. Be charismatic, be a good listener, be tenacious, never overlook the detail and build that crucial respect.
- Ensure a personal commitment to good conduct.
- Be a good team player: with Compliance colleagues, with control partners, with the business.
- Adapt to new challenges, new businesses, new data sets, new tools and different organisational approaches.
- Enthusiasm for learning is crucial.
- Challenge colleagues (be it in the business and other control functions).
Understand the overall risk, regulatory and control environment
Compliance specialists must have a thorough understanding for the myriad of risks the business they support is confronting. Understand the regulatory environment and the risks, purpose of the requirements and how they may change. This is the foundation stone for a successful and effective Compliance officer, but it is no more than that. Compliance must have understanding and respect for:
- Financial performance controls.
- Credit and market risks.
- Operational risks and controls.
- Data controls.
- Legal risks.
Compliance must understand and apply the data and tools available – across the three lines of defence:
- IT systems.
- Manual processes and procedures.
The regulatory environment is ever-changing. Successful Compliance leaders embrace this change and recognise the forces at play, which impact on their function; be they social, economic, political or technological. This environment must be constantly scanned, and a Compliance Officer must have both knowledge and interest of the regulatory environment they work within:
- Know where competitor firms have demonstrated control failings and material breaches.
- Track heightened scrutiny by overseas regulators.
- Respect and understand the evolving of FinTech and RegTech space.
The regulatory knowledge is worth little if the Compliance officer doesn’t have the other skills and attributes.
Compliance is a well-remunerated, demanding and highly competitive control function to operate within. There are lots of bright, ambitious and talented ex-graduate programme employees climbing the Compliance career ladder and learning all the time from those above them. They must be a sponge and soak up as much advice and experience as they can from those who have been there when the proverbial balloon has gone up. All those interviewed for this article cited learning from Compliance incidents and other regulatory challenges that took place during their career, and how important it is to enable others to learn from these challenges and therefore recognise red flags.
I hope some of this article has been informative and indeed helpful, especially to those of you perhaps at earlier stages in your Compliance career. We will be following this article with one looking at what makes an effective anti-financial crime specialist.
A movie quote to conclude and from a character perhaps not known for Compliance but some wise words nevertheless:
“The most valuable commodity I know of is information”
Gordon Gekko, Wall Street, 1987