Do you remember when a general practitioner would treat patients with varied medical problems? Then came the age of specialisation, and then super specialisation, which required a “specialised” doctor to treat each individual body part.

Similarly, compliance in banking has evolved considerably, due to its complexities into a multi-specialist profession wherein being a “compliance officer” is simply not enough. Unlike the medical profession, it is still in its early stages, but considering the amount of information and regulations that a compliance officer has to deal with, every day can turn out to be challenging.

An archetypical profile of a compliance officer a few years back would require someone with “regulatory experience” — which is no longer the case anymore. The role has now been split into various specialised activities, such as Anti-Money Laundering (AML), Sanctions compliance, regulatory compliance and so forth. These roles further demand various specialisation and knowledge in fields such as Basel, Foreign Account Tax Compliance Act (FATCA), Financial Action Task Force (FATF) recommendations, Sarbanes — Oxley Act, labour laws, risk management, code of conduct and ethics, Corporate Governance etc and then specialised knowledge on jurisdictional compliance and regulatory matters.

A compliance officers’ role in any organisation depends largely on the complexity of its business and multi-jurisdictional influences. However, it is a fact that the expectations and pressure on the role have certainly increased due to the high stakes involved for the entire organisation.

Codes of conduct

As per the Basel Committee on Banking Supervision, the expression “compliance risk” is defined as the risk of legal or regulatory sanctions, material financial loss, or loss to reputation a bank may suffer as a result of its failure to comply with laws, regulations, rules, related self-regulatory organisation standards, and codes of conduct applicable to its banking activities.

Compliance laws, rules and standards generally cover matters such as observing proper standards of market conduct, managing conflicts of interest, treating customers fairly, and ensuring the suitability of customer advice. They typically include specific areas such as the prevention of money laundering and terrorist financing, and may extend to tax laws that are relevant to the structuring of banking products or customer advice. A bank that knowingly participates in transactions intended to be used by customers to avoid regulatory or financial reporting requirements, evade tax liabilities or facilitate illegal conduct, will be exposing itself to significant compliance risk.

In principle, this is easier said than done. The possibility of exposing the bank to said risk is enough to give sleepless nights to a compliance officer and to provide further incentive to senior management to consider what else the bank could or should do. As this is just a tiny fraction of numerous regulations and laws, it would be unrealistic to expect one individual to understand and implement everything that comes their way; thus there is a need to have specialised individuals to cater to specific requirements.

Corrective plans

In order to ensure “compliance” to various regulations, it is also important that compliance officers are entrenched deep into the organisation. They need to monitor activities of other departments to remain abreast of the status of all compliance activities and to identify trends and potential areas of compliance vulnerability and risk. They also need to suggest and implement corrective plans, provide guidance and direction to the board and the management on related matters. It is thus important for the compliance officer to not only have an excellent and thorough understanding of all the functions in the bank, such as treasury, back office operations, finance and more, but also have in-depth awareness and knowledge of all products within the bank as well as processes. Hence, there is a strong need to find professionals who not only have experience in “compliance” but also in other banking fields.

The role of the compliance officer over the years has also changed from the conventional policing role to that of a mentor, who needs to use interpersonal and communication skills to be effective. The skills do not only assist in advising, training and raising awareness among staff on compliance related matters, but also support in better communication in cross cultural societies such as UAE. Furthermore, a compliance officer in the area of Islamic banking should also be equipped with a basic fundamental of Islamic banking principles and its contracts when working for any Islamic banking institution.

Business support function

But does the role of compliance end by way of interpretation of the regulations, enforcing them in an organisation and then subsequently monitoring them? I believe not. As a business partner, it is important that compliance plays a larger role in an organisation as a business support function by advising on available options and opportunities, within the spirit of the regulations and law.

Just as in the medical industry, where there will always be a need for medical specialists, banks will always need the compliance specialist too. However, similar to how fitness instructors and nutrition specialists help their clients to reduce the need to visit the medical specialists, as an industry, banks too must invest in their equivalent specialists, to support an overall healthier and efficient banking industry.

The writer is the Head of Compliance, Noor Bank. Views expressed in the column are the writer’s own and do not reflect that of the newspaper.