Hiring compliance leaders, the impact of getting it wrong

Driven by an explosion of supervision and enforcement action over recent years, we are now seeing a huge surge in companies seeking to employ senior compliance staff, to help them get their houses in order.

Of course, this is the natural reaction of an industry which is keen to demonstrate it’s not afraid of spending money to achieve compliance and to mollify its ever-zealous regulator. To this end, industry efforts have focused, not only on the hiring of increasingly senior and well remunerated compliance staff, but also on the expansion of compliance teams in general. It’s not unheard of to find tier one operator compliance teams which have grown from two or three people on that landmark date of November 1st 2014, to nearer fifty in the present day.

One, consequence of this situation is that there are no longer enough sufficiently experienced and qualified compliance leaders to go around. This has resulted in more and more companies promoting people with little to no experience and expecting them to undertake the Head of Compliance role, complete with PML liability.

In my view, there is no viable fast track to such a position. Significant quantities of blood, sweat and tears are required to get someone to a point where they can effectively lead a compliance function in the current regulatory environment. Years of failing, years of learning how to pick up the pieces and start again, years of dealing directly with regulators and indirectly with customers, years of managing relationships with challenging, commercially focused business leaders.

Undeniably, there is a moral angle to consider when recruiting for the top jobs. Potentially, whole careers can be placed in jeopardy should things go wrong and a compliance professional’s suitability to hold a PML is called into question. Yet how many ambitious, hungry, young people would turn down the opportunity if it was offered to them early on in their working life? I know I wouldn’t have done.

Putting individual career risk aside, this issue should be recognised as a threat to the industry as a whole. If the people in control of compliance departments don’t fully understand the weight of their responsibilities or, perhaps more importantly, how they go about ensuring a commercially driven business is discharging its obligations effectively, who is being placed at risk? The operator for sure but on a more concerning level, the customer. 

It hardly needs to be highlighted but of course, even the slightest inkling of a potential lack of effective consumer protection presents a huge problem for the sector, as it desperately tries to change its image in the eyes of the public, the media and the regulator. 

As a positive and pragmatic person, it’s against my nature to present a problem without suggesting a solution to counterbalance the negativity. However, this is tricky, and I genuinely don’t know what the answer is. 

Perhaps it is a change in the standard industry compliance model, whereby operators employ senior compliance staff on a part-time basis to work only on high-level strategy; guiding and upskilling compliance teams to manage the day to day workload and thereby freeing senior individuals to advise multiple companies simultaneously. Perhaps it is operators recruiting compliance experts from other regulated sectors and committing time and resource to properly teach those individuals about the intricacies of the industry. Perhaps it is the regulator providing further guidance, hard requirements or even competency assessments for companies to implement when placing individuals in top compliance jobs.

As I said, I don’t know the answer, but I do know that it is not acceptable, fair or indeed good business sense, to recruit inexperienced people into top compliance roles and expect them to be able to fix highly complex, deeply entrenched problems. Particularly when the protection of the consumer is at stake. 

Companies need to recognise the importance of recruiting for these positions and if they can’t tempt the right people, they need to start thinking outside the box. 

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