In our latest survey, 85 percent of CCOs consider compliance software extremely important to monitor risks like personal trading. The consequences of violating regulations are simply too severe to rely on an outdated manual process, and CCOs are increasingly finding that an automated solution is more effective. Additionally, in the financial services sector, a failure to maintain compliance can impact more than just the firm and CCOs can also have personal liability.
An Increase in Legislation Targeting Personal Liability
Over the past few years, several regulatory changes have highlighted regulators’ intentions to hold CCOs and other executives responsible for violations.
- A 2015 Department of Justice memo directed US Attorneys and Department AAGs to punish individual leaders for corporate malfeasance.
- The Senior Managers & Certification Regime in the UK was passed in 2016 and became effective for all firms by the end of 2019. This regime is intended to make senior leaders’ roles more visible to regulators, ultimately increasing those leaders’ accountability.
- A 2017 FCPA Enforcement policy made it clear that corporate CCOs and other executives can be held liable for their action or inaction related to violations of the Foreign Corrupt Practices Act.
Worldwide, legislators and regulators in several jurisdictions including Ireland, Singapore, Malaysia, and Australia are also reviewing proposals that can subject CCOs and other executives to enforcement actions.
4 Ways to Reduce Personal Liability Risk
According to Thomson Reuters, the majority of firms expect personal liability to increase in 2020. This means that CCOs need to be more prepared. Below, we’ve compiled a list of tips & tricks to help CCOs remain alert. By implementing these best practices, CCOs will be able to monitor employee activity more effectively.
- Maintain documentation of compliance tasks: This includes being able to demonstrate an understanding of all applicable rules and regulations, having up-to-date policies and procedures in force, conducting ongoing and periodic reviews of procedures and controls, managing third-party due diligence, and addressing problems promptly and appropriately.
- Confirm that policies reflect practices: Having detailed policies and procedures can be a good thing, but that’s not the case if those policies don’t accurately reflect what the firm is doing. Ensure firm policies are current, relevant, and tailored to actual practices.
- Document supervisory responsibilities: Be sure lines of reporting and responsibility are clearly defined and documented, so each supervisor understands whose actions roll up to his or her role, and each employee understands the line of supervision.
- Use attestations: Require employees and other associated persons to certify their understanding of rules and policies periodically. In addition, CCOs could require individual supervisors and firm executives to attest periodically to their understanding of their roles and expectations.
While we expect enforcement actions to increase, a robust RegTech solution can help CCOs maintain compliance. With the right tools in place, CCOs can proactively monitor employee activity and take action against violations before it’s too late.