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. 

In this article, we'll explore the significance of compliance teams, take a closer look at their responsibilities, as well as uncover some of the top tips you should follow to build a strong and reliable compliance team. From identifying top-tier talent to fostering a culture of compliance, we'll also examine the indispensable role that recruitment specialists play in building out a solid compliance infrastructure that not only meets regulatory requirements but also drives sustainable growth and success. 

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. 

Within the Financial Services sector, compliance covers a range of regulations aimed at safeguarding the integrity of financial transactions, protecting investors, and preventing illicit activities such as money laundering and terrorist financing. One of the most crucial aspects of compliance in this sector is Anti-Money Laundering (AML) compliance. 

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. In 2012, HSBC, one of the largest banking and financial services organisations globally, agreed to pay $1.9 billion in fines to settle allegations of money laundering and violations of AML laws. The bank was accused of allowing Mexican drug cartels to launder money through its accounts and failing to implement adequate AML controls. Similarly, in 2017, Deutsche Bank, a German multinational investment bank, was fined $630 million by U.S. and UK regulators for failing to maintain an effective AML program and allowing $10 billion in suspicious transactions to flow through its Moscow branch. The bank was accused of facilitating money laundering for Russian clients. While both banks had substantial financial recompense to pay, they also suffered an erosion of trust, tarnishing their reputations. Such events can even cause the destabilisation of their entire market. 

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. The collapse of Wirecard had far-reaching consequences, not only for the company itself but also for investors, customers, and the broader fintech industry, raising concerns about regulatory oversight, corporate governance, and the reliability of financial technology companies. The fallout from the scandal prompted calls for regulatory reforms and stricter supervision of fintech firms to prevent similar incidents in the future. 

Regulatory requirements continually evolve, and in this environment, compliance teams act as the enforcers (and defenders) of ethical conduct and regulatory adherence within their companies. Their primary responsibility is to develop, implement, and enforce internal policies and procedures that ensure their organisation operates within the bounds of the law and upholds the highest ethical standards. 

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 – compliance teams must stay on top of all the latest regulatory changes and interpret how they will impact their organisation's operations. They will analyse laws, regulations, and industry standards relevant to the company’s activities and provide guidance on compliance requirements. 
   

• Developing policies and procedures – developing and implementing policies, procedures, and controls to ensure adherence to regulatory requirements is a key responsibility for any compliance team. These policies cover areas such as data privacy, anti-corruption, anti-money laundering, and conflict of interest, among others. 
   

• Training and education – they provide training and education to employees on compliance policies, procedures, and ethical standards. This includes conducting workshops, seminars, and online training sessions to raise awareness and promote a culture of compliance within the organisation. 
   

• Risk assessment and mitigation – compliance teams conduct risk assessments to identify areas of potential non-compliance and develop strategies to mitigate risks. They assess the effectiveness of existing controls and recommend enhancements to address emerging risks. 
   

• Monitoring and surveillance - they monitor activities within the organisation for compliance breaches, including employee conduct, transactions, and communications. Compliance teams will use technology-driven surveillance tools and techniques to detect suspicious activities and anomalies. 
   

• Investigations and remediation – when compliance violations occur, the team investigates the root causes, assesses the impact, and implements corrective actions. This may involve collaborating with internal audit, legal, and human resources departments to conduct thorough investigations and implement remediation measures. 
   

• Reporting to regulatory authorities – compliance teams are responsible for reporting compliance violations to regulatory authorities as required by law. They must ensure timely and accurate reporting of incidents and maintain open communication channels with regulators. 
   

• Internal and external audits – a compliance team will be responsible for facilitating internal and external audits by providing documentation, answering inquiries, and addressing findings. Compliance teams work closely with auditors to ensure that audit processes are conducted efficiently and effectively. 

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. 

Having a clear vision for compliance efforts is essential for driving the team forward effectively. It provides a roadmap for the team to follow, guiding decision-making processes and resource allocation. A well-defined vision helps unite team members behind common objectives, fostering collaboration and cohesion. 

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. 

Industry-specific knowledge is also critical for understanding the unique compliance challenges and requirements within a particular sector. It allows the team to tailor compliance strategies to the specific needs and risks of the industry in which the company operates. Together, these specialised skills form the foundation of a robust compliance team, capable of addressing a wide range of compliance issues. 

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. 

Ensuring clear communication channels with other departments is essential for promoting a culture of compliance throughout the company. Compliance professionals must effectively communicate requirements and expectations to other departments, helping them understand their roles and responsibilities in maintaining compliance. Likewise, compliance teams must be receptive to feedback and concerns from other departments, fostering a collaborative approach to compliance management. 

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. 

So, what skills and expertise could a recruitment company bring to your candidate search? Here are some of the key benefits of partnering with recruitment specialists: 

• Industry knowledge – recruitment specialists have a deep understanding of the industries they serve, including the regulatory frameworks and compliance requirements unique to each sector. This expertise allows them to identify candidates with the necessary industry-specific knowledge and experience to thrive in compliance roles. 
   

• Talent identification – recruitment specialists excel in sourcing and identifying top talent through various channels, including job boards, professional networks, and through their own little black books of connections. It is not unusual for compliance professionals, unhappy with their current positions (or feeling that compliance is not taken seriously enough in their organisation), to reach out to recruitment specialists in search of new opportunities. This means that your recruitment specialist may have the ideal candidate just waiting for you, saving you time and resources on your candidate-hunt. 
   

• Assessment and evaluation – beyond sourcing candidates, recruitment specialists are skilled in assessing candidates for cultural fit, competency, and alignment with the organisation's values and compliance culture. They use a range of assessment tools and techniques to evaluate candidates objectively to ensure they meet the organisation's requirements. This can save an internal recruitment team hours of research or CV sorting and means that you only have to consider the very best candidates. 
   

• Regulatory compliance – recruitment specialists are well-versed in regulatory challenges and ensuring compliance with legal and regulatory requirements throughout the recruitment process. They stay updated on relevant employment laws and regulations to mitigate risks and ensure fair and ethical recruitment practices. This means that even as you build out your compliance team, you can ensure fair and ethical recruitment processes that are inclusive. 
   

• Diversity and inclusion – the importance of diversity and inclusion in building effective compliance teams can’t be overstated. Recruitment specialists will actively promote diversity in hiring practices and implement strategies to attract candidates from diverse backgrounds, ensuring that the compliance team reflects the diversity of the workforce and the broader community. This also means your compliance team will be best equipped to consider and pre-empt compliance issues from the widest perspective, negating as many potential concerns as possible. 

Recruitment specialists bring a unique set of skills and expertise to the recruitment process, enabling organisations to build strong and effective compliance teams. Their industry knowledge, talent identification capabilities, assessment and evaluation skills, regulatory compliance expertise, and commitment to diversity and inclusion contribute to the success of compliance initiatives and the overall organisational goals. 

Don’t forget 

The surge in regulatory fines, exemplified by the $5.8 billion incurred by crypto and fintech companies in 2023, underscores the critical importance of strong and resilient compliance measures. These fines not only pose significant financial burdens but also threaten the very existence of businesses, highlighting the need for effective compliance strategies. 

Compliance teams stand as the frontline against these risks, responsible for interpreting the ever-evolving regulations, implementing compliance protocols, and fostering cultures of integrity within their organisations. Their responsibilities cover a wide array of functions, from interpreting regulations and developing policies to conducting training sessions and investigations. The role of compliance teams is indispensable in safeguarding organisational integrity, reputation, and regulatory compliance. 

The collaboration between compliance teams and recruitment specialists is essential for building strong and effective compliance infrastructures. By leveraging the expertise and resources of recruitment specialists, companies can enhance their compliance capabilities, mitigate risks, and drive sustainable growth and success in an increasingly regulated business environment. 

Are you looking for the right team to help you strengthen your compliance and AML practices? Get in touch with Hamlyn Williams to start taking the next step towards future-proofing your company and strengthening your compliance team.