Jody Houton
Content Marketing Manager

The importance of a robust, modern compliance program, especially in the financial services sector, cannot be overstated.

This year taught us that more than any other. 

Despite this, many private equity firms, hedge funds, asset managers, and investment banks still rely on legacy compliance solutions, and a compliance team that is ill-equipped to deal with the surveillance and monitoring of traders who are working from home.

A more modern approach to compliance is required.

But first, it’s important to understand what a compliance officer typically does, and why the old way is no longer working…

What Does a Compliance Officer Do? 

A compliance officer is expected to have a thorough understanding of his/her firm’s particular compliance program and working environment. Ideally, he/she should also be aware of employee working habits and know them well enough to detect anomalies in behavior, which can often be an early indicator that they may engage in financial crime or act in breach of compliance laws or conduct regulations. 

Traditionally, this involved pounding the trading floor to get a “reading of the room”; listening and looking out for raised voices, or hushed conspiratorial tones. Other red flags involve traders spending late nights or early mornings in the office, working and communicating when no-one else is there. 

When Compliance Changed Overnight

Of course, in a COVID-19 world, where many people are working from home and compliance teams lack in-person visibility into investment professionals’ behavior, telltale signs of “bad actors” can be harder to identify. The once unfathomable concept of traders and their compliance counterparts working in isolation has quickly become a reality. 

Indeed, the pandemic has accelerated the digitization and decentralization of working conditions within the financial sector, which has made the adoption of communications and compliance monitoring solutions a necessity.

Although banks and other financial services have been utilizing technology to assist with the surveillance of suspected bad actors for more than a decade, such rudimentary solutions are often limited to certain data streams (emails) and lexicons of keywords, which are applied as a filter against the e-communications of monitored employees. 

A further failing of legacy compliance solutions is that such monitoring and analysis are usually carried out in hindsight, meaning that by the time the compliance breach had been identified, it was often too late.

Compliance has changed. A more modern compliance program is required.

To discover how to modernize your compliance program, and effectively mitigate a myriad of risk factors that can impact organizations, download our How to Create a Modern Compliance Program white paper.