United Kingdom

Details

  • Industry: Financial Services, Banking, Insurance
  • Type: Business and industry issue
  • Date: 15/07/2014

Compliance Co-Sourcing: the efficient answer to compliance monitoring 

The issue

 

Compliance departments are under unprecedented pressure. The barrage of recently-implemented and upcoming regulations bring a welter of onerous new and revised compliance requirements. Meanwhile, many financial services firms are introducing new policies and procedures to align corporate culture and conduct with improved practices as they seek to rectify past mistakes.

 

The expectations of everyone from regulators, policymakers and the media to boards, senior management and customers are rising. Compliance departments are increasingly charged with delivering wider, deeper and more preventative insights into their business’ health and robust assurances that activities follow prescribed policies and guidelines. The stakes are high. Failures or mistakes risk jeopardising the firm’s reputational and financial wellbeing1.

 

Current frailties

 

To satisfy the growing demands, many financial services firms continue to expand their compliance teams. In its June insight2, recruitment specialist Astbury Marsden reported that compliance and risk related roles now account for four in 10 City hires. It is a similar story across other sectors of the financial industry. Compliance staff wages are climbing in response. Andrew Adams, head of compliance, audit and operations at recruitment consultant McGregor Boyall, noted in a recent article that salaries are between 11 percent and 14 percent higher year on year 3.

 

Throwing more bodies at the issue may be a temporary fix, but it is not a sustainable solution. The current reliance on manual compliance checks is increasingly expensive and leaves institutions exposed to the risk of human error and poor defect capture rates. Cost constraints also mean checks are typically limited to small sample sizes, producing potentially questionable results.

 

KPMG believes there is an urgent need for financial services firms to reduce risk by improving the effectiveness and coverage of their compliance control checks, while cutting compliance costs.

 

A new solution

 

Many manufacturing industries decided long ago that the only way to ensure compliance was to build quality processes and adopt a preventative approach. Monitoring a process as close to real time as possible, measuring specified control limit variation and ensuring rapid corrective action following the emergence of potential adverse trends has delivered non-compliance levels to parts per million.

 

Financial institutions’ compliance teams can now undertake a similar step change with the help of KPMG’s Compliance Co-Sourcing solution. Combining regulatory expertise, robust compliance operations and proven IT and data services, we offer users a preventative compliance monitoring service that works for a host of processes.

 

KPMG’s service uses an integrated technology solution to automate triage compliance checks on a broad range of unstructured data. This includes sales and claim conversation telephone calls, customer application forms, system data, and communications such as emails, social media and texts. The automated triage assessment identifies exceptions to required compliance standards, and produces a heat map of the exception events/locations/people for further investigation. KPMG’s operational teams then investigate exceptions, and provide clients with rapid analysis and feedback to deal with the key risk events.

 

 

 

Potential benefits for clients include: 

 

  • Increased compliance checking coverage for process performance data. 
  • Greater consistency of checking and certainty in outcomes. 
  • Reduced risk through expanded coverage and rapid identification and feedback on vital exceptions. 
  • Lower costs through automated triage and efficient operational teams.

 

Enhanced insights into the monitoring outcomes and opportunities for future process improvements.

Footnotes

 

1 (The Financial Conduct Authority, which came into force on 1 April 2013, leveraged total fines of £474 million in 2013. As of 17 June, year-to-date fines for 2014 totalled £136 million.
2 June 2014 City jobs review, Astbury Marsden, http://www.astburymarsden.com/our-thinking/article/0/june-2014-city-jobs-review/

3 Salaries sizzle as competition heats up for compliance staff, Joe McGrath, 2 June 2014, Financial News, http://www.efinancialnews.com/story/2014-06-02/asset-managers-battle-for-compliance-staff-salaries-sizzle?ea9c8a2de0ee111045601ab04d673622).

 

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Simon Walker Simon Walker  


Partner
Financial Risk Management – Regulatory

0113 2313328

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John Seaton

 

John Seaton

 

Director
Financial Risk Management – Regulatory

020 7311 8130
07824 520805

Email John