The meaning of compliance is literally ‘the action or fact of complying with a wish or command’. It means that you comply with the laws and regulations of the government, (financial) regulators, and others. It is also important that you work according to the standards and rules of your own organization.
Especially in the financial world, more and more laws and regulations arise. That is also what the term compliance was coined for. This is partly due to the financial crisis of 2008. Of course, we never want to experience something like that again, so we cam up with more rules, and they started piling up. Rules against fraud, insider trading, and money laundering.
A financial organization today even faces rules to prevent the financing of terrorism. Go figure!
If you're working in finance, expectations and demands are quite high. For example, you're expected to perform your job honestly, reliably, and carefully. You're expected to look at what your customers and your shareholders think is important. You are required to behave according to the law and to not misuse your knowledge. You're also expected to let others judge you and to ensure that people trust and have confidence in the financial sector. If you fail to do this, you are liable.
There you go, that's compliance management in a nutshell. Michael Douglas in the movie ‘Wall Street’ and Leonardo DiCaprio in ‘Wolf of Wall Street’ are perfect examples of how not to do it.
Financial institutions supervised by DNB (Bank of the Netherlands), AFM (Financial Markets Auhtority), and/or BFT (Financial Supervision Office) are required to appoint a compliance officer (aka compliance manager). This is, by definition, an independent and autonomous position.
But there's more. In a way, compliance management is similar to ISO certification. The crucial question is whether you're doing it for the regulator, or because you really want to make progress as an organization?
Ultimately, compliance management is also about the effects of your activities on the environment, which in turn is part of the QHSE (Quality, Health, Safety, and the Environment) policy – a framework that helps organizations manage and improve their performance in these areas. Compliance management also forces you to take into account the needs of all the people who come into contact with your organization, which refers to your organization's corporate social responsibility.
Although compliance management originated in the financial sector, there are very few organizations for which compliance is not relevant. It's not always labeled compliance, because many sectors have a different name for it.
As a lawyer, you have to deal with codes of conduct for which you have taken an oath or promise. In healthcare, too, it is important to adhere to codes of conduct and to be honest and trustworthy.
Due to a number of stock market scandals, compliance management is now also important in corporate companies. By the way, compliance management can be quite a challenge, especially if you operate abroad. If that is the case, take into consideration that the interpretation of laws and regulations differs from country to country when it comes to managing compliance.
Compliance management is much more than an obligation. As an organization, you can also use compliance management in decision-making processes. How? For example, by making it part of the goals of your organization for new developments.
Compliance also helps to determine whether a choice you want to make, is desirable and feasible. As a result, the work of the compliance manager is very versatile.
In the financial sector, compliance management is primarily focused on sustainability, says Caja de Groot. She is compliance officer at Stroeve Lemberger, an independent asset management advisor.
“The financial sector is important in achieving international sustainability goals. To this end, new laws and regulations are emerging that will help improve the operations, processes and procedures of financial organizations. An example: previously, investors could exclude sectors such as the arms industry. But in the future, you can actually choose investments that steer towards environmental objectives.”
Compliance management: inform your employees
Laws and regulations change all the time. Even the standards and procedures within an organization are not set in stone. So you have to keep repositioning them in your policy and working methods. But if employees know nothing about it, nothing will change, of course. Compliance management also means informing your employees, involving them in the changes so they understand why something is needed, what is needed and what is their role in it.
Compliance management software makes a difference
To inform employees, good compliance software is indispensable. “For that we use WoodWing Scienta”, says Caja. “With Scienta, you can give your entire organization access to current laws and regulations, implications for procedures and using documents. Let's say we have an educational meeting. Then we put the important documents in Scienta: from procedures to instructions.”
“After that, I send our employees a message from Scienta with links to those documents. This is valuable to employees. As compliance officer, using the available compliance software, I have established that they are well informed. And I can prove that employees have viewed the documents. Also very nice in Scienta is the search feature that employees can use to find everything quickly. In short: good compliance software helps enormously, both for quality management and process management. For us it works perfectly.”