The Cost of Compliance
I hear some senior management being quoted as wanting to be known for their compliance standards. Spouting that they will have the best compliance program. The budget is unlimited for adopting a culture of compliance. I question whether these statements are genuinely understood. If you’re reading this and thinking, I know the cost of compliance; then this article is obviously not directed at you. Alternatively, if you feel defensive, questioning your last set of justified refusals, then maybe, just maybe, this article is for you.
Compliance is a vast topic, related to different industries and functions. Anti-Money Laundering compliance is my primary obsession. It doesn’t end here. Aside from implementing a solid AML compliance program, consideration has to be given to regulatory compliance. It will not only include AML policies but also industry requirements and company standards. Assessing, researching, understanding and implementing an appropriate compliant culture is essential. Beyond avoiding a fine, a compliant culture will promote consistency of service, provide a dependable working environment for staff, create a means of detecting failures or anomalies.
On paper, this is quite appealing to have a compliant, efficient and well-branded company, known for adherence to regulations; this is attractive. Sadly, many focus on the financial investment it takes to achieve this. Compliance is no longer integrated into other departments but highlighted in its starring role. Unlike the Human Resources or IT department, or even the Legal Team, senior management does not see the direct value of investing sufficiently in compliance, be it money or time. Managers have been caught saying I can’t pass the cost of compliance to the customer; how can I recoup this? Their salary is too high, that software doesn’t seem worth it and other similar statements. In my biased opinion, compliance is so much more than a cost to be recuperated. Without a proper compliance culture and program, you are complicit in the crimes of not only your region but the world, depending on your client base. Without it, you deny staff a reliable and efficient means to do business. Overloading compliance staff to justify their existence at the cost of running an efficient compliance program will only yield shortcomings in the compliance program. Without it, your words are without actions. I recognise that startups and small businesses often require compliance staff to pitch in other departments. I have no faults with this, as I’ve had to do the same, just never at the cost of a robust and efficient compliance environment or at failing to adhere to regulations.
The cost of compliance is not, in my opinion, the salary of your compliance team, the price of your software, or the cost of doing business in a compliant environment. Instead, the cost is loss of reputation; the cost is regulatory fines; the cost is loss of brand; the cost is loss of clients. If you are a large firm, a conglomerate, global name, you pay the fine, call a marketing meeting and generally move on. If you are a small to medium-sized firm, I dare to say you feel the heat and live the cost of your mistake for years to come. Actually, in recent years, regulators have taken note of the cavalier reaction to their fines and have drastically added zeros to the penalty fees levied. Be the senior management team that puts action to their words and values the investment of a sincere culture of compliance.
