A Compliance Officer Is The Sheriff Not The Gunslinger – – Cyprus

Explaining the mysterious world of company compliance

In recent years ‘compliance’ has become something of a
buzz word in governmental, business and professional circles,
whilst a perceived lack of ‘compliance’ can result in
negative news headlines and the downfall of organisations and many
a public figure.

It was the non-compliance of former UK minister, Nadhim Zahawi,
with ministerial codes that angered many colleagues and forced his
recent removal from office rather than his actual tax
indiscretions. Indeed, the concept of ‘compliance’ has
become crucial to organisations and individuals alike; spawning an
entirely new profession, that of the compliance officer. In fact
most large organisations will now house entire departments of this
once rare breed, leading many to ask just what is their role and
what are we all meant to be complying with?

Role of a compliance officer

Legal compliance is adherence to all relevant national and
international laws and regulations. At its simplest, the role of
compliance officers is to ensure that the organisation that they
work for is doing this. To this end they will tend to be involved
in setting and monitoring internal policies and procedures designed
to keep the organisation ‘on track’ and following best
practices. Their role is one of constant evolution since they must
always be cognisant of the latest laws and regulations and be able
to transpose these into procedures for the compliant operation of
the organisation.

Broken down into its basic components compliance deals with
identification and prevention of breaches, errors and omissions,
systems monitoring, advisory input on systems and procedures, and
reporting on compliance performance.

However, one aspect of compliance, and that of the role of the
compliance officer, that is frequently overlooked and yet is its
raison d’être, is that compliance fosters trust on the
part of organisations, businesses and individuals with whom one may
wish to work or do business with. One of the most important factors
in profitability is the trust built with customers and suppliers.
Publicly demonstrable adherence to, for example, production
standards, anti-money laundering procedures, tax laws, health and
safety regulations and economic sanctions demonstrate
professionalism and promote trust in an organisation.

In business, trust builds brand and supplier loyalty creating
long term profitable relationships to the benefit of all. Trust in
governments and institutions inspires confidence in them and
support for them. Loss of trust can be a difficult and sometimes
impossible issue to resolve – as Gerald Ratner can testify to
the collapse of his multimillion pound company when he gave a
public speech in which he described his company jewellery products
as “crap”.

Thus whilst many might think of compliance and compliance
officers as, at best a necessary evil, it might behove them to
rebadge both as a significant asset!

Gemini of the professional world

Many employees (sometimes including executives) will regard a
compliance officer as the ‘bad guy’ within their
organisation. He, or she, is the person often viewed as adding
‘unnecessary’ bureaucracy and irritating steps to a task.
In all honesty few people readily take to the idea that their
actions are being controlled, and within an organisation colleagues
may resent feeling as if they are being constantly watched. To them
the compliance officer can often be regarded as an irritant getting
in the way of job performance since, he is always there to ask for
more information, more documents and yet another ‘know your
customer’ file! This can result in an ‘us’ and
‘them’ culture where some staff feel that they are the ones
‘producing’ for the organisation whilst regarding the
compliance team as being parasitical.

Nor is this negative view always confined to those within the
organisation. Which of us has not cursed when put through a series
of questions and checks before we can ask our bank a simple
question on the phone? How many of us have felt frustrated by
having to repeatedly prove our identity to an organisation we may
have dealt with for decades? Indeed many of us will often wonder
out loud at why, when we are performing a straightforward legal
transaction with our own legally obtained funds, we have to jump
through quite so many hoops?

Yet that same ‘bad guy’ is also the ‘good guy’
that protects us. Many of us have cause to thank the compliance
individuals and systems that identify abnormal transactions on our
accounts and seek verification from us that they are legitimate
rather than the result of theft or fraud. When company data
breaches are announced in the press are we not glad that the
businesses we work for or trade with have systems to safeguard
against such events? Do we not like to be confident that the house
or business that we think we have just acquired did actually belong
to the person who ‘sold’ it? Is it not preferable to be
sure that money you receive is ‘clean’ rather than
laundered?

Without our ‘bad guys’ we can have no such assurance and
the negative consequences of a compliance breach can have
catastrophic and/or costly effects. Enron’s downfall, and the
imprisonment of several members of its leadership group, was one of
the most shocking and widely reported ethics compliance violations
of all time. It not only bankrupted the company but also destroyed
Arthur Andersen, one of the largest audit firms in the world. In
2021 ABN Amro (€480m), NatWest Bank (£264m), Deutsche
Bank (€120m), JP Morgan ($125m) and Credit Suisse
(£147m) all received hefty fines for various historic
compliance failures which also harmed them reputationally.

In short, it could be asserted that the compliance officer
should not be perceived as the ‘enemy’ within but rather as
an essential component of an organisation, helping to ensure
legality and to generate, reputation, trust and profitability.

A good compliance officer

A compliance system is only as good as its components, so what
makes an individual suitable for a career in compliance? As with
any task, a role is best performed by those who actually love doing
it and see the value of their role. It is said that a successful
compliance officer always remembers the mission, “Follow the
guidelines” and “A job done with care and compassion, is
a job done well!”

However, it is not a job that everybody is suited to. The
following must be regarded as important basic skills.

1. The ability to interact with people in a positive constructive
   manner. They must be able to build relationships based on trust
   inside and outside the organisation and have the ability to alter
   the perception of the compliance function from that of a burden to
   that of a benefit.




2. The ability to fully understand problem issues that may arise
   and help find an alternative solution without risking of breaching
   the rules.




3. The possession of managerial skills and confidence in handling
   data. There is a need to be to be optimistic, creative, take
   initiatives and mitigate risk.




4. An ability to recognise the ‘big picture’ and embrace
   change. A good compliance officer must be a step ahead and foresee
   changes (e.g. the rise of online processing, the emergence of
   crypto assets etc) and take measures to adapt policies and
   procedures in order to protect the company in light of those
   changes.




5. The ability to balance commercial and regulatory risks by
   understanding the laws relevant to their organisation




6. The ability to conflict manage. Demonstrating good emotional
   intelligence with colleagues will help spread a positive compliance
   culture among them.

However, above all this, the attributes which are most essential
are personal integrity and courage. The actions of a compliance
officer must be above reproach and, if necessary to ensure
compliance, they must be willing to stand up to the most senior
people within their organisation. They must not allow themselves to
be bullied out of doing ‘the right thing’ even if there is
a chance that it may cost them their position. Certainly,
pensioners and employees from the Mirror News Group fiasco would
have welcomed the intervention of a strong compliance team to
counter the bullying nature of Robert Maxwell and insist on proper
financial controls and corporate governance.

The ideal compliance officer is the sheriff and not the
gunslinger. They are a person who has good judgement and takes
professional satisfaction when observing that all their clients
within and without the organisation are, as the old Italian saying
goes, “Sani e salvi” (safe and sound).

So the next time you feel inclined to vent frustration at the
‘compliance’ systems you encounter, and the individuals
operating them, it might be time to pause and think just what might
happen without them!

Originally Published by Cyprus Mail

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.