The interview: Martin Moloney

Since taking over as Director General of the Jersey Financial Services Commission earlier this year, Martin Moloney has been in listening mode. Now, he’s ready to engage with the island’s financial services community in a mutually constructive way – He calls it ‘smart regulation’

What’s your background and how did you get to where you are now?

My father and grandfather worked in banking, so banking was in my blood as a young man. I started my career in the private sector, working in banking in London, but I got an offer of a job in the Irish civil service and it was quite a hard choice to make because it involved cutting my salary in half and moving back to Ireland. 

I decided to go back and it was at that point that I realised that I was naturally a public servant. I have spent most of my career since trying to build my capacity as a professional public servant and that’s very much what I see myself as. 

I worked for a long time in the Irish Department of Finance and then in Ireland’s financial regulator. I am very much a regulator’s regulator at this point.

What appealed to you about being a public servant versus working in the private sector?

I hope it doesn’t sound in any way pompous, but there is something about working for everyone, for the community at large, that is quite assuring. The work is also really challenging because, by contrast with a lot of private sector roles, in the public sector you are asked to do a lot of different things and combine them together, so you get involved in many different types of work and build up a lot of different skills. 

For example, my original university course was in history and philosophy but I ended up subsequently studying law and economics as part of my personal development. That was essential for the kind of complex work you do as a regulator.

You joined the Jersey Financial Services Commission (JFSC) earlier this year. In a nutshell, could you describe what the JFSC does?

Putting it very simply, we try to make sure that financial firms don’t fall into low standards of behaviour. We check the quality of what financial services firms do and make sure their standards are high. We can’t, of course, guarantee high standards; it’s a very complex industry and there is a huge amount of transactions going on, but we try to find ways to encourage and support industry to do a high-quality job.  

What excited you about the opportunity to come to oversee regulation in Jersey – a much smaller jurisdiction than Ireland?

My last role actually was very global in character, but it was also a very focused role in the sense that I specialised in liquidity and innovation and how regulators should deal with those issues. 

This job is very diverse in terms of the themes I have to deal with and, although it’s a smaller jurisdiction, Jersey has a really strong reputation for solid regulation. I’ve been very excited and motivated by the trust and responsibility I’ve been given – that trust focuses the mind and really makes you determined to do your best for the people who’ve placed that trust in you.

On your appointment, your vision was for a public-service based, technologically ambitious and team-focused approach to financial regulation. Why did you want to focus on these areas in particular?

We all have to recognise that organisations have become really complex internally and co-ordinating people within organisations has become a key challenge. We all have to be more aware and have more conversations and discussions inside organisations about how we do things. 

This feeds into the agenda of inclusion and diversity – which is an issue I’m very keen about because organisations need to be able to ensure that their teams are working efficiently. 

I strongly feel that when teams work well together, they massively outperform less well functioning teams. So anything you can do in an organisation to focus on that – and get people to be aware of the things they do, often by accident, that exclude people and/or underuse people’s abilities – is really important in terms of us delivering as a regulator and being cost-effective.  

The second aspect you mentioned, which is important, is that everyone can see all around them the growth of fintech and the changing significance of technology in the financial services sector. If the regulator doesn’t keep up with that, and doesn’t even get ahead of it, then the quality of regulation will fall and that’s something we need to call out very clearly as a regulator.

Do you feel you’ve been able to make progress in achieving that vision?

The JFSC is performing really well in a very challenging environment, and the pace of change that the organisation is facing is really intense. What I have started to do here is have discussions and assessments around where we need to go in order to be able to respond well to that pace of change. So, yes, I would say we’ve made great progress.

What’s driving that intense pace of change?

First, I’ve already mentioned the technology. Second, we are still dealing with a lot of the consequences from the financial crisis; a huge raft of new regulations has been brought in, but our ability to effectively supervise industry compliance with those obligations is something we still need to work on and get really good at. 

We’re also living in an increasingly uncertain world. The way I think about that is we don’t know when a storm is coming and we don’t know what its character will be, but now is the time to invest and prepare for that rather than wait for it to hit us.

What’s your strategy for tackling these kinds of challenges?

We’re in the middle of a very intense debate internally around that. We will be announcing our strategy at the beginning of next year and we want to have really strong engagement internally, talk to industry in advance of that and get what we want on board in terms of support for our approach.

Where can we expect the JFSC to focus its efforts during the next period?

As an organisation, we have to ensure that we are resilient and that we can deal with change. We have to ensure that we have the organisational and financial strength we need to do our job. Money spent on financial regulation from the point of view of Jersey is money well invested because the financial sector is so important for the island. So that is definitely going to be an important feature for the next period.  

The quality of supervision and making sure we’re able to supervise an increasingly technological environment will be another priority for next year. The third aspect is the importance of pivoting to a focus on the quality of our controls here in Jersey against financial crime. 

The external environment is increasingly risky in that regard. We have a good record of making sure that we are among the best in the world at this.

Which aspects of financial crime are you particularly concerned about?

Financial grooming is a big concern, but there are other areas – around money laundering, in particular – where, I’m glad to say, Jersey’s record is really strong. But the way in which people attempt to do money laundering is constantly changing and we have to be assured that we have the systems to keep up with those changes. For example, we have to make sure Jersey is well placed to deal with risks such as cybercrime.

How widespread is financial grooming within Jersey and how is the JFSC helping to tackle it?

The cases I’ve come across are, frankly, deeply disturbing. You often see elderly people whose savings have been taken and, unlike younger people, they haven’t got the capacity to go back into the workforce and rebuild their financial position. So the harm that has been done will stay with them for the rest of their lives. Preying on the vulnerable is a really obnoxious and objectionable type of crime; we need to talk about it and raise awareness.   

There is a problem, however, which I want to recognise up front. Financial services regulation is not designed to protect people against this type of financial crime. One thing people should not do is assume that they are safe because a financial adviser comes from a firm with a licence from the JFSC.

The vast majority of advisers we authorise are entirely honest and decent people doing a good job. But occasionally someone can get through the system through lies and deception and they can do huge harm unless people are really aware of the risks. People are the best guardians of their own money, so they need to be aware of these risks and we will do anything we can to help raise that awareness.

You’ve called for the establishment of an investor compensation scheme, but are you disappointed that industry hasn’t really engaged with the idea?

If I was working in industry, I would be cautious about this and would want to know what it actually means for me. That’s fair enough. But it’s important for us to be honest and tell Jersey the truth. 

From where we sit as the regulator, it’s not a great idea that Jersey does not have an investor compensation scheme. If you look at the way the investment business is going, with increasing amounts online, you don’t want to get yourself into a position as a sector where you are uncompetitive compared with online services. 

One thing that might really damage people’s faith in the local industry is exactly the kinds of behaviours that we’ve just been talking about. So the Jersey financial services sector, particularly the investment advisers, should think carefully about the possible merits and benefits for themselves of a well-proportioned and not overly costly but well-structured investment compensation scheme.

How would you assess the health of the JFSC’s relationship with the financial services community on the island?

I have certainly found that the local industry is up for engagement, conversation and for reviewing and testing where we are in relation to various issues. There are a number of initiatives under way around trying to ensure that industry’s voice gets heard within the JFSC. 

It’s very important to the style of regulation that we do here in Jersey that we listen very carefully to the messages coming from industry. We have to form our own judgement in the end, but it has to be an informed judgement.

Do you think that the JFSC hasn’t perhaps listened as closely to industry as it should have in the past?

I think you have to constantly renew what you’re doing. You may have established mechanisms for consultation with industry, but you always have to go back and ask, particularly when a new person comes on board, how well is that working? 

Styles change over time, too. My style is very much to say that my door is open. I have turned down very few invitations from industry to meet or talk to them – I’m very open to those kind of discussions. 

One of the most important skills when you join an organisation in my position is the ability to listen. To listen carefully, take notes, take them away, reflect on them, and try to build a picture of everything you hear in order to keep being agile in responding to the changing environment.

You’ve talked about using ‘smart regulation’ to maintain and protect Jersey’s reputation as a well-regulated jurisdiction. What is smart regulation?

It’s about us all seeing our mutual dependence on each other here in Jersey. There’s always a temptation in all walks of life to see our own interests narrowly, but if we can see our interests broadly, we will usually do better. 

Jersey is a tight-knit community. It potentially has a competitive advantage compared with larger jurisdictions if we can turn those tight-knit relationships into a smart approach for achieving high-quality and efficient regulation.  

It’s a bit like a football team. If the people who are off the ball are constantly paying attention to how they can help the person who has the ball, then that’s a well-formed football team and they will work well together. Similarly, if I can make my problems as a regulator industry’s problems, and if I can take on some of the burden of helping industry with its problems, then Jersey becomes a distinctive location with a distinctive culture and a distinctive competitive advantage. 

I don’t pretend that that’s easy.  Naturally, we all tend to look at things from our own point of view and it’s hard to actually share the other person’s point of view to figure out a solution that works for everybody.  
  
How can you help Jersey’s financial services community move towards that approach?

The cost of compliance for businesses has risen over recent years. I’m happy to put that issue on the table and to try and help industry to control those costs.

But, by the same token, if I’m finding that there are weaknesses in the quality of outcomes that are being delivered by financial services firms in terms of their compliance, risk management and the quality of the services they provide to their customers, I would hope that industry would not see that just as a problem that I have to deal with, but a problem that they have to deal with too.

Are you getting much enthusiasm from industry for the greater collaboration and co-operation you’re talking about?

They get it in principle. In practice, we all are subject to constraints: various legal obligations that I have to meet and various budgetary controls and commercial pressures that they have to meet. So I don’t want to be naïve about this and suggest this is all easy. It’s not. But in principle, I think people are encouraged and enthused by being willing to put those issues on the table, discuss them and see what progress we can make.

Your predecessor stepped down for reasons of stress and risk of burnout – an issue he was very open about. In light of this, going forward, how does the JFSC plan to help employees deal with these pressures? 

It’s a really important issue and it is definitely something where we have a very active approach to supporting our staff through an employee assistance programme and a stress and wellbeing policy. 

But one of the things that has struck me since I came to the JFSC is that the staff here are a caring bunch. There’s a lot of laughter around the office. People get on well together. If they see each other having problems, they rush to help and that’s one of the great things about coming to work here. 

It’s a really positive culture in this organisation, where there’s recognition that people sometimes can have problems and we need to help each other. If the organisation is supportive, then that really matters to people.

How do you personally handle the pressures of the job?

When I was a young man, one of my first jobs was a very high-pressured, time-limited job and I learnt a few techniques in terms of maintaining calm under stress back then.

I also had the experience of going through the financial crisis in Ireland, which was one of the worst financial crises that any country experienced and that was quite a stressful period. So if you’ve had past experiences that have been quite stressful, you can reflect on how you deal with that.

I also find that a good walk in the fresh air always helps. I get to walk past the bay and Elizabeth Castle on my way to and from the office and that’s quite a calming experience.