| Mr Khoo elaborated that as the financial industry evolved post-crisis and new regulatory rules emerge, there would be greater expectation of financial institutions in the areas of corporate governance and risk management. Financial institutions should take this opportunity to establish stronger systems and processes, and develop the right qualities and capabilities in their people. He concluded that the compliance role was important to help financial institutions achieve necessary changes in behaviour and risk management practices to deliver the firm's regulatory responsibilities.
Several senior industry veterans also shared their views and perspectives on pertinent topics.
Key Challenges and Opportunities of Recent Regulatory Trends – Strategic Perspective Mr John Palmer, Principal of Regulatory Professionals Pte Ltd shared his insights on the causes of the Global Financial Crisis, market conduct problems, and measures to crisis-proof financial systems. He also discussed the compliance implications of these new measures, and upcoming challenges and opportunities.
Mr Palmer said that the effects of the recent financial crisis were more strongly felt in the transatlantic region than in Asia. He opined that the root cause of the crisis could be summed up in one word – leverage. He noted that causes of the crisis also included widespread and deep-rooted complacency, blind faith in markets, the illusion of perpetual liquidity and endless growth (exacerbated by weak public policy), excessive risk-taking and numerous bailouts.
While there have been attempts to crisis-proof financial systems, Mr Palmer noted that some of these initiatives would have implications on the compliance profession. In his opinion, the current environment encourages compliance officers with expanded responsibilities and increased opportunities for potential advancement
Impact of Regulatory Developments on Specific Business Activities:
(i) Consumer Business
Ms Jane Foo, Head of Compliance, Retail & Commercial Banking of Australia and New Zealand Banking Group Limited noted that the global financial crisis had brought about valuable experience to the financial institutions and regulators as financial institutions learnt about the benefits and importance of customer suitability. She emphasized that it was essential to define customer suitability, and review the quality of information gathered from customers relating to their financial needs, objectives and situation. In addition to obtaining the client’s financial information, risk profiling was also critical. She highlighted there should be a clear methodology that could withstand scrutiny.
(ii) Wholesale Business
Mr Lam Chee Kin, Global Head, Wholesale Bank Compliance, Standard Chartered Bank observed that the compliance profession continues to evolve at great speed driven by changes in business and the regulatory environment. Firstly, business drivers included financial institutions having verticalised governance structures, increased cross-border funds and transaction flows, and increased activity in less freely convertible currencies, each presenting a set of challenges to the compliance function. This is contributed to by greater focus on the share of the client wallet, holistic coverage of clients and cross-selling/universal banking, with increasing interaction between the public and private sector, and investment banking and private banking.
With regard to regulatory drivers, Mr Lam also provided his perspectives on post-crisis regulatory trends with a move away from deregulation, and how regulators are addressing conflicts raised as a result of cross-selling/ universal banking initiatives, including a significant rise in insider trading prosecutions. Finally, Mr Lam dealt briefly with the compliance challenges introduced by centralised clearing of OTC products.
(iii) Fund Management
Mr Long Jek Aun, Partner of Allen & Gledhill LLP highlighted that stricter regulation was inevitable. This would mean increased scrutiny and oversight of the fund management industry and greater challenges for compliance functions.
Mr Long cited examples of proposed reforms in the United States (US), with similar developments taking place in the European Union (EU) in the form of the Directive on Alternative Investment Fund Managers (“AIFM Directive”), which aimed to establish a common regulatory and supervisory framework for investment managers domiciled in the EU and funds managed, domiciled or marketed within the EU.
He also commented on the proposed regulatory changes in Singapore in relation to fund management companies and exempt financial intermediaries. These proposed changes were likely to result in changes in the competency and staffing requirements, custody and administration, compliance arrangements and risk-based capital requirements.
Building and Implementing an Integrated Compliance Framework: Building a Culture of Compliance in the Organisation
Mr Andrew Chow, Co-Head, Corporate Legal, Asia ex-Japan, Head of Compliance, South East Asia of Nomura Singapore Ltd opined that to build a culture of compliance in an organisation, compliance ownership within the organisation was essential. It would be critical for a compliance officer to possess the required soft skills (such as the analytical and lateral thinking skills) to be effective in his/her job.
Mr Chow also highlighted we should apply the “Keeping It Simple” process so that all staff in the relevant financial institution can understand and adhere to the relevant principles. In summation, Mr Chow listed the values that a compliance officer should uphold, above and beyond a vision or mission statement. These include being knowledgeable, factually accurate and transparent, consistent, courageous and humble, which are essential during times of crises.
Plenary Discussion: Building Confidence and Resilience through the Compliance Function
The plenary discussion was moderated by Mr Conrad Lim, Deputy Chief Executive & Head of Legal and Compliance, Asia of LGT Bank (Singapore) with participation from Ms Sharon Craggs, Head of Compliance and Assurance, Standard Chartered Bank and Mr Andrew Chow from Nomura Singapore Ltd.
Mr Lim provided his definition of the compliance function as one which aimed to educate, remind, discipline, fix and provide feedback. He noted that compliance function had its challenges, one of which was to effect changes. He elaborated that driving compliance function towards excellence was about trying to build confidence, to have a clear vision and effective judgment. Other challenges would include addressing issues such as Anti-Money Laundering (AML), Countering the Financing of Terrorism (CFT) and KYC (Know Your Customer).
In response to Mr Lim’s query on building confidence and resilience, Ms Craggs said that compliance officers should be competent, qualified and well-trained to enable issue identification and resolution. Judgement and experience comes with both training and education and “combat experience” i.e. on the job training. This type of compliance professional would instill confidence within management and stakeholders. At the same time, it was increasingly important for compliance officers to be knowledgeable on a broad range of areas, including legal, product, risk, financial, accounting and tax aspects, as making the right decision involves weighing all these aspects. .
Mr Chow highlighted that in terms of compliance priorities, one should look into how one analysed and influenced business activities. He added that this process could go a long way in providing the right direction to compliance practitioners.
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