Compliance violations are a critical issue for any firm, particularly in the regulated world of FinTech.
According to MCO, for compliance officers, the inevitability of facing these issues is not a question of if, but when. Handling these violations effectively—identifying, mitigating, and analyzing them—is a testament to the robustness of a company’s compliance framework.
Mitch Avnet, Founder and Managing Partner at Compliance Risk Concepts (CRC), emphasizes that nearly all compliance breaches are unintentional, often resulting from employee carelessness. To mitigate these risks, Mitch advises companies to look for patterns and trends within their compliance data. By presenting these findings through statistical analysis to stakeholders like CEOs, boards, or regulators, companies can pinpoint potential gaps in their compliance processes.
Effective compliance programs are not just about identifying problems but also about implementing solutions. For instance, upon detecting a compliance issue, initiating targeted training and requiring certifications can demonstrate a firm’s proactive stance to regulators. “Training is cheap – get in front of your people if you see patterns of violations emerge – it’s the perfect opportunity for just-in-time education,” Mitch suggests. This proactive approach not only addresses gaps but also enhances the transparency and accessibility of compliance records, aligning with regulatory requirements.
Moreover, Mitch recommends publishing the firm’s code of conduct electronically, which allows tracking which sections are most frequently accessed by employees—often highlighting areas of highest risk.
Addressing non-compliant behavior, especially among employees who consistently test the boundaries of compliance, is crucial. Ensuring that compliance officers have a seat at the leadership table enables the enforcement of strict repercussions for non-adherence. Linking compliance performance to tangible outcomes, such as bonus eligibility, can further enforce compliance norms.
Dealing with non-compliance in high-performing individuals or leadership poses a particular challenge. Consistent application of the rules laid out in the Workplace Supervision Procedures (WSPs), regardless of the individual’s position within the company, is essential for maintaining the integrity of the compliance program.
In cases where internal resolution proves challenging, Mitch notes the benefit of involving a third-party consultant. This can provide an objective perspective on compliance issues, particularly useful when dealing with difficult personalities or senior leadership. Such consultants can offer valuable regulatory insights and help alleviate the burden on internal compliance teams by articulating the risks and potential consequences of non-compliance.
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