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Can compliance be interesting?

Compliance. Why is it important?

David Reinhardt

on 13 August 2013

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Transcript of Can compliance be interesting?

The why, the how and the what
Can compliance be interesting?
Sally is the breadwinner and matriarch of a single income family.…
a short story
starting with why
Selected Regulators
key players
walk of shame
Global effort by the IRS to close a perceived US tax gap
Establishing a resilient, effective and attractive retail investment market
All financial services (banks, product providers, independent financial advisers, wealth managers and stockbrokers)
Reduce the risk of settlement failures linked to naked short selling and credit default swaps
Preventing ‘too big to fail’
All parts of the (US) financial services industry
Global regulatory standard on bank capital adequacy, stress testing and market liquidity risk
Calls for a common set of solvency regulations across Europe
EU insurers and re-insurers
Detecting, preventing and reporting suspicious activity that might signify money laundering, tax evasion, or other criminal activities
All financial institutions
Retail Distribution Review (RDR)
Dodd- Frank
Short Selling
Solvency II
what's next?
what's hot now?
what should you be thinking about?
Consumer protection
Ensuring that products and processes are fair, transparent and not designed to take advantage of customers.
Ability to access, aggregate, analyse and report on (risk) data quickly, accurately and ideally on-demand.
Too big to fail
The notion of systemically important financial institutions (SIFI) and systematically important banks (SIB) has been introduced with increased focus on recovery and resolution planning
Customer knowledge
Institutions need to be aware of who their customers are. This needs to include nationality, likely behaviours, credit exposure and so on.
Liquidity management
Increased capital requirements supported by the ability to understand commitments relative to capital on hand.
New supervisory structures
The raft of new legislation has created a range of new regulatory authorities, e.g. the FCA and RPA.
The Financial Conduct Authority (FCA)
The Prudential Regulation Authority (the PRA, a subsidiary of the Bank of England)
Serious Organised Crime Agency
Federal Reserve (“The Fed”)

Securities and Exchange Commission (SEC)

Commodities Futures Trading Commission (CFTC)
European Supervisory Authorities
European Banking Authority
European Securities & Markets Authority
European Insurance & Occupational Pensions Authority

European Systemic Risk Board
selected Industry bodies
A market where members join together as syndicates to insure risks
Lloyd's of London
A trade association for the UK banking and financial services sector, currently responsible for setting the LIBOR rate
British Bankers’ Association
A global standard for inter-operation of integrated circuit cards, i.e. credit and debit cards

(Europay, MasterCard and Visa)
Understanding why regulations are introduced contexualises them as both interesting and important.
Compliance typically is a function of meeting regulations which are enacted. Regulations come from legislation. Legislation is born out of an ambition to provide a protection against some perceived risk.
Compliance is not about ticking boxes, it’s about protecting people from influences that are too great for them to control
Our ambition in this space is to help implement regulatory / legislative change enabling our clients to operate both responsibly and cost effectively.
BSG’s compliance service is about identifying the underlying changes required in order to meet regulatory standards and making these changes happen.
At BSG we are passionate about designing and delivering change which makes a difference for our customers.
26 Mar 2012
17 July 2012
06 Aug 2012
Continental Illinois
Realisation of settlement risk on FX trades in the wake of the bank's liquidation
Northern Rock
Standard Chartered
Speculation in the South Sea Company caused overinflated stock prices
Bubble Act
Was the largest US bankruptcy at the time
Notion of "too big to fail"
Basel Committee on Banking Supervision
Herstatt Bank
New largest corporate bankruptcy in U.S. history
Vickers Report
UK's first bank run in 150 years
The company was exceeding its own risk controls and did nothing about it
(including NatWest and Ulster Bank)
Banks admit misconduct in feeding undervalued rates into the LIBOR calculation. The story breaks with Barclays (subsequently fined £290m) but more reporting banks are involved. As the worst offender offender, UBS receives the biggest fine £630m
LIBOR rework?
HSBC allowed Mexican drug cartels to launder billions of dollars through its US operations
AML changes?
The bank was accused of skirting US sanctions by running a rogue unit that schemed with Iran's government to hide more than $250bn (£160bn) in illegal transactions
Sanctions changes?
Growing recognition within the investment markets that customers were not empowered to make appropriate investment decisions
Retail Distribution Review (RDR)
Growing sense of unease in retail investment market
South Sea Company
(eventually led to Basel II
and Basel III)
(and amendments to capital requirements)
(and amendments to capital requirements)
Predictive, real-time transaction monitoring with the ability to execute preventative interventions will continue to grow in importance
Transaction monitoring
19 June 2012
Barclays, UBS & co
Infrastructure monitoring and reporting?
Millions of customers were unable to access funds for up to two weeks due to a software update glitch
Bank for International Settlement (BIS)
Basel Committee
20 Nov
28 July 2012
Appropriate AML surveillance?
Coutts is fined £8.75m for failure to identify high risk clients and problems monitoring associated financial transactions. This is the biggest AML fine in history
Trader Kweku Adoboli admits trading far in excess of authorized risk limits and booking fictitious trades to hide true positions. The bank loses $2.3bn and is fined £29.7m
Appropriate checks and balances?
Full transcript