Commandments of compliance
global comp
What'sNewS Issue 7 November 2000
When 'compliance' hits the headlines it usually means bad news for all concerned.
A number of scandals down the years, induding the notorious activities of Nick
Leeson, and, albeit on a much lesser scale, an incident in one of our own member
banks, all demonstrate the consequences of getting compliance wrong. As part of
our ongoing efforts to reduce the risk of Rl featuring in this sort of damaging head
line, global compliance has just published its Worldwide Compliance Standards
document. Hot off the press, it's compulsory reading.
Road rules
Building confidence
Proactive thinking
Decentralized approach
Fortunately, it's also very readable. In
just 10 pages the Standards set out 10
principles designed to keep RI staff on the
right side of the compliance track. As
global compliance chief, Richard Collins,
explains, 'We don't want to create a huge
layer of bureaucracy which stifles creativ-
ity, we just want to put the right frame-
work in place.'
Collins draws an analogy with the nto-
torist's Highway Code. 'Motorists aren't
expected to know every detailed clause of
their national Road Traffic Acts, but if
they've thoroughly learned their Highway
Code, they won't go far wrong.' Just as
every driver must know the rules of the
road, it's also the responsibility of RI em
ployees to know and practice the princi
ples of compliance. 'We want to get across
the message that compliance isn't just an
issue with sorne particular transactions: it
is a question of professional and personal
integrity which affects us all and touches
everything we do, both within the bank
and outside.' Effectively the Standards set
out the foundations for a corporate cul
ture of compliance by building these prin
ciples into RI's operating systems. 'In the
past, compliance has often been a matter
of cleaning up the mess after an event. For
that to change, people should be thinking
compliance first,' says Collins.
In the marketplace of today, maintaining
the highest standards of corporate behav-
iour is imperative. 'We operate in a world
of increasing regulatory vigilance, and as
Euroland's central banks relinquish con-
trol of the domestic economy to the ECB,
more resources will become available to
scrutinize the banks' adherence to ever-
increasing European regulation'. But it is
Spreading the word on compliance:
Richard Collins on the road in Amsterdam
not just the regulators who are watching.
Customers too are far more critical of
bankers' standards and have far higher ex-
pectations of a bank's honesty, integrity
and transparency than in the past. This is
particularly true for a knowledge-driven,
sector-specialist bank such as RI, where
potential conflicts of interest are an ever
present danger. As such cliënt confidence
is a huge commercial consideration.
Clients have to be certain that, while the
same team of experts may be acting for
many parties within the sector, they can
count on an independent handling of their
own account and fair treatment vis-a-vis
the bank's, as well as other customers',
interests. Chinese walls, often cited as the
method to create independence, are ulti-
mately just a tooi needing reinforcement
by RI's reputation for integrity and profes-
sionalism. 'That is why the cultural di-
mension of compliance is so vital,' says
Collins.
Creating that culture calls for a proactive
approach to compliance - sins of omission
weigh just as heavily as sins of
commission in the eyes of the regulator
and the public. Consequently, the Stan
dards make clear, ignorance is no defense
before the law. It is, for example, the duty
of the banker to know his or her customer
- not only to prevent money laundering
and fraud - but also to ensure that the
right products are matched to the right
clients. 'In reality the over-enthusiastic
salesman is more dangerous than the
rogue trader', says Collins. Alongside ig
norance, incompetence ranks as a prime
cause of compliance infringements. Thus
the Standards emphasize the requirement
that all RI employees possess the skills and
technical competence to perform the du-
ties required by their position. If you are
asked to assurne responsibilities for which
you have not been trained, it's no use hop
ing for the best. Inform your line manager
or local compliance officer, say the
Standards.
The line manager and local compliance
officers are key figures in the RI compli
ance strategy. In an organization as large
as RI, global compliance cannot hope to
cover all the bases. 'The actual supervision
and enforcement of compliance has to be
decentralized. In the final analysis the
practitioner at the front line, be he or she
a salesman, dealer, or relationship man
ager, and his or her line manager are the
people who best know the product, the
customer and the local circumstances,'
says Collins. Thus the Standards conclude
with a section aimed at line management
at all levels entitled 'Duty to Supervise'. To
ensure adherence to this code, effective su
pervision is critical. Somebody has to say
'the buck stops here', the Standards make
clear. 'In many ways this is what good line
managers already do - we're not asking
anybody to do anything radically different
- maybe just to change their approach a
little.'
For its part, global compliance will be
offering a full training program over the
coming months to provide local manage
ment with all the necessary support.
For further details please contact your
local compliance officer.
