Compliance is often seen as the ‘demon’ within regulated entities – the department that stops you doing things, costs a lot of budget, doesn’t produce anything and was imposed on you by the regulators!
Well, if that is still the view, apart from being nonsense, it’s also inaccurate and totally unfair on the hardworking and dedicated people within the function. The truth of the matter is, that the compliance function only stops you doing things that would cause the company harm. It also makes you do things that will benefit the company in the long term. Whilst it also contributes much more to the business than it costs, due to the fines and sanctions it helps to avoid. For these reasons, integrating compliance into strategic decision making of regulated entities is so important.
Senior management does, and should, recognise the valuable and essential part that compliance plays in the business’ success. Which is why, increasingly, a compliance strategy must form an essential part of decision-making that drives the business forward. No 5-year plan should ever be formulated, within a regulated entity, without consideration of the role compliance will be playing.
How compliance isn’t a ‘blocker’, but can help drive the business forward
In the Financial Services (FinServs) sector, companies are scrambling in a very competitive environment to gain or retain their foothold in a dynamic market. If not kept in check, this can lead to bad habits forming: taking shortcuts, ignoring signals and trying to do business at any cost. The ‘cost’, however, can be high, if the regulator identifies errors or sloppy practices.
The role of compliance isn’t just to stop these bad habits forming, but to find better and more efficient ways of doing business that will satisfy the regulator. Every regulated entity has anti-money laundering (AML) obligations around due diligence (CDD), when performing their onboarding, whether that be consumer (KYC) or B2B (KYB). One of the key roles of compliance is to identify the best processes available to deliver these functions in the most efficient, effective and economic ways. By doing this they can provide protocols for the sales teams to follow, that will help to make their processes both safer and more efficient.
The days of following manual processes to verify identities are gradually receding into the past. There are still some notable exceptions to this, particularly amongst the more monolithic members of the FinServs community, who still struggle with multiple legacy systems that don’t talk to each other and fear the disruption that introducing automated software systems they imagine might bring. Sadly, that fear is imaginary, as modern, bespoke software systems cause little disruption, as most are hosted offsite and are managed through cloud-based portals.
Efficient processes from integrating compliance into strategic decision making
Conversely, regulated entities that have embraced the introduction of compliance automation to run their KYC/KYB programmes are benefitting hugely from them. For these forward-thinking companies, gone are the days of compliance CDD backlogs and customer disillusionment. Instead, processes are slick and effective, providing excellent customer service, ripe for repeat and incremental sales business. In addition, the sales team can concentrate on generating more sales. Whilst the compliance function only has to deal with queries that might need further investigation, based on their risk profile.
This level of automation also provides the opportunity to easily deliver ongoing monitoring and remediation. These two areas continue to cause headaches within the compliance function if delivered manually. Data can go out of date at any time and the importance in monitoring and remediation is to recognise what has changed and understand how those changes may affect the customer’s relationship with you. It could be something trivial that has no bearing on their situation, but it could also be something significant, or unusual, which may require further clarification or verification.
Giving the compliance function the right tools to keep yourself informed is important, because, in this way, they can ensure that your systems and processes are running smoothly. They can also spot situations developing, before they become a problem.
Putting your compliance strategy at the heart of your business
One of the key functions of any company board is to ensure the continued safety of the organisation against outside threats. The key threat for any regulated entity is attacks by criminals who see them as a vehicle for laundering their ill-gotten gains. So, compliance has to be front and centre of any planning strategy.
Recognising the positive contribution of the compliance function is the first step. An extensive compliance strategy can both stop a business losing money, as well as helping it to make money, by verifying and updating customer data. In addition, it can also provide valuable customer intelligence to the rest of the business, which can enable it to derive more income and profit from the customer base.
Automated software platforms don’t just clean and verify data, they also provide a lot of accurate data for modelling, which can enhance a business’ sales and marketing model. By using this verified data, a company can target customers more accurately for upsell and cross-sell opportunities, contributing hugely to marketing and sales intelligence and influencing marketing strategy.
In this way, the resource and budget put behind the compliance function, isn’t just put down to an expense to block negative actions but can be seen as a positive catalyst for driving business intelligence and informing sales.
A fully rounded compliance strategy to support business growth, safely
The challenges faced by the compliance team are severe and increasing, within any regulated entity. These challenges, if not met face on, can bring both the team and the company to its knees. By recognising the functions, challenges and needs, however, and resourcing appropriately, meeting those challenges can bring huge benefits to the company, in terms of morale, efficiency and cost-savings, as well as a positive influence on sales and marketing.
Looked at in this way, providing compliance with the right tools, helps to complete the circle and make the company a more rounded and complete business.
Integrated compliance into the strategic decision making of the business
The benefits of integrating the compliance strategy into the decision making of the wider business is obvious, but there are significant challenges when it comes to reality. With a trusted technology partner in compliance solutions, and by rationalising data, processes and systems, businesses can achieve a true dynamic integration of compliance and strategy to gain valuable business insight and growth.