The emerging challenge of the conduct risk agenda is a focus for boards, according to the third biannual Deloitte survey of compliance officers in Jersey.
The survey provides an insight into the current landscape of compliance matters within Jersey’s financial services industry. Over 35 compliance officers from a range of regulated businesses took part in the survey, which is the fifth of its kind by Deloitte in the Channel Islands.
Deloitte reports that the key challenges highlighted from the survey include how existing elements of ethics, financial crime, culture and good corporate governance are brought together into a holistic approach and framework.
Over 90 different conduct risks were highlighted by the survey respondents who are working under scrutiny by regulators locally and overseas and with the additional pressure of the ongoing spotlight on activities in offshore jurisdictions.
Recruitment was again seen as a challenge with a number of businesses seeking to recruit into compliance. Whilst the overall level of vacancies was down from the last survey, the level of expected recruitment is higher than ever before and the challenge to recruit experienced and qualified compliance staff continues.
Deloitte observes that the use of consultants and outsourcing has also risen with 35 per cent of participants reporting an increase in their use during the last 12 months, typically to meet the demands of business growth or to cover vacancies during recruitment.
As would be expected, Deloitte found there to be plenty of discussion on the role of the regulator, notably on the Civil Penalty Regime which has been introduced since the last survey was conducted. The focus of discussions was how the Regime may be used in practice, which is awaited with interest and in some quarters, disquiet.
Consistent with the recent Moneyval report on the island, the survey highlighted the increasing amount of time spent by compliance teams on financial crime prevention matters and the continued monitoring of the business. There is also a clear increase in the use of online systems for both anti-money laundering and sanctions assessments and controls. Deloitte note that one in four participants reported to be looking at further investment in technology to support anti-money laundering and compliance processes in a broader capacity than previously seen, bringing together a number of operational processes and the production of quality management information.
The results of the survey emphasise that engagement of people, whether existing or new to a business, and an effective business culture is a key consideration for today’s new workforce, the ‘millennials’ as much as it is for staff who have many years of experience.
Discussions with participants regarding the top three conduct risks relevant to each business revealed to Deloitte that many participants are citing the importance of people being engaged, having a robust framework for the identification and subsequent management of potential conflicts of interest and importantly, ensuring that timely and clear client communications reflect the tone of the business.
The survey highlighted that the best defence against a breakdown in controls is the mindset and actions of every individual supporting the compliance agenda and that this needs to be automatic and intuitive. This brings the agenda back full circle to the conduct agenda and its importance for the board, not only to ensure good business practices but also to support both the recruitment and retention of the right people.
The full report can be found here.