An Interview With...

Julia Shamini Chase

Pioneering Compliance Leader and CEO of Gold Leaf Consulting Limited

Recently, Finance Monthly was delighted to speak with Julia Shamini Chase, the Founder and CEO of Gold Leaf Consulting Limited. Julia Shamini is a highly respected figure in the BVI regulatory law and compliance arena. With an exceptional track record and unwavering dedication to excellence, Julia Shamini has positioned Gold Leaf as the gold standard in the compliance industry. She is a highly sought-after authority in the British Virgin Islands regulatory and compliance regime and beyond. Julia Shamini brings a wealth of expertise and experience to compliance consulting.

In this article, we delve deeper into Julia Shamini's insights into the BVI regulatory regime and explore her perspective on anticipated changes and upcoming trends, offering readers a comprehensive understanding of the regulatory landscape in the BVI.

How would you describe the current regulatory environment in the BVI, and how has it evolved over the years?

The BVI business company (BVI BC) and the broader BVI financial services industry are widely recognized as essential enablers of global commerce, establishing the BVI as a prominent international financial centre. With the evolution of its financial services landscape, the BVI has progressed from primarily facilitating company incorporations to offering value-added services encompassing corporate, commercial, fund management, and succession planning products. The BVI BC has gained popularity as an asset-holding vehicle and secured listings on international stock exchanges.

To support its sophisticated offerings, the BVI has developed a robust regulatory framework to prevent misuse of its products, services, and jurisdiction for illicit activities such as money laundering, terrorist financing, and proliferations financing. Compliance with the FATF recommendations and OECD guidelines is a priority for the BVI, demonstrated through its ongoing good standing ranking and membership in the Caribbean Financial Action Task Force.

Building upon its solid foundation, the BVI introduced comprehensive legislation for virtual asset service providers in February 2023, following the establishment of the BVI Fintech Sandbox regime in 2020. The Sandbox regime allows eligible fintech service providers to test their innovative products and services in a quasi-regulated environment.

Investors have consistently shown interest in leveraging the BVI’s exceptional financial landscape to facilitate their trade. In summary, investors recognize the BVI as an all-encompassing business environment emphasizing a harmonious blend of innovation, usability, and regulation.

Gold Leaf has been an active observer and stakeholder, witnessing and participating in the evolution of the BVI’s regulatory landscape. Our deep-rooted relationship with relevant stakeholders and regulators has enabled us to foster a strong understanding of expectations and priorities. Through my appointment as a member of the BVI FSC’s Fintech Steering Committee, we have actively contributed to shaping the virtual assets regulatory landscape in the BVI. Through these collaborations, we have provided valuable insights and perspectives, ensuring that the BVI’s regulatory framework remains robust, transparent, and responsive to the needs of businesses and investors.

In September last year, the BVI Financial Services Commission approved the Territory’s first investment business license, which authorizes the holder to operate a cryptocurrency exchange. Can you tell us more about it?

The approval of the BVI’s first cryptocurrency exchange license marked a momentous occasion for the jurisdiction and Gold Leaf as the regulatory counsel behind the successful licensing application. We take immense pride in having played a pivotal role in preparing and overseeing the application on behalf of our client, ensuring compliance with the stringent regulatory requirements. Our client was also the inaugural participant in the BVI Fintech Sandbox license. Through strategic planning, we successfully navigated the licensing process. We utilized the Sandbox regime to facilitate our client’s operational familiarity within the BVI’s regulatory landscape, fostering innovation and a secure virtual asset ecosystem.

During the Sandbox phase, as regulatory and compliance consultants, we assisted our client in developing and enhancing their policies, controls, and procedures to ensure compliance with BVI regulatory requirements. Once our client was confident operating within the BVI’s regulatory framework, we applied for their full Category 7 license under the BVI Securities and Investments Business Act 2010 (SIBA) specifically for cryptocurrency exchange platforms. We continue to act as regulatory counsel and as the approved compliance officer for our client, through Gold Leaf Corporate Compliance Services Ltd., the licensed corporate compliance service provider arm of Gold Leaf’s business.

The enactment of the BVI’s Virtual Assets Service Providers Act, 2022 has expanded the regulatory regime for BVI entities and legal arrangements involved in virtual assets. This legislation complements the existing regulatory framework, supports fintech development, and aligns with international standards for virtual asset regulation. This has not only bolstered investor confidence but has also attracted a new wave of entrepreneurial ventures to the BVI, positioning the jurisdiction as a favorable destination for cryptocurrency-related activities.

What makes BVI so attractive to institutional investors in the crypto industry?

When discussing the attractiveness of the BVI to institutional investors in the crypto industry, it would be remiss of me to not only highlight the jurisdiction’s favorable regulatory environment which I will discuss in more detail, but also its natural beauty. The BVI’s unique combination of regulatory excellence and breathtaking surroundings contributes to its appeal as a preferred destination for institutional investors in the crypto industry.

In addition to its stunning beauty, the BVI offers the following key elements that make it attractive to institutional investors in the crypto industry:

1. Regulatory Clarity – which the BVI has established with a clear and well-defined regulatory framework specific to virtual assets, through the passing of the BVI Virtual Assets Service Providers Act, 2022 (VASP Act). The VASP Act addresses the licensing and supervision of persons and entities engaged in virtual assets activities. It establishes a framework for compliance, risk management and reporting obligations which enhance consumer protection and investor confidence in the virtual assets space.

2. Investor Protection – the VASP Act implements robust investor protection measures, such as custody and safekeeping requirements, capital adequacy, testing, auditing, and, robust money laundering, terrorist and proliferation financing, and fraud detection measures, to ensure overall investor protection.

3. Compliance and Reputation – The BVI has, and continues to maintain, a stellar reputation as a compliant and robustly regulated jurisdiction. The VASP Act and the BVI Anti-Money Laundering, Counter-Financing of Terrorism and Proliferation Financing (AML/CFT/PF) legislative framework imposes a risk-based approach on virtual assets providers, to demonstrate that their AML/CFT/PF policies and procedures remain adequate and effective to combat their inherent money laundering, terrorist financing and proliferations financing risk exposures. Such robust compliance measures are attractive to institutional investors who prefer investing in jurisdictions that actively combat financial crime, as it reduces the risk of their investments being involved in illicit activities inadvertently.

4. Stable and Political Environment – The BVI Government has demonstrated its support to help develop a robust virtual assets sector, which reduces uncertainties and risks associated with sudden regulatory changes or sudden policy shifts. It has also established a strong and stable economy, which is reflected in its fiscal policies, sound financial structure and proactive measures to mitigate risk.

What other trends do you expect to see around regulation and compliance in the British Virgin Islands?

The BVI has consistently demonstrated its foresight and tenacity to evolve and adapt as a leading offshore finance centre. At Gold Leaf, my team and I actively engage in monitoring and analyzing emerging trends that shape the regulatory and compliance landscape in the BVI. As a forward-thinking and commercially minded consultancy firm, we anticipate several key areas of focus in the BVI’s future regulatory and compliance landscape:

1. Embracing Regtech Solutions – The BVI has always been a forward-thinking jurisdiction, as evidenced by its embracing of Fintech. This has allowed the jurisdiction and, moreover, the BVI FSC as a regulator, to foster innovation while ensuring robust and transparent regulation. I foresee the BVI adopting more regulatory technology solutions to streamline compliance processes, automate reporting, and improve data analytics capabilities. Regtech adoption will enable more efficient compliance management while reducing costs and increasing accuracy. The BVI AML Legislation already permits the use of electronic or digital verification (ED) provided that such ED satisfies certain prescribed criteria within the legislation.

2. Strengthening of Virtual Assets Regulations – With the introduction of VASP, and as the industry continues to develop and mature, we anticipate further enhancements and refinements to the regulatory framework governing virtual assets. The BVI will likely continue to focus on ensuring compliance with the FATF Recommendations, by focusing on preventing illicit activities, while fostering a secure and transparent virtual assets ecosystem.

3. Continued Commitment to Anti-Money Laundering (AML), Combating Financing of Terrorism (CFT) and Proliferations Financing (PF) – The BVI will continue to maintain its strong stance on AML/CFT/PF and sanctions compliance. The AML/CFT/PF framework has matured into a risk-based framework which ensures that the internal controls being implemented by licensed entities are not only adequate but effective in achieving regulatory compliance. I believe we can expect to see ongoing efforts to enhance these AML/CFT/PF frameworks to strengthen due diligence procedures and ensure the highest standards of financial integrity.

As a jurisdiction, we are certainly set to continue our path of furthering regulatory and compliance advancements. These trends reflect the BVI’s commitment to staying at the forefront of regulatory best practices, embracing technology, and maintaining a robust and trusted financial ecosystem.

How does Gold Leaf ensure that your clients stay ahead of the curve when it comes to complying with new and changing regulations?

At Gold Leaf, we take pride in our commitment to keeping our clients ahead of the curve when it comes to complying with new and evolving regulations. Our approach combines proactive measures, industry expertise, and cutting-edge solutions to deliver exceptional compliance services.

1. Continuous Monitoring – Our diverse and expertly skilled team continuously monitors regulatory landscapes, both locally and globally, to stay informed about upcoming changes and emerging trends. We keep a finger on the pulse of regulatory developments, enabling us to anticipate and quickly respond to regulatory shifts, preparing our clients well in advance.

2. Tailored Compliance Solutions – Through our patented SFC-Solutions Focused ComplianceTM (SFC) methodology and tools, we design tailored compliance programs that are sustainable for implementation to help protect our clients’ peace of mind. By tailoring our solutions, we ensure that our clients have a robust framework in place to address new regulations and adapt to changing compliance demands. Also, using our SFC-Solutions Focused ComplianceTM we have created proactive compliance assessment tools that go beyond the minimum requirements. Our assessment tools identify potential gaps and vulnerabilities in our client’s compliance frameworks. By proactively addressing these areas, we help our clients fortify their compliance posture and minimize the risk of non-compliance.

3. Expert guidance and advisory – Our team is comprised of experienced compliance professionals who contribute extensive industry experience and regulatory expertise. Through our wide network, we also work closely with and have access to, leading global consultants who we engage, as necessary, in the delivery of our services. Our goal is to provide timely and informed guidance to our clients, whilst also offering practical strategies on how to navigate regulatory challenges effectively.

4. Training and Education – A fundamental ethos at Gold Leaf is that knowledge is key to maintaining compliance excellence. We offer training tools and solutions, to keep our clients updated on the latest regulations, industry best practices and emerging compliance trends. By investing in continuous learning, our clients are equipped to adapt to new requirements and seize compliance-related opportunities.

How does your company approach balancing a client’s business goals with their regulatory obligations?

Our clients are leaders in their respective markets and industries. We appreciate that they must maintain a keen focus on their business productivity and profits. In balancing their business goals with their regulatory obligations, our approach is underscored by our mission to become our clients’ trusted partners, enabling them to achieve compliance excellence and peace of mind. Our team at Gold Leaf possesses not only extensive knowledge of regulatory frameworks but also a deep understanding of business operations and strategies. This distinctive combination of regulatory expertise and business acumen allows us to effectively guide our clients in navigating the complex landscape of compliance while achieving their business objectives.

We demonstrate this actively through:

1. Client-Centric Approach – We prioritize our clients’ unique business goals and objectives. Our team takes the time to understand the specific client, operational nuances, and growth strategies. By aligning our services with their business priorities, we ensure that compliance becomes an enabler rather than a hindrance to their success.

2. Customized Solutions – We recognize that compliance is not a one-size-fits-all approach. Our team of professionals works closely with each client to develop tailored solutions that meet their specific regulatory requirements while aligning with their business goals. We strike a balance by designing compliance frameworks that are practical, efficient, and customized to their industry and operational needs.

3. Proactive Compliance Planning – We adopt a proactive approach to compliance planning. By staying ahead of regulatory developments and trends, we can anticipate potential impacts on our clients’ businesses. This allows us to provide early insights, assess the potential implications, and develop strategies to address regulatory changes efficiently. Through advance planning, we help our clients navigate evolving compliance landscapes with confidence.

4. Streamlined Compliance Processes – Our SFC-Solutions Focused ComplianceTM (SFC) tools, technologies, and streamlined processes are designed to minimize the burden of compliance on our clients’ day-to-day operations. We leverage automation, digital platforms, and innovative solutions to simplify compliance tasks, reduce manual efforts, and improve efficiency. This enables our clients to focus on their core business goals while we handle their compliance needs effectively.

5. Safeguarding Reputation – We understand that our clients’ reputation is a valuable asset. Our services are designed to safeguard their reputation by ensuring compliance excellence. By implementing robust compliance frameworks, conducting thorough assessments, and providing ongoing monitoring and support, we help our clients mitigate compliance risks and maintain their integrity in the marketplace.

Our approach to balancing a client’s business goals with their regulatory obligations is rooted in our client-centric philosophy, customized solutions, proactive planning, streamlined processes, and a commitment to safeguarding their reputation. In every engagement, we are our clients’ trusted partner, allowing them to focus on their core business while we provide comprehensive compliance support. Trusting us to deliver gold-standard solutions, our clients can achieve compliance excellence, peace of mind, and perpetual business growth.

About Gold Leaf Consulting Ltd

Gold Leaf has established an unparalleled reputation for delivering tailored, practical, and efficient compliance frameworks, making them a trusted partner for organizations navigating the complex regulatory landscape. Under Julia Shamini’s astute leadership, Gold Leaf has achieved an outstanding milestone—an impeccable 100% track record for the approval of licensing applications in the BVI. This remarkable achievement speaks volumes about Gold Leaf’s expertise, meticulous approach, and deep understanding of the regulatory landscape. Clients entrust Gold Leaf with their licensing aspirations, knowing that their applications are in the hands of a proven industry leader.

Gold Leaf’s commitment to its clients extends far beyond licensing approval. Organizations seeking to navigate the intricate web of compliance requirements highly value Gold Leaf’s sought-after services. With their comprehensive understanding of evolving regulations and a practical, client-focused approach, Gold Leaf offers tailored compliance solutions that enable businesses to thrive while upholding the highest standards of regulatory adherence.

Contact:

Gold Leaf Consulting Limited

Units 6 and 7, Road Reef Plaza

Prospect Reef, Tortola

British Virgin Islands

T: 1-284-494-9559

E: info@goldleafbvi.com

Compliance should go beyond simply ensuring that all employees understand and follow the law, rather it should be an integrated part of your company’s values. By fostering a culture of compliance, employers can ensure their employees are aware of applicable laws, regulations, and policies while also providing them with the tools they need to remain compliant. Doing so not only protects businesses from potential legal action or financial losses due to non-compliance issues, but it also helps create an atmosphere where employees feel safe and secure in their work environment.

#1 - Making Employees More Compliant - What You Can Do

Compliance is ultimately an individual responsibility, but employers still have a significant role in helping employees become compliant. When you have a complaint and, more importantly, an ethical workforce, your business is better protected against potential risks. Whether you want to implement bigger hand hygiene compliance in your business, or you want to make your employees more compliant in the context of data protection, you, as an employer, need to lead by example. Most of the following strategies can be implemented in any work environment:

#2 - Lead By Example and Foster a Culture of Compliance

Employers should lead by example when it comes to compliance. Demonstrate the importance of compliance by adhering to safety protocols and legal requirements yourself, such as wearing a face mask in places where it is required or maintaining social distancing rules. This will show your employees that you take compliance seriously, which will help foster an atmosphere of trust in the workplace. If you’re not following the rules yourself, it’s unlikely that your employees will.

#3 - Establish Clear Rules, Regulations, and Expectations

It’s important to set clear rules and regulations for your employees to follow. Be sure to document any policies and procedures in writing, distribute them among all staff, and make sure everyone understands what is required of them. Create a system of enforcement for when the guidelines are not followed, such as corrective action or suspension for major infractions. Moreover, expecting employees to be compliant will help drive the point home.

#4 - Provide Proper Training To Employees

Proper training is essential for promoting employee compliance. Make sure all new employees receive training on applicable laws, regulations, and policies upon joining the team. This will help ensure that your employees are aware of their responsibilities from the start. For existing staff, regular refresher courses should be conducted to evaluate their understanding of compliance rules and regulations and update them on any new policies. Furthermore, make sure your team has access to the necessary tools, resources, and information needed for them to stay compliant.

#5 - Make Sure Everyone Understands The Consequences of Non-Compliance

Employers need to make sure all employees understand the consequences of not following compliance rules and regulations. Let them know that there may be serious legal, financial, or other repercussions if the rules are not followed. This will help ensure that employees take compliance seriously and think twice before disregarding any policies or procedures. However, it is very important to create the difference between a work environment that promotes compliance, from a toxic work environment where compliance is forced upon employees.

#6 - Use Communication Tools Like Email/Intranet/Newsletters For Regular Updates

Making sure everyone is up-to-date on the latest compliance rules and regulations can be a challenge. Using communication tools like email, intranet platforms, or newsletters to provide regular updates is an effective way to keep everyone informed. This will make it easier for employees to remain compliant and give them access to any new information they might need. For instance, if there are changes in the safety protocols, it’s important to make sure everyone is aware of them. 

#7 - Leverage Technology For Tracking Compliance Issues

Technology can also be used to track compliance issues. For instance, if you want to ensure that your employees are following safety protocols such as wearing face masks or washing their hands regularly, there are various tools available that will help you monitor and enforce compliance. These systems can alert supervisors when an employee is not compliant with a particular policy or procedure and take the necessary steps to address the issue. 

#8 - Encourage Open Dialogue Between Employees and Management

Employers need to encourage open dialogue between employees and management so that any concerns or questions about compliance can be addressed. This will not only help create a culture of trust but also make sure that everyone is on the same page when it comes to the rules and regulations. Additionally, having an open channel of communication will allow employees to share any ideas or suggestions they might have for improving compliance.

#9 - Reward Compliant Behavior with Recognition or Incentives

Recognizing and rewarding compliant behavior is a great way to motivate employees to stay compliant. This could be anything from verbal recognition or public praise to tangible rewards such as bonus points, vouchers, or even prizes. Rewarding staff for their compliance will help promote the message that following protocols is important for the success of the organization and encourage others to do the same.

#10 - Perform Regular Audits or Reviews on Employee Compliance Status

It’s important to assess how well employees are following the rules and regulations. Regular audits or reviews should be conducted to check if everyone is compliant with the policies. The results of these reviews can then be used as a benchmark for improvement or further training if needed. Furthermore, it can help ensure that all employees are up-to-date on the latest compliance policies and regulations.

#11 - Monitor Industry Changes and Update Policies Accordingly

The compliance landscape is constantly changing, so it’s important to stay on top of industry developments. Employers should regularly monitor changes in the regulations and amend their policies accordingly. This will help ensure that everyone remains compliant and there are no unforeseen issues or surprises when it comes to compliance requirements.

By following these tips, employers can create a work environment that promotes compliance and makes sure that everyone follows the rules and regulations. This will help create a safe, efficient, and productive workplace where everyone is working towards the same goal. Additionally, it can help protect employers from any potential legal issues or financial penalties due to non-compliance.

But as with any emerging technology standard, progress is littered with both milestones and speed bumps. Below I will outline some of my key observations from working with leading players in this space.

Open Banking will reshape the global financial services system

It is no longer a question of if Open Banking will continue to evolve, but a question of how quickly it will accelerate. As Open Banking’s remit continues to expand, it will fundamentally change how we use financial products.

Open Banking can be used to assess a consumer’s creditworthiness, for example, by opening the doors to novel products aimed at supporting financial health and inclusion. 

The complex world of credit scores will be simplified through the transparency Open Banking provides. Authorised Open Banking fintechs can securely access a customer’s bank account to see incoming and outgoing transactions, providing a foundation from which to accurately assess users’ credit scores and personalise services accordingly. 

Personal Financial Management platforms (PFMs) like Money Dashboard are leveraging Open Banking technology to provide their clients with insights into transaction behaviour. Its retailer clients, such as supermarket chains, benefit from a better understanding of what their customers spend their money on when they are shopping at other stores. Its investor clients, meanwhile, use the data to predict how companies are operating in order to decide whether to invest in a stock. 

Another example of a company paving the way forward is Bud – which is demonstrating what is possible through Open Banking-powered personalisation and AI automation. Banks use Bud’s products to automate lending decisions and perform more accurate affordability checks – improving risk assessment while delivering more tailored services to their customers. 

From Open Banking to Open Finance

In the future, Open Banking will evolve into Open Finance, meaning that data-sharing will not be limited to transactional bank account data only. Other types of (financial) information will become accessible to authorised third parties, creating a more interconnected financial ecosystem.

Crypto wallets, pensions, insurances, mortgages, stock trading and other wealth management accounts – will all become accessible to facilitate easier exchanges of data, helping providers to establish a comprehensive digital overview of a customer’s financial position and encourage continued innovation. 

These benefits will not be limited to retail customers. Another important area of expansion will be to use Open Banking solutions in the B2B space. Highlighting the potential use-cases, McKinsey estimates that merchants collectively spend $100 billion annually on transaction fees. Through account-to-account (A2A) payments, Open Banking players are already enabling the direct transfer of money between accounts without relying on third-party intermediaries or payment cards – offering a real-time and cost-effective solution to the problem. 

Overcoming the biggest challenges

There are three main obstacles on the road to Open Finance:

1. Access to data

How do we make it easy for providers to access data from a broad range of financial institutions? Technological integrations (APIs) must be built to support the efficient flow of data, but building integrations that work with each financial institution is a tedious and fragmented process. To facilitate this, data and API standardisation needs to be implemented in order to make the task of providing access to data across the whole ecosystem simpler.

On the other hand, the reluctance of institutions to share highly valuable customer data will restrict access. This means regulators will need to step in – as they did for Open Banking – to create a legal environment that opens financial data for third parties to access through standardised APIs. 

2. Analysing the data

Making sense of huge volumes of data is already a gargantuan task, even when it “only” covers Open Banking data. This becomes even harder if data from a wider set of financial products is considered. Fintechs will need advanced categorisation engines and other analytical tools to structure and analyse the information they receive.

Fintechs and companies can have access to all the Open Banking data in the world, but if they cannot create a way to analyse it, they will struggle to draw out any valuable insights. Leading providers like Money Dashboard have already done the legwork when it comes to data analysis – its Open Banking categorisation engine has been trained on over 10 years of data, which allows it to accurately classify consumer transactions. Other providers must follow suit if they haven’t already. 

3. Compliance 

Whenever personal information is shared, it is crucial to have a stringent compliance framework in place, to prevent any breaches or misuses of data. This, however, is not the challenge – the real challenge is ensuring that regulation protects the consumer, without stifling innovation. 

In order to achieve this delicate balance, regulators will need to have open and constructive dialogues with Open Finance providers, and together create an environment that nurtures innovation without threatening data privacy. 

An M&A outlook

Open Banking is still a relatively early-stage technology, so we will continue to see a lot of investor activity in this space, with the market expected to grow to $43 billion by 2026.

Companies with an innovative product and state-of-the-art tech will have no problems raising funds. For instance, UK-based Bud raised $80m in June to continue to scale its AI-based Open Banking platform and expand internationally. 

In the M&A space, we expect to see an increase in activity as small, unprofitable companies (who have developed good technology) might decide to look for a buyer as Venture Capital funding becomes harder to access. Some of the industry’s largest players could also merge in order to consolidate the market, create synergies and expand their reach. 

Notably, Apple’s recent acquisition of Credit Kudos, which develops software that uses consumers’ banking data to make more informed credit checks on loan applications and is a challenger to the big credit reporting agencies (Equifax, Experian and TransUnion)., signals interest from further afield. With more and more businesses making inroads into financial services, M&A activity in this space is heating up.  

Having advised on a number of M&A and fundraising transactions in the Open Banking space, Royal Park Partners have seen first-hand the impressive leaps companies are making to transform Open Banking and increasingly Open Finance into a positive and productive tool for customers and businesses. In the future, Open Finance will provide the infrastructure to connect all financial products that consumers and businesses use, while also providing access to innovative new solutions.

The digital imperative for financial services firms cannot be understated. In order to ensure their (and their products’) relevance in the future, they will have to embrace Open Banking and Open Finance technology.

About the author: Ricardo Falter is Fintech M&A Associate at Royal Park Partners.

Kelly-Ann has 13 years of experience in the compliance & risk management industry including both as a practitioner and as a solution provider.

MyComplianceOffice is the leading provider of Conduct Risk Solutions to the financial services sector, with a focus on Conflicts of Interest challenges, the ability to identify, detect, and prevent misconduct and ensure adequate controls in mitigating these risks.

Why is creating a strong culture of compliance mandatory for financial services firms?

Creating a culture where regulatory obligations and ethics are embraced should be the foundation of any firm, regulatory or otherwise. But over the years, we have seen banks may pay more than $200 billion in fines since the financial crisis (and that number is growing!), which shows there is still more work to be done. These years of continuous failures in large and small firms to follow regulatory best practices, but worse, put the self-interest of themselves above the interests of their own clients and the public leads to a lack of trust in the market. Thus, embedding an appropriate culture of compliance from the top-down, bottom and across the middle is more than just a mandatory requirement, but it is an expected behaviour across firms.

What are your key tips for successful compliance and conduct risk management for financial services companies?

As I’ve mentioned, creating a culture of compliance is everyone’s responsibility within a firm, and that must start with some basics, as well as enforcing behaviour along the way. There are three key areas I see as assisting to embed the culture of compliance:

• Policies and Procedures – Ensure your firm has easy to understand, digest, and communicate policies. As soon as policies, procedures and handbooks become complicated and hard to understand, they are ignored or forgotten.
• Training – Both face to face and eLearning can be used to optimise the learning process. Face to face (or in the COVID times, remote live training) should be used to share important elements of how you do business. This training should be supplemented by eLearning. eLearning doesn’t have to be long and boring either, it can be utilised in short sessions (up to 10 minutes) to reinforce a topic. Perhaps there had been a recurrence of certain compliance breaches in your firm or a firm similar to yours. These micro-trainings are a great way to reinforce your policy and learn from real-life case studies.
• Embedded Controls – Now take your policies and the training and bring them to life, make it easy for staff to raise issues, raise potential conflicts, and submit information to risk and compliance teams. Without this, where regular forms, attestations and certifications (e.g. declaring personal trading, outside interests, gifts, or other firm conflicts) are completed manually or via pdf forms, you may find there is a general disinterest and lack of uptake in actually carrying out the policies and procedures in your firm.

What are the benefits of having a centralised compliance management platform?

Disparate solutions for managing employee compliance, in particular, mean there isn’t a consistent way for your employees to interact with compliance, yet for compliance officers, it means a ‘swivel-chair’ compliance function, reducing the time to act on potential areas of concern. By using a solution like MyComplianceOffice you are enabling conflicts of interest to be detected when they occur, rather than days or weeks after the potential conflict arose. For example, if your firm is looking to conduct research on a particular business entity, which is listed in Europe, you have employees who hold stock in a subsidiary of this firm, and your company has also provided a lot of gifts to this firm, if you didn’t have a consolidated system, you would have to check at least four systems to determine if there are any potential conflicts, where as with an integrated solution, the clearance conflict check on this business entity should identify the conflict immediately. That is the type of benefit a centralised solution can provide to front office and compliance teams. 

What role does technology play in creating a culture of compliance?

Technology can be implemented in many areas of the compliance value chain, and all of these areas are important to instilling a culture of compliance:

• Awareness – By implementing technology to assist in the research and monitoring of regulatory changes, firms can stay ahead of future changes, and ensure their internal policies are kept up to date. Regulatory change systems allow firms to monitor such changes, and map regulatory change directly to policies, procedures, risks and controls, allowing for swifter changes in internal processes.
• Education – Technology can assist firms as already mentioned, in embedding compliance training and in particular micro or short training where cases of good and bad behaviour can be shared to reinforce your policies and values as a firm.
• Communication – Compliance Software Technology can assist in the sharing of information across a disparate workforce. Whether that be the communication of changes to policies and procedures, communication of upcoming training, recent bad and good behaviour, or simply communicating responsibilities related to annual certifications.

Solutions like MyComplianceOffice can be used to both distribute and enforce the completion of such activity, you are assisting in creating the appropriate culture. 

What are the advantages of MyComplianceOffice’s compliance management platform?

MyComplianceOffice’s single integrated solution provides an easy Software as a Service (SaaS) platform for small and large firms to get started in embedding an integrated compliance management solution. Our software can assist firms with all aspects of Employee Compliance, Third-Party Risk as well as Firm Trade Surveillance to provide near real-time conflict checking across multiple data elements. Our solution uses integrated third-party company and security data to allow firms to quickly identify conflicts across all elements of their business.

What problems does technology like MycomplianceOffice solve for its customers?

MCO’s customers range from as small as 10 staff through to 100,000 and as such the breadth of challenges these firms face can be varied. However, at its core, our customers are challenged with the ability to provide timely, auditable and adequate information to regulators. A traditionally paper-based workflow becomes difficult to keep up with as your firm grows, some of our smaller firms have found that moving to technology has repurposed a compliance officer onto more productive activities. Some of our larger firms are challenged with disparate information in multiple different systems, that means traditionally slow turnaround time in clearing conflicts so front office teams can in fact do the needful and conduct their business. By moving to a single integrated solution where Deal Transaction Conflicts, Firm Trading and Employee Conflicts are managed in one solution, this time is significantly reduced.

Contact details

Website: mycomplianceoffice.com  

LinkedIn: https://www.linkedin.com/in/kellyannmchugh/

Email: advance@mycomplianceoffice.com

Peter Ku, VP and Chief Financial Strategist for Informatica, outlines the challenges posed by the transition and how firms can turn them into opportunities.

The London Interbank Offered Rate (LIBOR) underpins some $240 trillion in financial contracts, and with just 11 months to go until the move to risk free rates, Sterling Over Night Indexed Average (SONIA), financial services firms are under pressure to finalise this complex change programme.

Widely considered one of the biggest transformation programmes undertaken by modern financial services firms, the shift away from LIBOR is a complex business challenge which impacts teams across the business. Failure to adequately prepare represents significant operational risk. Why? Because at the heart of it all is data – what is it, where is it, how is it connected, governed, and made available to the business. Board level committees, cross-functional teams and significant resources have been dedicated to managing this intensive and – at times – painful process. However, it’s not all imposition; there are meaningful upsides to having trusted, governed and relevant data, shifting it from tool to strategic business asset.

The Road Ahead

The Bank of England recently published an updated 2021 Roadmap, outlining key milestones that need to be met in order to prepare for the LIBOR transition. It suggests that by the end of Q1 2021, organisations will have completed the identification of all legacy LIBOR contracts. For banks that have hundreds of systems – each with thousands of indexes – locating and tracking the lineage of this data across all systems is a mammoth task.

After completing the LIBOR data inventory, firms can begin conducting an impact analysis on all existing LIBOR contracts. This is a crucial, in-depth exercise covering a number of areas. What will the financial impact be of switching from LIBOR to SONIA? What is the market, operational, credit and reputational risk? Data quality is paramount to being able to perform accurate analysis and in turn manage risk. It’s important to keep in mind that a change of a single data point will impact multiple systems and, in most cases, hundreds of reports. Therefore, having confidence that the data is accurate and trusted is essential. Finance and accounting teams will need to update risk and valuation models once the risk exposure is identified. These include valuation models, pricing future revenue streams and how those impact daily, monthly and annual reporting.

What will the financial impact be of switching from LIBOR to SONIA? What is the market, operational, credit and reputational risk?

Alongside this work, legal and compliance teams will be working to review and replace fall back language in LIBOR contracts which expire in 2022 and beyond. The roadmap published by the Bank of England working group suggests that firms complete these conversions by the end of September 2021. The success of this maps back to the data inventory, and whether teams are able to determine which systems service which contracts, and adequately address corrupt data.

The singular thread through it all, whether it be those managed by legal and compliance, finance and accounting, or risk management, is a dependency on data that is good for use. Unfortunately, many organisations today still struggle with data quality. There are instances where the correct data just isn’t available, or it’s unclear where the data is located or how it is connected to other indexes. This is a continuous work in progress but the conversion from LIBOR to SONIA is undoubtably driving improvements in the automation and scale of existing data governance projects.

Operationalising Data Governance

The LIBOR transition may be a landmark one, but it certainly won’t be the last challenge for the financial sector, which will continue to face increasing market pressures fuelled by rapidly emerging technologies, global interconnectedness, changing economic and jurisdictional factors, and consumer demands. It is the adoption of cloud-based technologies and steady foundation of intelligent data governance that will deliver sustainability, resilience and efficiency moving forward.

As Chief Data Officers round out these gargantuan programmes, a continued focus on two core areas will accelerate the shift of data governance from an IT-centric discipline to a core business function that empowers all within the organisation to be more data-driven.

First, there needs to be a continued focus on resolving data quality issues. Data quality management should be proactive, measured, monitored, and communicated across all data stakeholders from data engineers, analysts, stewards to executive business decision makers. This will ensure data quality management is transparent, predictable and measurable.

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Secondly, users need to leverage tools and technologies to make data governance processes more automated and agile. AI-driven data governance solutions can operationalise data governance by decentralising data stewardship and enabling self-service stewardship to reduce the cost to the business, while still allowing data governance to scale.

Data is the new currency of financial services firms. Forward-thinking organisations will view the overhaul required to move away from LIBOR as a stepping stone to turn data management challenges into opportunities.

Ilia Sotnikov, VP of Product Management at Netwrix, looks at the state of cybersecurity in financial services and the external factors that drive it forward in 2021.

The past year has required financial teams and organisations to review many of their technical processes, especially as employees were forced to work remotely almost overnight. Research shows that 30% of financial organisations feel they are now at greater cybersecurity risk now than they were pre-pandemic. The majority (64%) are concerned about both more frequent cyberattacks and the security gaps caused by remote work – but despite this increased concern about malicious activity, the most reported incidents for financial firms involved human errors.

As a result, 2021 will certainly see financial organisations reassessing their data security policies to be fit for purpose in a post-pandemic digital world. However, given the wide range of financial services emerging, financial organisations today are on very different security maturity levels. Some have consistent ongoing risk management, established processes and dedicated IT security teams. Others just expect IT operations to handle security as part-time assignment. Many financial organisations from the less technically mature side of the spectrum or still heavily rely on legacy systems simply don’t have internal motivation to adopt better security practices.

External pressures for financial services

The good news is that moving into 2021, these organisations will be driven to increase security maturity by external factors: cyber insurance and privacy regulations. With 2021 bringing both new privacy laws and stricter enforcement of existing regulations to minimise the risk of incurring steep fines for compliance failures, businesses will turn to cyber insurance.

The bad news is those policies will come with their own security standards and requirements, such as regular risk assessment and effective detection and response capabilities.

Many financial organisations from the less technically mature side of the spectrum or still heavily rely on legacy systems simply don’t have internal motivation to adopt better security practices.

In 2020, many privacy-related bills were pushed down in priority due to more urgent tasks related to global pandemic. However, this isn’t an issue that will go away. Any British or European businesses that deal with local or international markets have to comply with GDPR – and with Twitter’s recent fine of approximately €500,000 for failing to promptly declare and properly document a data breach marking the first cross-border GDPR ruling, there will be a renewed vigour in the finance industry to ensure compliance. Furthermore, payments-related legislation such as PCI-DSS and PSD2 will face further strains given that a huge consequence of the pandemic has catalysing the move of payments becoming cashless.

A balancing act to compliance and security

This renewed focus on privacy laws require financial organisations to pay more attention to what data they have on hands, how they handle this data, and who is accessing it and why. Failing to document this or to follow documented policies can result in significant fines in case of consumer complaints or a data breach. This may force finance firms to adopt security and data governance practices they did not have in place this year.

The other driving factor for financial firms to revamp their data security measures is cyber insurance. The cyber insurance market is growing rapidly at an impressive 26% CAGR. This growth is fueled by the surge in cyberattacks and businesses seeking to offset their risks, and executives and board members recognising potential breaches or ransomware threats as business risks.

Finance companies are more likely to turn to insurance as an option to deal with the potential cost of these new risks. However, cyber insurance is not a “pay-and-forget” thing. To lower the risks that their customers will be breached, cyber insurance carriers are requiring them to comply with their own security standards, such as regular risk assessment and effective detection and response capabilities. This way, cyber insurance carriers contribute to the growth of security solutions that provide such functionalities. Finally, they force companies to cover security fundamentals and regularly reevaluate their IT risk programs and carrier’s policy changes to ensure adequate coverage, as insurance is not a panacea for a weak or inconsistent security programme.

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The long view

It's safe to say that in the coming year, insurance and legislation will drive mass adoption on fundamental security practices for finance firms and teams. However, given the particular data pressures they face, financial services will be faced with a balancing act of meeting insurance criteria as well as complying with the regulatory standards themselves. While this may throw up some data management challenges, in the long run, it will certainly prove beneficial in helping financial services improve their cyber security posture.

Whether you are a new startup or you are an established business in your niche, taking the right approach to your small business accounting is crucial for the success of your enterprise moving forward. With the right financial data at your disposal, you can make better-informed decisions about the future of your business, assess your performance and adapt to changing trends with ease. 

Failing to maintain proper financial records can cause your business all sorts of problems down the line. From delaying the receipt of payments to cash flow problems and issues with filing your taxes, poor financial management can quickly spell disaster for small businesses. To ensure that you stay in control of your business finances, it’s important that you adopt the right accounting habits this year to set your small business up for success in 2021. 

Let’s take a closer look at five accounting habits you should adopt in 2021 to help you to stay in control of your business finances. 

Maintain Proper Records

One of the most important accounting habits that any business owner can adopt is keeping good records. Keeping meticulous records will ensure that you keep track of all of your income expenses, that you get paid on time and that you have the financial information you need when reporting time rolls around. Having access to up-to-date and accurate financial data will also allow you to make better-informed business decisions going forward.

Seek Professional Advice

Business owners wear many hats, contributing to many aspects of the business. When it comes to managing your finances, you need to ensure that you have the right advice to help you keep your business on track. Seeking out professional financial advice will help you to gain a better understanding of your accounts and implement systems that will help you to manage your finances more efficiently. 

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Invest In The Right Tools

Modern cloud-based accounting programs can help you to manage your business accounts and meet your reporting obligations with ease. These powerful accounting solutions are capable of automating many of your financial recording and reporting tasks, giving you more time to focus on the daily tasks associated with running your business. Choosing the right accounting software to meet the needs of your business will allow you to manage your business accounting with more precision and confidence.

Remain Tax Compliant

As a business owner, you need to ensure that you meet your tax reporting obligations to the ATO. At the beginning of the financial year, be sure to enter all of your report due dates into a calendar or other organiser so you know what reports are required and when they are due. Taking an organised approach towards your business tax reporting obligations will ensure that you avoid incurring any penalties or fines which could hinder your business at tax time. 

Monitor Your Expenses

Having a clear understanding of your business expenses is essential in planning for the future needs of your business. Being able to identify where you are overspending or where you are investing with little return will help you to make changes as required. Whether you will need to reduce your spending, seek financing or generate more income, monitoring your expenses closely is key in maintaining your profitability and having adequate cash flow to allow you to operate optimally.

Take The Right Approach To Your Business Accounting In 2021 And Beyond

Managing your business finances is a constant struggle for many business owners. With a new year beginning, now is the time to reassess your accounting habits and make positive changes going forward. Take the right approach to your business accounting in 2021 and adopt new accounting habits that will allow you to stay in control of your business finances and on track toward your financial targets.

Today, you can use video conferencing software and project management tools to facilitate coordination and communication in a team that’s spread across multiple locations. Consequently, a global workforce is gradually becoming the norm for companies, irrespective of their size and niche.

This isn’t surprising considering the awesome benefits that global recruitment and remote work offer. To begin with, it introduces cultural diversity and multiple perspectives in your team. This can go a long way to encourage innovative thinking and creative problem-solving among your employees.

It’s crucial when you want to break into new markets and expand your business internationally. Also, when your employees work remotely from the comfort of their homes, it can increase their productivity and efficiency. Recruiting employees in certain countries can even be more economical than hiring from your home country.

Having said that, building a global workforce comes with its own set of obstacles. From managing multiple time zones to ensuring complete transparency - you need to overcome various hurdles.

However, the biggest challenge of recruiting employees across the globe is managing payroll. From compliance issues to payment delays - you’re likely going to face various problems while paying international employees.

In this article, we’ll discuss some of the most common challenges you’ll have to overcome to pay employees overseas. But let’s first take a closer look at the different employment models you can use to build a global workforce.

How to Build a Global Workforce

Typically, if you’re looking to recruit international employees, you’ll likely use one of the following employment models:

Independent Contractors

This is a common choice for small and mid-sized businesses. Instead of recruiting full-time employees, you hire freelancers on a contractual basis. It saves you the trouble of providing any benefits, bonuses, and other incentives. When hiring contractors though it’s important that they are contractors to avoid the risk of misclassification.

From compliance issues to payment delays - you’re likely going to face various problems while paying international employees.

Direct Hires

In this model, you recruit part-time or full-time employees from a foreign country and make them a part of your global payroll. This requires you to keep a tab on the taxes and labor laws in their host country. You will also have to establish a legal entity in the host country before you can directly recruit international employees. This is known as the global payroll model, to distinguish it from the contractor and global PEO models even though all 3 global workforce models require paying and a ‘payroll’ to your overseas hires.

Global PEO

The global PEO or professional employer organisation model allows a company to use a professional services company to hire and become the employer of record for the employee in the overseas country. The global PEO is responsible for handling all employee-related responsibilities, including payroll processing, tax management, benefits management, etc. Recruiting through a global PEO simplifies the overseas talent acquisition and onboarding process enabling you to hire overseas without having to first open a local entity.

Challenges of Paying International Employees

Unless you have partnered with a global PEO who will undertake the payroll and ensure that your employees’ salaries are in accordance with local payroll taxes, you’ll have to manage payroll for your international employees. Even if you have recruited freelancers, you will still need to ensure that they’re paid the right amount at the right time.

Here are a few common challenges you’ll encounter when paying employees overseas:

1. Compliance Across Multiple Jurisdictions

Every company has its own set of labour laws and tax legislation. Even if you’re establishing a legal entity in a foreign country, you’ll need an expert to guide you through the local laws.

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If you fail to adhere to these regulations, your company might be liable for financial penalties. That’s why compliance is the most common problem you’ll experience when paying international employees. This can become particularly challenging when you need to keep a track of multiple laws across various jurisdictions.

Hiring independent contractors doesn’t exempt you from the purview of compliance. This is because if you exclusively work with a freelancer for a long period, it could potentially make them look like full-time employees in the eyes of the local jurisdiction.

2. Manual Processing Across Multiple Payroll Calendars

If you’re working with many contractual employees across the globe, they’re likely going to follow diverse payroll calendars. Monitoring these calendars and making manual payments in a timely manner can be excruciatingly difficult.

Also, when you’re paying employees in different countries, you need to account for various processing delays. While in some countries, the bank processing time is only a few hours, others can take days or weeks to complete a transaction.

You need to factor in these delays in your payroll calendar to ensure that your employees get paid on time, irrespective of where they’re located.

3. Moving Money Across Borders

Wiring money to different countries isn’t the same as making a bank transfer in your home country. You need to consider various factors, including the currency exchange rate and processing fees.

Manually tracking these details on a regular basis is going to be challenging. Also, depending on the number of overseas employees, you might end up spending a lot of money on processing fees.

Wiring money to different countries isn’t the same as making a bank transfer in your home country.

Global Payroll is the Solution

If you’ve had any experience in hiring and paying overseas employees, you’re likely be already familiar with the concepts explained here. For those taking their first steps in hiring abroad, this post should give you an idea about some of the complexities involved.

What steps is your company taking to simplify the process of paying overseas employees? Share your tips in the comments section below.

Ammar Akhtar, co-founder and CEO at Yobota, explores the steps necessary to the creation of successful fintech.

The first national lockdown in March highlighted the importance of the quality and functionality of digital banking solutions. Indeed, most of us quickly became accustomed to conducting our financial affairs entirely online.

Financial services providers have needed to adapt to this shift, if they were not already prepared, and consumers will continue to demand more. For instance, Yobota recently surveyed over 2,000 UK adults to explore how satisfied customers are with their recent banking experiences. The majority (58%) of banking customers said they want more power to renegotiate or change their accounts or products, with a third (33%) expressing frustrations at having to choose from generic, off-the-shelf financial products.

Consumers are increasingly demanding more responsive and personalised banking services, with the research highlighting that people are increasingly unlikely to tolerate being locked into unsuitable financial products. This is true across all sectors of the financial services landscape; from payment technologies (where cashless options have become a necessity as opposed to a trendy luxury) to insurance, the shift to “quality digital” poses challenges throughout the industry.

Providers and technology vendors must therefore respond accordingly and develop solutions that can meet such demands. Many financial institutions will be enlisting the help of a fintech partner that can help them build and deploy new technologies. Others may try to recruit the talent required to do so in-house.

The question, then, is this: how is financial technology actually created, and how complicated is the task of building a solution that is fit for purpose in today’s market?

Compliance and regulation

The finance sector is heavily regulated. As such, compliance and regulatory demands pose a central challenge to fintech development in any region. It is at the heart of winning public trust and the confidence of clients and partners.

Controls required to demonstrate compliance can amount to a significant volume of work, not just because the rules can change (even temporarily, as we have seen in some cases this year), but because often there is room for interpretation in principle-based regulatory approaches. It is therefore important for fintech creators to have compliance experts that can handle the regulatory demands. This is especially important as the business (or fintech product) scales, crosses borders, and onboards more users.

The finance sector is heavily regulated. As such, compliance and regulatory demands pose a central challenge to fintech development in any region.

Businesses must also be forthcoming and transparent about their approach towards protecting the customer, and by extension the reputation of their business partner. Europe’s fintech industry cannot afford another Wirecard scandal.

Compliance features do not have to impede innovation, though. Indeed, they may actually foster it. To ensure fintech businesses have the right processes in place to comply with legislation, there is huge scope to create and extend partnerships with the likes of cybersecurity experts and eCommerce businesses.

The size and growth of the regulation technology (regtech) sector is evidence of the opportunities for innovations that are actually born out of this challenge. The global regtech market is expected to grow from $6.3 billion in 2020 to $16.0 billion by 2025. Another great example would be the more supportive stance regulators have taken to cloud infrastructure, which has opened up a range of new options across the sector.

Addressing technical challenges 

It is the technical aspect of developing fintech products where most attention will be focused, however. There are a number of considerations businesses ought to keep in mind as they seek to utilise technology in the most effective way possible.

Understanding the breadth of the problem

The fintech sector is incredibly broad. Payment infrastructure, insurance, and investment management are among the many categories of financial services that fall under the umbrella.

A fintech company must be able to differentiate its product or services in order to create a valuable and defensible competitive advantage. So, businesses must pinpoint exactly which challenges they are going to solve first. Do they need to improve or replace something that already exists? Or do they want to bring something entirely new to the market?

The end product must solve a very specific problem; and do it well. A sharp assessment of the target market also includes considering the functionality that the technology must have; the level of customisation that will be required from a branding and business perspective; and what the acceptable price bracket is for the end product.

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Knowing your client

In the same vein, as a vendor it is important to be specific and strategic when it comes to pursuing the right clients. A fintech might consider itself to be well-positioned to cater to a vast selection of different businesses; however, it’s important to have a very clear target client in mind. This will ensure product and engineering teams have a clear focus for any end goal.

The value of a good cultural fit should also not be underestimated. The business-to-business relationship between a fintech and its client (a bank, for example), particularly at senior levels, is just as important as finding the right niche. There must be a mutual understanding of what the overall vision is and how it will be achieved, including the practical implementation, timeline and costs.

Balancing “best tech” with (perceived) “best practice”

Leveraging the newest technology is not always the best approach to developing a future-proof proposition. This has been learned the hard way by many businesses keen to jump on the latest trends.

Shiny new technology like particular architectures or programming languages can have an obvious appeal to businesses looking to create the “next big thing”. But in reality, the element of risk involved in jumping on relatively nascent innovations could set back progress significantly.

The best technology systems are those that have been created with longevity in mind, and which can grow sustainably to adapt to new circumstances. These systems need to run for many years to come, and eventually without their original engineers to support them, so they need to be created in modern ways, but using proven foundational principles that can stand the test of time.

Curating a positive user experience

To revert back to my original point, fintech businesses cannot forget about the needs of the end customer. There is no better proof point for a product than a happy user base, and ultimately the “voice of the customer” should drive development roadmaps.

The best technology systems are those that have been created with longevity in mind, and which can grow sustainably to adapt to new circumstances.

Customer experience is one of the most important success factors to any technology business. Fintechs must consider how they can deftly leverage new and advancing technology to make the customer experience even better, while also improving their underlying product, which users may not necessarily see, but will almost certainly feel.

Another important consideration is ease of integration with other providers. For example, identity verification, alternative credit scoring, AI assisted chatbots and recommendation algorithms, next generation core banking, transaction classification, and simplification of mortgage chains – these are all services which could be brought together in some product to improve the experience of buying a mortgage, or moving home.

Progressive fintech promotes partnerships and interoperability to reduce the roadblocks that customers encounter.

The human side of fintech

Powerful digital solutions cannot be created without the right people in place. There is fierce competition for talent in the fintech space, especially in key European centres like London and Berlin. Those who can build and nurture the right team will be in a strong position to solve today’s biggest challenges.

In all of these considerations, patience is key. It takes time to identify new growth opportunities; to build the right team that can see the vision through; and to adapt to the ever-changing financial landscape. Creating fintech is not easy, but it is certainly rewarding to see the immense progress being made and the inefficiencies that are being tackled.

No matter which area of finance or business that you operate in, knowledge of the regulatory climate that you work in is essential. If you are working in the UK, which has one of the world's largest financial services industries and is home to many of the world's most important financial institutions, then you will need to become acquainted with the Financial Conduct Authority (FCA).

This is the government body that is responsible for the regulation of any and all financial services activities that take place in the UK or involve UK-based companies, individuals, and entities. They create and regularly update the framework and regulations governing areas such as trading, banking, currency, accounting, and dividends, to name just a few.

Falling afoul of the FCA can not only be ruinous for your business and career plans, but it can also land you in prison. Furthermore, you will not be able to legally conduct financial services activities in the United Kingdom without the approval of the FCA. With that in mind, let's summarise what the FCA actually does and how their remit affects you.

Preventing Misconduct

The most important role of the FCA is to prevent misconduct by financial services companies. They will investigate and enforce against classic types of misconduct such as insider trading and shadow-banking, but that's not all. They also work to prevent anti-competitive behaviour such as monopoly building, the mis-selling of financial products, and any attempts at market manipulation.

Regulating Trustworthy Companies

The FCA also helps financial services companies by providing them with a badge of legitimacy. For example, if you are looking for a qualified UK CFD broker service, you will find that the most well-regarded companies proudly advertise that they are regulated by the FCA. If a company is regulated by the FCA, then potential customers and clients can know that they are trustworthy and abide by rigorous ethical standards.

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Dispensing Advice

The FCA is a massive organisation with thousands of employees and an annual budget of £600 million. Much of these resources are directed towards giving essential legal and compliance advice to the 58,000 companies that the FCA is responsible for regulating. This service is extremely valuable for smaller companies that might not have the resources to fully navigate the regulatory environment on their own. In a business environment where only the top dogs can afford a legal team of their own, the advice provided by the FCA can be a life-saver.

Launching Legal Investigations

The FCA also has powerful enforcement mechanisms and can launch their investigations into companies and individuals, rather than simply referring potential incidents of misconduct to the police. As an arm of the UK government, the FCA reserves the right to investigate any person or entity that they have a reasonable suspicion of being guilty of financial crime. Investigations launched by the FCA can and do lead to the suspension of licenses, multi-million-pound fines, and the arrest and imprisonment of those found guilty of a crime by a British court. That's why compliance is crucial.

If you want to do business in the UK, joining the FCA and paying a membership fee is definitely a worthwhile pursuit. The cost of applying for FCA regulation currently stands at £1500, but this is a worthwhile investment.

Keith Pearson, Head of Financial Services EMEA at ServiceNow, explains how banks can ride this wave of changes and emerge more resilient and productive than ever before.

At the start of this crisis, much of the banking industry was in a different position from many businesses. The 2008 recession spurred a need for improvements and, combined with the emergence of tech-savvy fintechs, the industry has seen a major shift as customer expectations have adapted. The pandemic has forced organisations to accelerate innovation already part-underway in the banking industry.

As banking experienced its first wave of transformation, institutions focused on customer engagement, uniting physical and digital channels for an improved customer experience. Banks invested heavily in front office digital technology, creating visually appealing mobile apps, engaging online banking experiences and technologies for bankers to personalise customer engagement.

However, this digital engagement layer is not enough. Regulations like PSD2 reinforce the necessity to remain compliant, adding additional pressure to the digital transformation process which in turn has been accelerated by COVID-19. Banking is therefore in the midst of its second wave of transformation, where financial institutions are creating and seeking out critical infrastructure to better connect underlying middle and back office operations with the front office, and ultimately, with customers.

A Disconnected Operation

Many financial organisations are still struggling because they have yet to streamline, automate and connect the underlying processes that are enabling customer experiences. Which poses the question: why is connecting operations so difficult?

In most cases, multiple systems are still glued together by email and spreadsheets to track end-to-end status. Around 80% of a middle office employee’s time is spent gathering data from systems to make a decision, with only 20% spent actually analysing and making the decision.

In most cases, multiple systems are still glued together by email and spreadsheets to track end-to-end status.

The disconnect negatively impacts customers. For many, experiences like opening a bank account or getting a mortgage involve clunky, manual processes riddled with paperwork and delays. When front and back office employees lack the ability to seamlessly work together, customers can be asked for the same data multiple times, elevating frustration.

Customers have little patience and can be inclined to publicly broadcast problems when left unresolved. In a world of social media and online reviews, this could be detrimental to a company’s reputation.

With digitally native, non-traditional financial services players gaining market traction by offering a seamless customer experience, maintaining satisfaction is crucial for traditional banks to ensure that customers don’t switch. Banks must focus on making it easy for customers to do business with them by offering faster cycle times with more streamlined operations.

The Fintech Effect

Fintechs and challenger banks like Starling have shown what connected operations can do, having been built with digitised processes from day one. Modern consumers expect round-the-clock service from their bank. As financial institutions look to the future, developing a model of operational resilience that is capable of withstanding unforeseen issues, like power outages or cyberattacks, is critical to minimising service disruption. Having connected internal communications between front and back office staff means customers can be notified about any problems, how they can be fixed and when they might be resolved, as well as receiving continuous progress updates instantaneously.

Automation can go a step beyond this. Today, customers expect companies to not only do more and do it faster but to prevent problems from arising in the first place. With connected operations and Customer Service Management (CSM), banks can proactively fix things before they happen and resolve issues fast, enabling frictionless customer service and replicating the ‘fintech effect’.

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What About Compliance?

In the European Union and the UK, PSD2 and the Open Banking initiative are giving more control to the customer over personal account data. Digital banks such as Fidor and lenders like Klarna are seeking to reinvent banking by offering customer-centric services. But the process of streamlining underlying operations is not simply about providing customers with a fintech-esque experience. More than 50% of a financial institution’s business processes are also impacted by regulation.

Financial services leaders are focusing on streamlining and taking cost out of business operations while also placing importance on resilience. Regulators are pushing banks to have a firmwide view of the risk to delivering their critical business services.

Banks must invest in digitising processes to intuitively embed risk and compliance policies, which are generally managed separately and often manually from the business process, leading to excessive compliance costs and risk of non-compliance. With the right workflow tools for monitoring and business continuity management, banks can minimise disruption by gaining access to real-time, actionable information about non-compliance and high risk areas, encompassing cybersecurity, data privacy and audit management.

Increasing openness of financial institutions to RegTech solutions, or managing regulatory processes in the industry through technology, will prove key during this second wave of transformation. Banks will increasingly move away from people and spreadsheets and toward regulatory solutions that provide a real-time view of compliance and provide an end-to-end audit trail for Heads of Compliance, Chief Risk Officers and regulators.

With a unified data environment aided by technology, financial institutions can drive a culture of risk management and compliance to improve business decisions.

Increasing openness of financial institutions to RegTech solutions, or managing regulatory processes in the industry through technology, will prove key during this second wave of transformation.

Riding the Wave

The banking industry is still in the midst of its second transformation, and the pandemic hasn’t made it any easier. But riding this wave and successfully digitising processes to connect back and front office employees will present a profound difference to customer service.

The bank of the future will be frictionless, digital, cloud-enabled, and efficient; interwoven into the fabric of people’s lives. It will continue to be compliant and controlled but will deliver those outcomes differently, with risk management digitally embedded within its operations.

Demonstrating the operational resilience of its key services will not only drive customer confidence but will also provide a greater indicator of control to regulators and the market, adjusting overall risk ratings and freeing up capital reserves to drive more revenue and increase profitability.

The institutions that will thrive in this increasingly digital and connected world are the ones that are actively transforming themselves and the way they do business now, by taking lessons from fintechs, following regulations and paving the way in defining the future of financial services.

The COVID-19 pandemic has rendered daily life unrecognisable, and across the globe people are trying to determine how to navigate the strange new world we are living in. At the same time, businesses are having to alter their practices to keep functioning despite the changes that the rapid spread of COVID-19 has caused. The pressure is being felt across all sectors and financial services are no exception.

However, despite the uncertainty of the current environment, regulators still require businesses to comply with certain standards - as made clear in the recent information published by the FCA, which lays out the expectations of the regulator over the coming weeks and months.

With this in mind, there are steps financial services businesses can take to stay on the right side of the FCA during these unprecedented times. Imogen Makin, Director at DWF, outlines the most important ones to consider.

It's All in the Timing

There will undoubtedly be some teething problems for businesses as their workforces get used to the mass remote working required to comply with the current isolation rules. The FCA, and other regulators, know that this situation has never occurred before, and are therefore understanding of any problems or issues encountered in transitioning to this new way of working. However, the key here is just that, that these problems should be identified and reasonable steps taken to rectify them sooner rather than later.

Financial businesses must make it a priority to deal with any problems efficiently and effectively to minimise the risk of criticism from the FCA. Enforcement outcomes over the last few years suggest that firms' response times, both in terms of the identification and rectification of any problems, are important.

Keep an Eye on Your Employees

Another key issue linked to business being done from home is potential market abuse. Firms’ systems and controls for the prevention and detection of market abuse has been an area of focus for the FCA for some time, and the risks around mass remote working have brought this back to the forefront of the FCA's agenda. The FCA has stated that firms could consider whether they need to introduce enhanced monitoring, for example, in order to mitigate market abuse risks.

It is clear from the FCA Primary Market Bulletin published on 17 March 2020 that the regulator expects  firms to continue to comply with their obligations under the Market Abuse Regulation and relevant FCA rules, notwithstanding the operational difficulties they may be facing. Firms therefore need to ensure that their analysis of market abuse risks in this new working environment is clearly documented, alongside any actions taken to mitigate them.

The FCA has stated that firms could consider whether they need to introduce enhanced monitoring [...] in order to mitigate market abuse risks.

Reduce Work-Related Travel

Further to the new rules brought in by the government to only travel when it is essential, the FCA published a statement outlining the responsibilities of Senior Managers to determine which employees must continue to travel to work.

Senior Managers responsible for identifying which of their employees need to travel to the office or business continuity site should document clearly the rationale for requiring any work-related travel and ensure that this is kept to a minimum in order to both appease the FCA, and keep their workforce as safe as possible.

Treat Your Customers Fairly

The disruption caused by the COVID-19 pandemic is unchartered territory; it has affected education, work, and almost all aspects of everyday life.

With this in mind, it is important for financial services businesses to consider that their customers are likely experiencing many stresses and uncertainties themselves and so regulators, including the FCA, have made it clear that they expect customers to be given flexibility and leniency, for example, in relation to mortgage payments.

Firms will need to ensure that they strike the right balance between protecting consumers' interests, whilst also maintaining their own liquidity and financial resilience, all of which are important in the eyes of the FCA.

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Communication Is Key

As in all successful relationships, communication is key - and the relationship between firms and regulators is no different. The FCA accepts that businesses are doing all they can to keep functioning during these extraordinary times, but they are nevertheless still required to comply with their Principle 11 obligations.

Firms should make sure they maintain an open dialogue with the FCA and inform them of problems sooner rather than later; for example if a firm is unable to meet FCA requirements in relation to recorded lines, the FCA has stated that it expects to be notified. The FCA's publications in relation to COVID-19 suggest that the regulator is prepared to be forgiving as long as firms have kept them informed and have taken reasonable steps to deal with any challenges that arise.

No Need to Panic

Firms regulated by the FCA do not need to fear - everyone is getting to grips with the new working environment simultaneously and some initial challenges are inevitable. The FCA has demonstrated that it is willing to be reasonable, but it will not allow COVID-19 to be used as an excuse for bad behaviour. The points outlined above provide a few tips to FS businesses to maintain good relations with the FCA for when the world returns to normal (whenever that may be).