Getting the right compliance culture
Getting the right compliance culture
The text discusses the importance of an effective compliance culture in financial institutions, highlighting the Wells Fargo scandal as an example of the consequences of its absence, and emphasizes that fostering such a culture requires continuous effort, alignment of organizational values, and empowerment of employees.
Cassie Palaniandy
Compliance Consultant
Between 2002 and 2016, employees of Wells Fargo fraudulently opened fake accounts and forced customers to take on services which they did not need due to pressure from top-level management to enhance sales and meet quotas. Wells Fargo agreed to pay $3 billion in February 2020 to settle the criminal charges and actions brought against it. This case illustrates a complete lack of an effective compliance culture within every level of an organization and what impact it can have.
Scientific research supports the fact that a lack of an effective compliance culture in financial institutions not only had an impact on the financial crisis but is also a driver of human error, resulting in scandals, fines, and reputational damage. During the Anti-Financial Crime conference hosted by Deloitte Germany Forensic in 2019 in Frankfurt, a panel discussion took place with the title �Culture as a major root cause of financial crime'. One noteworthy statement of a panelist is �Social psychology assumes that our behavior at work is influenced by the �system' around us. Employees base their choices, and therefore their conduct, on what they perceive as important to the organization. It is key that the signals sent from both the formal and informal structures of our organization are aligned.� Indeed, as someone who has been working in regulated services for more than 5 years now, I can confidently say that culture can act as an enabler or disabler of financial crime and can make or break a business.
I often find it easier to grab the attention of the relevant stakeholders when talking about compliance culture when I link effective compliance culture to the business achieving its goals. Undeniably, a key benefit of implementing an effective compliance culture is that it encourages better decision-making.
Culture acts as a reference and answers questions which employees at all levels may have as they move through the decision-making process. An effective compliance culture will lead to decision-making which is aligned with businesses' values.
Embedding an effective compliance culture is not a one-time exercise but rather a continuous process since behaviors need to be constantly reinforced. The tone is set from the top, the leadership team has to embrace a culture which fights against financial crime to set an example. Communication is key, all employees should be aware of the values of the company and the risks it faces.
Businesses should empower employees and make them feel that they are a part of a team to promote and encourage ethical behaviors. The employee appraisal program should be reviewed to ensure that it is aligned with the organization�s values and culture and to create a sense of accountability. Financial Institutions should ensure that they have reviewed their internal controls and policies, so that the governance around the day-to-day running of their businesses does not conflict with their desired culture. Recruiting people with the desired skills and capabilities is an essential part of instilling an effective compliance culture.
Today we can read about compliance culture everywhere; however, the jury is still out on what a good compliance culture means exactly. There will definitely be more than one good answer to this. In my opinion, one simple illustration of a good compliance culture is the ability for employees irrespective of their hierarchy to address their opinions and concerns without any trepidation.
Aspida Insights is where we draw on our knowledge, experience, and expertise in key business areas such as compliance and risk management, regulation, and corporate governance to offer our thoughts, forecasts, and advice on a range of topical issues or areas of client concern.
Out with tree hugging and in with modern sustainability
August 27, 2021
Aspida's Jessica Regnard shares her insights on what �Eco-friendly' means in the context of sustainability in today's business world.
Read More �
Are you worried about the MFSA's new ICT Guidance?
June 21, 2021
Is your business compliant and are your policies in line with the new MFSA ICT guidance? We can help you.
Read More �
The Changing Regulatory Landscape of Malta AML Regulation
March 15, 2021
Aspida Malta's Compliance Services Executive, Aaron Brancaleone, sets out his take on Implementing Procedures targeting Company Services Providers (CSPs) and Proposed Amendments to the Implementing Procedures � Part I.
Read More �
```
