Hamlyn Highlights: How to build out a solid compliance team

In 2023, crypto and fintech companies worldwide incurred a staggering $5.8 billion in regulatory fines. This meant that for the first time they were fined more for negligent controls than the entire traditional financial system, last year. These fines covered a number of infractions spanning from deficiencies in customer verification processes and anti-money laundering measures to lapses in enforcing sanctions and addressing other financial crime concerns. 

The immense financial and reputational risks businesses face in the absence of effective compliance strategies can be so significant that they can spell the end of an organisation from one simple indiscretion. With regulatory bodies tightening their grip and public scrutiny intensifying, the need for robust compliance measures has never been more crucial. 

Compliance teams serve as the frontline defence against these risks, playing a pivotal role in ensuring that organisations operate ethically, responsibly, and within the bounds of the law. These teams are tasked with interpreting ever-evolving regulations, implementing compliance protocols, and fostering a culture of integrity across all levels of their company. 

Understanding the compliance landscape 

Within sectors like Financial Services, where regulatory scrutiny is particularly stringent, compliance stands as the very foundation on which secure business models are built. At its core, compliance refers to the adherence to laws, regulations, guidelines, and ethical standards that govern an industry. Nowhere is this more critical than in the Financial Services sector, where the ramifications of non-compliance are often very severe, impacting not only the reputation of the institution but also the stability of the entire financial system. 

AML regulations mandate financial institutions to implement strict measures to detect and prevent money laundering activities. These measures often involve thorough customer due diligence, monitoring of transactions for suspicious activity, and reporting of suspicious transactions to regulatory authorities. Failure to comply with AML regulations can result in hefty fines, reputational damage, and even criminal prosecution for both institutions and individuals involved. 

Some of our most well-known banks, household names, have been slapped with fines amounting to billions for failures in AML compliance. However, it is these big organisations that also have a certain amount of buoyancy, allowing them to recover from their indiscretions. For smaller companies, there are no such luxuries.

Wirecard AG was a German payment processing and financial services company that gained prominence as a leading fintech company, offering digital payment solutions and financial services globally. However, in June 2020, Wirecard became embroiled in one of the largest corporate scandals in Germany's history when it was revealed that €1.9 billion ($2.1 billion) of cash on its balance sheet likely did not exist. As a result of the scandal, Wirecard filed for insolvency in June 2020, and its stock price plummeted from over €100 to just a few euros within days. The company's CEO, Markus Braun, was arrested and faced charges of fraud, embezzlement, and market manipulation.

What are the responsibilities of a compliance team? 

The responsibilities of a compliance team cover a wide range of functions, all aimed at ensuring that an organisation operates within the bounds of the law and upholds ethical standards. Here are some key responsibilities typically undertaken by compliance teams: 

• Interpreting regulations

• Developing policies and procedures

• Training and education  

• Risk assessment and mitigation  

• Monitoring and surveillance

• Investigations and remediation

• Reporting to regulatory authorities    

• Internal and external audits

The compliance team plays a critical role in safeguarding the organisation's integrity, reputation, and regulatory compliance. By proactively addressing compliance risks and promoting a culture of ethical conduct, they contribute to their company’s long-term success and sustainability. 

How to build out a solid compliance team 

While there are many individual skills and attributes you should look for in your compliance team, there are several overarching factors that you must ensure are at the heart of your team.

• Leadership and strategy - in any compliance team, leadership must play a pivotal role in steering the direction of compliance efforts and ensuring alignment with organisational goals. Leaders within the compliance function are responsible for setting clear compliance goals and strategies that align with the company's overall objectives. They establish the tone at the top, emphasising the importance of compliance throughout their company’s culture. 
• Expertise and skills - a solid compliance team requires a diverse set of skills and expertise to support the company through the complex landscape of regulations and ethical standards. Specialists in legal, regulatory, and industry-specific knowledge are essential assets within the team. Legal expertise enables the team to interpret and apply relevant laws and regulations to the company's operations effectively while regulatory specialists stay on top of changing compliance requirements and ensure that the company remains in compliance with applicable laws and regulations. 
• Effective communication - communication is essential for the smooth operation of most teams, and compliance is no exception. Clear and open communication channels within the team enable collaboration and knowledge-sharing, which allows team members to work together towards common objectives. Effective communication also extends beyond the compliance team, including interactions with other departments and stakeholders within the organisation, as well as with regulatory bodies and external parties. 

Continuous learning and adaptability 

The compliance landscape is constantly evolving, with new regulations, guidelines, and best practices emerging regularly. As such, continuous learning and adaptability are essential qualities for a solid compliance team. Team members must stay updated on changes in laws and regulations relevant to their industry and be proactive in adjusting compliance strategies accordingly. 

Importantly, a culture of continuous learning enables the team to identify emerging risks and opportunities proactively, allowing them to stay ahead of compliance challenges. Adaptability is equally crucial, as compliance requirements may change rapidly in response to external factors such as technological advancements, geopolitical shifts, or industry trends. By embracing a mindset of continuous learning and adaptability, compliance teams can effectively navigate any changes and challenges to ensure the long-term success of the organisation.

The role of recruitment specialists 

Recruitment specialists can play a central role in the success of any organisation's compliance efforts. Their expertise and skills are instrumental in identifying, attracting, and retaining top talent for building a robust compliance team.  

Recruitment specialists act as strategic partners in the recruitment process, working closely with hiring managers and HR professionals to ensure that the compliance team is equipped with the right talent. Their understanding of the compliance landscape and the intricacies of regulatory requirements enables them to effectively match candidates with the specific needs of the organisation. Not only do they source candidates, but they can also play a crucial role in assessing cultural fit, navigating regulatory challenges, and promoting diversity within the compliance team. 

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