ComplianceMedium

3 min read · 487 words

What the seat actually does

Rules arrive from outside the firm — statutes, regulators, sanctions regimes. Somebody has to turn them into something a desk can actually follow, build the controls that make following them the default, and produce the evidence that all of it worked. That is compliance.

The deliverable is evidence, not intention. A firm that behaved well and cannot show it is in the same position as one that did not, because the only thing a supervisor can examine is the record. That is why so much of the seat is documentation, and why the documentation is the substance rather than the overhead.

• Advisory — what a proposed trade, product or arrangement is permitted to be.
• Surveillance — monitoring for market abuse, from front-running to manipulation of a closing price.
• Financial crime — knowing who the customer is, where the money came from, and screening against sanctions.
• Regulatory reporting, and answering when a supervisor asks.

A day, and where it goes

• Alerts. The surveillance system flagged something overnight; almost all of it is noise and the point is the part that is not.
• Onboarding. New clients waiting on checks, and the ones whose file cannot be completed.
• Approvals — a new product, a new market, an unusual structure.
• Policy — rewriting something because a rule changed, and then making sure anybody reads it.

What it is measured on

• Findings — from supervisors, from internal audit, and how long they stay open.
• Whether controls operated, evidenced, rather than whether they exist on paper.
• Alert quality. A system that flags everything has told nobody anything.
• Time to onboard, which is where the business feels this seat most.

What it touches on this site

• What protection exists for the client — investor protection.
• Who writes the rules — supervision and regulation and central banking.
• Where the seat is felt — transaction banking, trade finance and the branch.
• When it goes wrong — 2020, where what was reported and what existed were not the same thing.

How it goes wrong

• A control that exists and does not operate. The policy is written, the training is completed, and nobody performs the step.
• Alert fatigue. Thousands of flags a day guarantee that the real one is closed in the same eleven seconds as the rest.
• Advising on the letter and missing the arrangement. Each step permitted, the whole thing plainly not.
• Being consulted after the decision, at which point the only available answers are yes and an argument.

Concepts to master

• The record is the control. An undocumented decision cannot be examined, and therefore cannot be defended.
• Conflicts are structural, not personal — see the other side of the trade.
• Information asymmetry is what most market rules address — see market microstructure.
• Operational risk is a real family, not a residual — see which risk decides.