Financial crime: compliance challenges for 2016 and beyond

Notwithstanding George Osborne’s indication that he wants to work with financial institutions, we anticipate that compliance and anti-money laundering concerns will grow ever more important for the financial services industry in 2016. In the last year we have seen the FCA publicly committing to pursuing more cases against individuals and the announcement of the Senior Managers Regime which will come into force in March 2016 with the aim of making it easier to hold senior management to account (see our earlier blog). Financial crime and compliance looks set to remain firmly on the agenda.

What are the future challenges?

In November 2015, Lexis Nexis Risk Solutions produced a report for the BBA which focused on the key future risks facing British banks from financial crime. The report identified four key themes:

• Growth in the “regulatory burden” of anti-money laundering, counter-terrorism, anti-bribery and corruption, and other financial crime regulation;
• Increased personal liabilities for compliance failures, including custodial sentences for bank employees charged with tackling financial crime;
• “Moves and barriers” to greater collaboration between and within banks, regulators and law enforcement; and
• The pace of change of technology, product innovation and criminal methodologies.

What future for compliance professionals?

The report refers to the “regulatory burden” and the impact this has had on compliance professionals. In a survey of 198 banking and other financial services compliance and financial crime professionals 61 per cent said “there was enough or too much regulation, but inadequate enforcement”. The report also argued that the trend of imposing on compliance staff the risks and responsibilities of the most senior management, without the rewards, threatens to undermine the attractiveness of compliance roles. 54 per cent of compliance professionals surveyed said that the increased personal liabilities meant they would choose another career path if they had the opportunity.

So what future for compliance professionals? There is no doubt that demand for compliance professionals will increase as banks and businesses try to insulate themselves from investigation and sanction. However, the report raises important questions about the impact of greater focus on civil and criminal liability for individuals combined with an increasingly specialised industry and higher demand for compliance professionals. The report argues that these factors mean that for many the compliance industry is no longer an attractive option.