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A Digitized Staff Compliance Platform is a Must-Have
VigilantCS | Robert Kirwin | July 24, 2019
Meeting regulatory obligations, respecting compliance policies and upholding ethical standards are mission-critical for financial firms—and their staff members.
In our experience, these requirements can only be achieved by deploying a digitized solution that increases transparency and promotes individual accountability. Through digitization, firms can automate and reinforce regulatory requirements, while reducing the cost of compliance programs.
This article will examine why we believe a digitized solution is a must-have for achieving compliance, why that must occur at a staff level, and how it can deliver a competitive advantage.
Canadians generally trust their financial services providers; however, uncertainty and even mistrust resurface. Concerns about aggressive upselling by major Canadian banks reported in 2018 has caused FCAC to implement new regulations around sales practices (C-86). Meanwhile, misconduct cases in the investment sector have spurred regulatory activism: Canadian securities regulators are determined “to put clients’ interests first.”
Increasingly focused on individual conduct, our securities regulators are pursuing many sources of data: registration forms, continuing education (CE) completion, complaints and transactional data. A digitized solution is not only more responsive, it can also pinpoint emerging issues and identify mitigations and interventions.
See: SEC wants big data tools for monitoring and enforcing cryptocurrency market compliance
Some registered firms have begun using regulatory data meaningfully to assess staff conduct risk. However, these initiatives have exclusively targeted rogue trading in which primarily trade and communication surveillance is assessed. The potential is much greater if more strategically valuable data sets are examined to improve transparency, diagnose individual conduct risk—and to support further investigation.
Specific, known behaviours are sound predictors of the propensity for compliant/non-compliant conduct. These can be assessed and interpreted but the key is to do so efficiently through a digitized system. Through our academic review of behavioural economic factors, we have observed specific markers of compliant behaviour at an individual level, including:
Registered Status Reporting: Registered individuals must make ongoing disclosure of personal status and competency. Behavioural factors reflected in these filings are potential red flags not yet fully recognized by the risk owner, i.e., the registered firm and its staff.
Professional Involvement: Can be measured through three key components: vigor, dedication and absorption. A willingness to invest in one’s work and career is telling. Committed professionals will not risk infractions that diminish their prospects. PD, CE filings, as well as responsiveness to compliance department inquiries, supply evidence of involvement.
Complaint And Incident History: Firm’s will conduct investigations on client complaints and regulatory breaches (breach of policy or regulatory requirements). This information about past behavioural lapses—if analysed using well-attuned tools—can predict the propensity to engage in future misconduct.
Turnover Behaviour: Employment duration indicates a willingness to adhere to regulatory protocols. Unethical or noncompliant behaviour may cause advisors to be dismissed and/or to leave firms or the industry. Alternatively, long tenure reflects stability and occupational commitment.
See: Canada Seeks to Widen AML Compliance Net
Corporate Environment: Firms operate with a set of shared values and/or unspoken assumptions they associate with success and which can affect ethical reasoning. Understanding behaviour favoured by the prevailing corporate environment makes it possible to better manage conduct risk.
Colleagues’ Behaviour: It is important to understand how social influence affects a firm’s atmosphere, as well as how authority figures shape its organizational values and ethical norms. Conduct risk is elevated in environments where it has previously occurred and/or is tolerated.
It cannot be overstated: An effective compliance program is much more than a “checkbox” exercise.
Conventional paper-based record-keeping systems typically produce a fragmented, dated and potentially disjointed view of individual professional conduct: they cannot deliver the transparency or accountability firms must have today. Employing an efficient compliance resource that responds to these factors can empower firms to gain, retain and reward staff whose individual conduct creates compliant operations.
The link between compliance, transparency, digitization and individual accountability is direct and unbreakable.
To be effective, a firm’s compliance platform must incorporate user controls over the data and generate a cohesive, real-time view of staff behaviour by leveraging regulatory filings, training records, and conflict-of-interest, complaints and incident reporting, as well as transaction history. In VCSOpen, firms get a pragmatic solution to address their core compliance program needs today and help them avoid the costly consequences of a regulatory breach, while also providing an enhanced experience for staff. (Not far in the future, we will offer an AI-driven resource that will make it possible to go even deeper.)
See: 5 Digital Policies Small Biz MUST Have
Compliance programs are a necessary function that have the potential to be a strategic advantage. VigilantCS has designed cost-saving, central-portal solutions that ensure a firm’s core asset—its people—are up to snuff when fulfilling their individual compliance obligations. Firms that do not adapt to new regulatory realities are at a competitive disadvantage.
Robert Kirwin, LLB, MBA
Chief Executive Officer, Co-founder, VigilantCS
Founded by compliance professionals, VigilantCS is an innovative producer of intelligent cloud-based platforms for cost-effectively managing and monitoring conduct risk and staff-level compliance. In 2018, VigilantCS was one of only three Canadian companies to be named to the RegTech 100 list by FinTech Global. For more: vigilantcs.com, linkedin.com/company/vigilantcs/ and @vigilant_cs.
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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