House

HOUSE, Issue 24

Welcome

…to the 24th edition of House. Now that most bonuses across the industry have been paid, we are anticipating more resignations in the weeks to come.

Arguably the biggest move within the sector this month was an internal move at Goldman Sachs, with Court Golumbic being made Partner; a real sign of the growing importance of Financial Crime Compliance. Court becomes one of the chosen 1% of employees to be elevated to Partner status.

Key hiring trends this month include: opportunities from an opening China, the possible emergence of a compliance officer surplus and the question of what background and experience to look for in a good compliance officer in the corporate sector.

Litigator or practitioner?

The corporate sector is still very much in its infancy when it comes to global compliance functions, so questions around what makes a good compliance officer are still being asked. Traditionally, large corporates have hired litigators as their senior compliance officers, a sensible move given the firms in question are often creating such a position to negotiate with a hostile regulator or government enforcement agency.

Arion House has met several Heads of Compliance from the corporate sector this month and the large majority still have a legal background. However, the people they are looking to hire, or the people we are looking to replace them with, are often not clones. Conduct, ethics, training and framework are the key pillars that compliance departments need to implement now, and this is not necessarily the key skill of former litigators. Fortune 500 and FTSE 100 are looking to implement or bolster long-term compliance programmes that change the culture of a global company to ensure that the conduct of staff is in line with the programme. Key to this is a compliance officer who can win over hearts and minds and get others from all parts of the organisation to embrace change.

Where to find these people? Financial Services compliance functions, management consulting firms or the Big 4 regulatory consulting teams? We don’t think there is a one size fits all answer but there are some very interesting positions appearing across the globe for people who have the personality to change the culture.

China

Whilst this is a common theme in House, we are genuinely seeing a lot of evidence that China is on the agenda for banks, asset managers, corporates, law firms and consulting firms as it is the most common focus of questions asked.

According to Chinese news sources, over the weekend The China (Shanghai) Pilot Free Trade Zone (FTZ) has had its new reform plan approved by the central government. This suggests a set of new rules will be unveiled that aims to lower the barrier for foreign investors on company listings and bond financing and liberalise regulations governing finance, foreign investment and trade in the area. The reform plan will also likely include the establishment of a free trade port inside the FTZ.

As a direct result, we have seen buy side firms looking to hire compliance officers and further establish their presence in the region. We foresee this trend growing, as foreign firms look to capitalise on China opening up.

“A surplus of compliance candidates….or are there still needs?“

Reactionary hiring across investment banks in KYC and AML has now reached a point where technology has caught up with regulation forcing firms to contemplate downsizing. During several meetings across Europe and Asia the automation of the more process driven, data-heavy compliance functions have never been far from the conversation. The wider ‘assurance’ functions have been left largely intact through cost-driven headcount cuts but as regulatory fines tail off it is estimated that lenders have paid over £250 billion globally in regulatory fines since 2008 - these have become areas of potential saving.

Markets have become fragmented and margins squeezed so the ability to respond to trading floor queries in as close to real-time as possible is now increasingly important. On the buy-side, we are seeing robust compliance infrastructure used as a marketing tool.

So whilst efficiency and automation are creating a surplus in some areas, a need to be compliant and set parameters for automated processes necessitates an increase in decision makers and subject matter experts. The trick now will be for compliance units to ride out increased automation whilst retaining an understanding of the operational implications of decisions at the top.

 

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