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1 December 2016
One of the great things I like about the financial services industry is its ability to create and use a myriad of acronyms. It is no wonder that to the uninitiated this is a mysterious world. From the FCA to FOS, the LSE to LME, all these organisations (Financial Conduct Authority, Financial Ombudsman Service, London Stock Exchange & London Metals Exchange), have created their own unique vocabulary. Do you know your CASS and your COBS? Can you KYC your UBO?, and are they are PEP? And have you considered TCF within your SYSC? Mind you it is common to most professional groups and coming from a family of Doctors – a profession which seems to have adopted that great and ancient language of Latin – I can vouch that family dinner conversation were pretty incomprehensible to those not medically minded!
Recently prominence has been given to the UK Chancellor’s recent autumn statement; and much was made about something referred to as “JAM”. A quick search on Google gave me “Just A Minute”, or “Just A Moment” and even the “Jazz Appreciation Month” although this particular JAM occurs in April. No the JAM that was being referred to here concerned those individuals and families who were “just about managing” This is a phrase he, Philip Hammond, was credited with creating shortly after taking up the position of Chancellor of the Exchequer. Now not wanting to take anything away from those families and individuals who are ‘just about managing’ it occurred to me that the phrase could equally be adopted by those in Compliance.
‘Just about Managing’ Compliance is a state which I feel that all in Compliance should aim for. Those who, ‘just aren’t managing’ are risking regulatory sanctions to both themselves as individuals and to the organisations they advise. Those Compliance functions which are easily fulfilling their regulatory responsibilities are equally guilty of wasting the firm’s resources and are failing the firm’s shareholders and owners. I would therefore argue that JAM Compliance is a state which all Compliance functions should aim for. Naturally like all things at breakfast a little too much jam is better than a lean spread on your slice of bread, but if you constantly have too much jam – well too much of a good thing is never a good thing!
But what does JAM compliance look like? The FCA has been accused at times of gold plating EU regulatory requirements, but should a financial services organisation do the same? Think about the legal definitions of a PEP as defined within the UK Money Laundering Regulations 2007 – “an individual who is or has at any time in the preceding year, been entrusted with a prominent public function.” and their immediate family and close associates . How many organisations go beyond what is legally required based on their (risk based) approach. Many adopt the adage of “once a PEP always a PEP.” Equally how many organisations adopted a more laisez faire approach to compliance for example in regard to complaints and product mis-selling before the FCA stepped in as in the case of the PPI scandal.
In my experience compliance has three legs within an organisation – the regulatory requirements, the industry standards, and the firm itself. Each firm through its board, must decide how it acts in concert with these three elements. Clearly the firm cannot be in breach of the regulatory rules but there is scope in the way the firm interprets and acts on them. In terms of the industry, whilst I am never one who would advocate following the crowd I think it is important to know what the crowd is doing. Finally there is the firm itself – how it intends to approach the rulebook, its risk appetite and how it approach those compliance and ethical “grey” areas. Do this, and your Compliance function should be `jamming` – just don’t let the jam jar run out!