Trading Surveillance Compliance Officers are widely recognized for their extensive regulatory knowledge, keen attention to detail and ability to make informed judgments. In a question-and-answer session on compliance in focus: Jonathan Dixon, Director of Regulatory Affairs EMEA The eventexplains how collaboration across all lines of defense is an important – and often overlooked – aspect of financial compliance.
What are the characteristics of compliance officers who work well together?
Jonathan Dixon, event
Collaborative compliance officers possess a combination of hard and soft skills and are strong communicators. They must be able to work effectively with the front office, which is time constrained and focused on revenue generation, while demonstrating they have expertise and the ability to add value. For example, when compliance officers ask a trader to explain the strategy behind the activities that led to a trading surveillance alert, it is important that this request is concise and that they understand the response given.
Compliance professionals must demonstrate to the trader that they are protecting both the institution and the trader, and help the trading desk do its job more effectively. For example, if the trader gives a compliance officer five minutes of their time, they could later avoid a Financial Conduct Authority (FCA) market abuse investigation, which would take much more time.
Within the regulatory compliance function itself, knowledge sharing needs to take place so that trading surveillance team members understand complex cases and why decisions are being made. There is also a need for more extensive compliance knowledge sharing in the form of training or supporting audit teams in Level 3 monitoring and line defense. Companies need to ensure that compliance officers and trading surveillance teams are as good as they can be, and educate the entire compliance team on what employees are doing and why. This is particularly important as recent long-term market volatility is likely to result in a higher number of alerts and regulators imposing more fines and investigating a wider range of product and asset classes for market manipulation than in the past.
Monitoring for cross-product manipulation poses a particular challenge for over-the-counter (OTC) markets, where there may be multiple legs for different asset classes. Regulators are aware of the difficulties, but companies need to be aware. Therefore, there must be intensive, ongoing communication between customers, regulators and providers to ensure that any issues are properly addressed.
Can you explain how technology supports both a culture of collaboration and a culture of struggle? solve?
The face-to-face collaboration between the front office and the compliance function helps the trading surveillance teams to understand the risks to the business. The risk assessment process must come first. Technology then helps companies manage that risk faster.
Good technology allows market surveillance teams to collect comprehensive data on alerts and focus on cases where risk is greatest. Companies have a limited number of analysts and a limited amount of time. With the right technology, they can focus on high quality and valuable alerts while casting a wide net. Sometimes low-value alerts accumulate over time, representing cumulative risk or an implication of continued misconduct. As such, organizations also need a way to easily look back at past issues and data
Traditional bank surveillance systems kept thresholds tight to avoid triggering a large number of alerts that did not match their risk tolerance. However, doing so runs the risk of overlooking issues that accumulate over time, whether through a build-up of low-profit alerts or regular, minor, breaches. Eventus’ market monitoring platform leverages robotic process automation (RPA) and machine learning to ensure organizations can cover the range of alerts they need to cover and not miss issues that may have been important overall. RPA technology can use enterprise-approved logic to automatically close a large number of alerts, allowing analysts to focus on a smaller number of higher-value alerts. Organizations can close alerts faster, but also store data behind the scenes on what has been done to enable retrospective analysis of customers, number of alerts, volumes and various other data points.
Can you give an example of how technological capabilities can help or hinder the collaboration and efficiency of compliance teams?
Suppose a good trade monitoring analyst can effectively examine up to 40 alerts per day. When they get 300 notifications, it’s very difficult to do it effectively and consistently. To improve the performance of the compliance team, companies need to ensure that analysts are able to handle high-quality alerts so they can focus on actionable alerts that add value to both the trading surveillance team and the broader regulatory compliance team .
The trading monitoring software should also allow other team members to step in and help deal with the overflow if needed. The platform must be able to handle the workflow of the entire compliance team, documenting who is responsible for investigating which alert, who has already viewed it, who is asking for collaboration, who has escalated an alert to a supervisor, and who has completed an alert alert. All of this should be verifiable and documented in the system.
Other collaborative technologies also help enable communication within and between teams, especially for low-value alerts that can be easily dismissed. However, for more complex alerts, it is very important to transfer the data to the trading surveillance platform to ensure sufficient audit trails.
What are the benefits of a collaborative compliance team?
A key benefit is internal growth. When there is more collaboration, analysts understand why decisions are made and expand their knowledge of alert types, procedures, and models. The more they learn and grow, the better analysts they become. And the more they work together, the better they can work with others. Interpersonal skills and learning how to interact with others are crucial.
In a broader context, better collaboration helps organizations understand their compliance risk. Analysts work with the front office or with auditors to explain why they have a particular process and why they do what they do. Collaboration enables better visibility across the organization and outside of silos.
By collaborating with a broader team, on both compliance and non-compliance issues, analysts can share their knowledge and foster a more positive work environment.
Compliance in focus is a content series on regulatory issues for financial markets and the challenges compliance officers face in overcoming oversight and control. Compliance in focus is produced in cooperation with Eventus.
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