- Compliance managers are like the police in investment banks
- They government regulations are enforced
- They also create a “culture of compliance,” where sticking to the regulations is the norm
- If you work in compliance you need to be a person of utmost integrity.
- You might also need to know how to code: some aspects of compliance (eg. Monitoring) are being taken over by computers
What do compliance jobs in banking and finance involve?
In financial services, the compliance function serves two key purposes. Firstly, it ensures that the institution operates within all applicable laws, rules, regulations and standards. Secondly, it creates and maintains a “compliance culture.
The compliance ensures that an institution operates within the rules and regulations applicable to its specific lines of business. You could say that compliance operates as an internal police force, monitoring behavior and tracking adherence to specific rules and regulations. Laws are typically created by government bodies and administered and enforced by government agencies. These agencies create rules that firms must obey. The interpretation of these rules requires both a thorough understanding of the law and an appreciation of the practicalities of the businesses affected. The compliance function provides this interpretation.
Compliance is also responsible for the establishment and maintenance of an appropriate compliance culture within a firm. That involves not only line-by-line review of the rules and regulation, but also the education process as well as the creation, along with senior management and the Board of Directors of a compliance program for the entire company. This notion of a “compliance culture” goes well beyond the employee training. It’s about influencing behavior and setting expectations so that adherence to rules and regulations becomes second nature.
The importance and influence of the compliance function within financial institutions has grown dramatically since the financial crisis of 2008. While compliance has always been important, the explosive growth of regulation as a result of the weaknesses exposed by the crisis has brought compliance needs into sharp focus.
The specific duties of compliance officers vary by institution, but core compliance jobs can roughly be categorized in four key areas.
Anti- Money Laundering (AML) and Know Your customer (KYC) jobs
KYC due diligence is conducted for both new and existing clients and investors. It’s an ongoing process: the origins of investors’ funds can change over short periods of time. There are two key objectives of each due diligence exercise: a) the identification and verification of investor’s identity and b) determining the ultimate purpose of the investment.
Anti-money laundering (AML) programs are a key to compliance. AML staff review the details about new and existing clients in terms of their locations, their relationships with others, and the laws applicable to them. The key elements of AML include training staff to spot money laundering issues, client due diligence, the designation of an AML officer, independent testing and governance documentation (policies and procedures)
Compliance Risk Management jobs
Financial institutions of all kinds require governance processes to be carried out and monitored to reduce the risk that regulations are infringed. Compliance risk managers look at everything from the compliance reporting, to roles and responsibilities within the compliance function, the disclosure of information about transactions, insider trading prevention, secrecy and privacy, recordkeeping of transactions and complaints, and potential conflicts of interest.
Business Conduct jobs
These jobs are about embedding a firm’s culture of compliance and code of ethics into specific business practices. Adherence to the specified requirements is constantly reviewed.
Compliance monitoring, documentation, and reporting jobs
Information flow is a key part of the compliance process. If you work in monitoring, documentation and onboarding, you job will involve keeping an eye on how clients are being on-boarded, on transaction flow and on policies and procedures to maintain an effective control environment. Technology has made these roles much easier: compliance monitoring professionals now have easy access to data about trades, clients, conflicts, and market practice. Their role is to aggregate, report and interpret this data. They also manage the information flow to the board of directors and senior managers, ensuring that they’re fully aware of the compliance risk profile at the heart of the bank.
Career paths in compliance
There’s no specified background for a career in compliance, but it’s also not uncommon for people with a background in law, business, accounting, or finance to move into compliance jobs. If you have a legal background, for example, you might find it possible to immediately apply your knowledge of relevant securities laws and regulations.
If you’re not coming from a legal position and are looking for an entry-level compliance job, you might find that you start out in the “control room”. The control room is responsible for the maintenance of the information “wall” between the public side of the institution dealing directly with investors and the private side which has access to non-public, confidential information.
Other entry-level compliance jobs include screening clients for criminal activity [KYC], ensuring that anti-fraud checks are carried out; performing due diligence on payments to make sure funds aren’t being used to finance illicit activities [AML]; or providing information to regulators and law enforcement agencies. Ultimately, these functions are all managed by senior compliance managers, but there are plenty of junior opportunities too.
The nature of your job in compliance will depend partly on the kind of firm you work for. For example, in a small institution like a start-up hedge fund, a compliance officer could wear several hats including customer and payment screening, managing people and writing policies. If you have a compliance job in a big bank, your work is likely to be much more specialized.
Ken Weiller, a veteran compliance and operating professional with experience in both banks and the hedge fund industry says compliance professionals in hedge funds have become more prominent in recent years. “The compliance staff interacts regularly with the rest of the firm on multiple levels; by setting policies and being the point person for their implementations,” says Weiller. He says that compliance professionals in hedge funds have responsibilities spanning everything from approving and regulating employees’ personal trades to participating in decisions about the allocation of expenses to investors.
“At many firms, Compliance personnel are involved in daily trading/research meetings as well as being members of firmwide committees dealing with areas such as valuations and conflicts of Interest,” Weiller adds.
If you want to get ahead in compliance, there are various professional certifications for compliance officers that can differentiate you. The American Bankers Association offers one in the U.S., for example, as does the Independent Community Bankers Association (if you want to work for a community bank). In the UK, compliance qualifications are offered by The Chartered Institute for Securities and Investment and International Compliance Association.
Which skills will you need for a career in compliance?
If you want a job in compliance, it will help if you have the following skills.
Legal and regulatory skills
More than anything else, you’ll need an understanding of the legal and regulatory framework surrounding both the business you cover and the overall financial services industry. The regulatory environment is constantly changing. You’ll also need to be acutely aware of the changes and the implications for the way business is done. Failure to do so may have severe financial and reputational costs.
Good compliance people have excellent communication skills. While this requirement is not unique to compliance, it is particularly important given that a major component of the job involves the explanation of often-complex rules and regulations. Compliance is often called to provide interpretations of complicated rules that must be understood by everyone form new hires to senior management.
Problem solving and critical thinking skills
You’ll need to be a good problem-solver. The rules are not static. Compliance officers are charged both with addressing current issues and anticipating potential new ones. They must have a good sense for the direction of business practice and the evolution of the laws and regulations.
Compliance issues affect everyone in an organization and staff must be able to establish good relationships from the top to the bottom. This requires an ability to “read” individuals and to develop relationships that span the organization. This can be tricky; compliance sometimes has to say “no.”
Compliance people need to understand the functions they cover. They must be seen as promoting the interests of their internal clients and not labelled as the “business prevention department.” Being called “commercial” is one of the highest compliments a compliance officer can receive.
Technology is changing rapidly in financial services. Compliance professionals need to understand technology infrastructure. The rise of crowdfunding, use of cryptocurrency, growth of digital banking, and increased reliance on cloud storage mean that today’s compliance professionals increasingly need technical expertise. Compliance is increasingly about the way that data is collected, aggregated, processed, and stored.
Compliance officers are often called upon to make difficult decisions. They need a keen sense of right and wrong. Banks rely on compliance to define the often-vague restrictions written into laws. Compliance professionals need to be “above the fray”, and capable of making the right call even when it may be unpopular.
Salaries and bonuses in compliance
Compliance jobs are not the best paid in financial services, but they won’t pay you badly either. If you work in compliance you probably won’t get a bonus that’s many times bigger than your salary, but you’ll still get a bonus that’s a lot bigger than those on offer in many other industries.
The eFinancialCareers salary survey suggests that starting salaries for graduates taking compliance jobs in London are close to £40k ($51k), plus a £2k bonus. Five or six years into your career in London, you could expect to make £70k, plus a £5k bonus. However, more experienced compliance professionals – working on Wall Street and with around nine years’ experience are on salaries of $173k plus bonuses of $49k – so compliance isn’t badly paid either!
The author acknowledges the following sources: