Research shows that “building a culture of compliance” was one of the top trends across the compliance industry in 2015, meaning higher ethical standards and behaviors are only going to continue to grow in importance. Regulatory pressure is not going to let up any time soon, and scrutiny will only continue to increase around what organizations are doing to ensure the highest level of compliance.

1. A CULTURE OF COMPLIANCE
How Compliance Can Affect Corporate Culture for the Better
The views and opinions expressed in this paper are those of the authors and do not
necessarily reflect the official policy or position of Thomson Reuters.

2. 2CULTURE OF COMPLIANCE: HOW COMPLIANCE CAN AFFECT CORPORATE CULTURE FOR THE BETTER
TABLE OF CONTENTS
INTRODUCTION3
THE COSTS OF NON-COMPLIANCE 4
CHANGING BEHAVIOR – BENEFITS OF A CULTURE OF COMPLIANCE 5
USING COMPLIANCE AS A COMPETITIVE ADVANTAGE 6
ESTABLISHING A COMPLIANT CULTURE – FROM A CULTURE OF COMPLIANCE TO A CULTURE OF INTEGRITY 7
CONCLUSION9
REFERENCES10

3. CULTURE OF COMPLIANCE: HOW COMPLIANCE CAN AFFECT CORPORATE CULTURE FOR THE BETTER 3
Introduction
Since the 2008 financial crisis, regulators have been working overtime to change the
popular perception and behavior of organizations around the world by implementing
new and complex regulatory requirements. But high-profile scandals in recent years,
such as Libor, Volkswagen’s emissions failures, manipulation of the FX markets, FIFA
corruption and many others, have continued to offset progress that has been made.
In order to restore trust and regain consumer
confidence, organizations need to find new
ways to ensure they remain compliant with the
increasingly complex regulatory demands they
face. Understanding regulators’ expectations and
requirements and being able to apply them can be
as big a challenge as keeping abreast of the many
changes.
The best and most effective way for a company to be
compliant is to embed core practices into its corporate
culture. Nearly all institutions provide some level of
training to employees, but a culture of compliance
goes beyond once-a-year mandated training. It
embeds compliance into everyday workflow and
sets the foundation and expectations for individual
behavior across an organization. Ensuring employees
are consistently educated and informed on company
and regulatory policies will help enforce increased
adherence to today’s constantly evolving compliance
standards.
The benefits of implementing a culture of compliance
can, and should, be leveraged as an opportunity for
competitive advantage. An institution that embeds
ethics into its core culture will see widespread
benefits ranging from increasing its bottom line to
bolstering confidence in clients, employees and other
key stakeholders as they recognize a foundation of
integrity and accountability.

4. CULTURE OF COMPLIANCE: HOW COMPLIANCE CAN AFFECT CORPORATE CULTURE FOR THE BETTER 4
The Costs of Non-Compliance
Regulatory demands are only continuing to increase,
placing added pressure on institutions across every
sector, most notably in the financial space. Complex
Financial Conduct Authority (FCA) Advising
Selling rules and Anti-Money Laundering (AML) and
Conduct Risk practices, among others, are growing
in importance as regulators take a closer look at
company procedures around these practices.
Scrutiny around compliance, or rather non-
compliance, is also rapidly increasing as regulators
look to ensure that companies are putting policies
and procedures in place to effectively respond to and
mitigate risk. The regulatory demands are high, and
the costs associated with non-compliance are even
higher.
The most obvious consequence of non-compliance is
the huge monetary penalties and fines that can occur
as a result of misconduct. These fines span industries
and regions as regulators look to make examples of
major compliance failures. German car manufacturer
Volkswagen is now facing fines up to $18 billion for
allegedly cheating on emissions tests in a scandal
that erupted in 2015.1
Japanese-based electronics and
industrial company Toshiba was hit with a record $60
million dollar fine for an accounting scandal in which
earnings were overstated by nearly $2 billion over
seven years.2
Across the financial services industry, exuberant
fines also run rampant. Research shows that in 2014,
banks in the U.S. and Europe paid nearly $65 billion
in penalties and fines, which is about 40 percent
greater than 2013.3
In June 2015, the Bank of New
York Mellon was fined $185 million for failing to
comply with rules intended to protect client assets.
Since then, the company has “undertaken an internal
review to improve its policies.”4
While the company
is now taking steps to strengthen its compliance
programs, it could have avoided a huge fine, as well
as reputational damage, had it incorporated a more
robust compliance framework from the start.
Besides the steep financial implications, research
shows that there is an increased focus from regulators
on personal liability. Compliance officers are
increasingly being held accountable for their actions,
or inactions, if the services they provide are deemed
negligent. In fact, a new study shows that 93 percent
of compliance professionals expect their personal
liability to increase over the next year.5
In 2014,
compliance officers at Deutsche Bank, Brown Brothers
Harriman, and Bank of Tokyo-Mitsubishi—just to
name a few—have been fined, banned or fired due to
compliance failures.
Huge fines and increased personal liability are just
two of the repercussions of non-compliance. While
big companies usually have a better shot at bouncing
back from charges or penalties they face thanks to
deeper pockets, smaller companies may not have the
capital or resources to do so, which can result in a
company having to completely shut down. With the
consequences of non-compliance only continuing
to grow, it is becoming increasingly imperative that
companies find ways to keep abreast of the
ever-changing regulatory environment.

5. CULTURE OF COMPLIANCE: HOW COMPLIANCE CAN AFFECT CORPORATE CULTURE FOR THE BETTER 5
Changing Behavior – Benefits of a Culture of Compliance
The behavior of companies and regulators is changing
across every industry. We are in a time of what many
are calling “super-regulation,” where regulators are
going beyond just slapping companies on the wrist
for misconduct. They are taking steps to circumvent
misbehavior by implementing processes and
standards to ensure compliance is top of mind and
that organizations of all sizes have a framework in
place to effectively mitigate risk.
In May 2015, for the first time ever, the Antitrust
Division of the U.S. Department of Justice
(DOJ) awarded a company sentencing credit for
implementing an effective compliance program after
the start of an investigation. London-based banking
and financial services company Barclays was being
investigated due to its involvement in the alleged
manipulation of the foreign exchange markets.
Barclays received credit due to its initiative to bolster
its compliance program in order to prevent similar
misconduct in the future.6
This ruling showcased that the DOJ is serious about
influencing operational changes and is willing to
reward companies that are taking steps to do so.
Regulators are continuing to heighten enforcement
through massive fines and stricter processes, but they
are also taking steps to encourage those companies
that are implementing stronger compliance policies.
The tangible and intangible benefits of implementing
a culture of compliance are widespread. The palatable
rewards can be seen in the case of the previously
mentioned Barclays ruling, where the company was
directly rewarded with a decreased sentence due
to its effort to make behavioral changes. Reduced
fines are just one of the direct benefits of compliant
behavior. The intangible benefits of creating an ethical
culture go beyond monetary implications. Creating an
organization that follows the rules and encourages the
highest level of ethical standards helps increase trust
with employees, clients and potential clients; it helps
draw in and retain top talent; and, most importantly,
it ultimately builds positive brand awareness with
influential stakeholders around the globe.

6. CULTURE OF COMPLIANCE: HOW COMPLIANCE CAN AFFECT CORPORATE CULTURE FOR THE BETTER 6
Using Compliance as a Competitive Advantage
Many companies operate reactively to regulatory
requirements as they scramble to develop internal
policies after new regulatory rulings are put into
place. By creating a proactive culture of compliance,
companies are able to respond to new rulings more
quickly, allowing them to better pursue their business
goals.
Adhering to regulatory requirements is mandatory,
time consuming and complex, but companies can and
should maximize the large amount of time and money
spent on developing a strong compliance program and
turn it into an opportunity for competitive advantage.
INCREASING THE BOTTOM LINE
Companies that set the groundwork for a culture
of compliance are ultimately more agile when
responding to new regulatory changes. They can
remain one step ahead of their competitors that have
more disparate, reactive processes in place.
Research has shown that an accounting scandal
alone typically takes a reputation-related toll equal to
about 27 percent of a company’s pre-scandal share
price.7
This alone shows that staying atop of regulatory
changes can help a company maximize growth and
preserve value for stakeholders.
STRONG BRAND REPUTATION AND AWARENESS
In a time where trust in financial institutions is lacking,
an organization can come out on top by promoting its
own strong ethical behaviors and internal compliance
policies, especially as compared to competitors.
Recognizing the public disconnect between integrity
and the banking sector and capitalizing on the
perception of mistrust, an organization can build
awareness around its own culture of compliance to
help bolster its own reputation.
REDUCED FINES
The recent ruling by the DOJ to reward Barclays with
sentencing credit is a prime example where a company
leveraged compliance in order to benefit the company
and its stakeholders.
In another example, Kayaba, a Japanese automotive
parts company, was charged for price fixing, bid
rigging and market allocations. The DOJ later reduced
their sentence in part due to the institution of an
effective compliance program. This is another case
that ruled in favor of a company that showed initiative
to incorporate change through stronger compliance
standards.8
In both cases, each company’s dedication to improving
its policies helped put them one step ahead of their
competitors. These rulings further indicate that the
DOJ is taking a hard stance to implement change.
As the DOJ and regulators continue to provide more
clarity around exactly what an “effective compliance
program” entails, a company can only benefit from
staying up to speed on new rulings and adapting its
corporate culture to ensure the desired policies are in
place.

7. CULTURE OF COMPLIANCE: HOW COMPLIANCE CAN AFFECT CORPORATE CULTURE FOR THE BETTER 7
Establishing a Compliant Culture – From a Culture of Compliance to
a Culture of Integrity
Establishing a culture of compliance is a huge
undertaking but an extremely worthwhile
commitment. It takes continuous vigilance, resources
and time to influence widespread change. As
regulatory demands continue to grow, companies
need to have the resources and technological
framework in place to build compliance practices into
their everyday workflow.
HOW TO ACHIEVE A CULTURE OF COMPLIANCE:
THE BASICS
• Awareness: Simply put, a company can’t be
compliant if it doesn’t fully understand regulators’
expectations. In today’s constantly evolving
regulatory environment, companies need to find
new ways to keep their finger on the pulse of
changing regulations. It is extremely important
that an organization has the resources in place to
keep managers abreast of new developments, meet
deadlines, and understand complex rules in a timely
manner, allowing them to make well-informed
decisions to better mitigate regulatory risk.
• Communication: Compliant behavior goes hand
in hand with instilling an ethical culture across an
organization. To achieve this, the tone needs to be
set from the very top. The C-Suite needs to effectively
and continuously communicate the expectations,
policies and procedures that employees must
understand and practice daily. Furthermore, senior
managers need to be transparent about their
own behavior by setting a high standard of ethical
conduct that can be filtered down throughout an
organization.
A culture of compliance is founded on the individual
behavior of each employee across an organization.
An effective compliance program needs to have
clearly defined rules and standards of behavior
that can act as a road map for every employee to
understand, trust, and practice daily. Clearly defining
the standards of respect and communicating
the behavioral expectations for each and every
employee will encourage teamwork and productivity
as everyone strives to adhere to the same cohesive
compliance policy.
• Education: Perhaps one of the most important
pieces of the compliance puzzle is ensuring that
employees are educated on an organization’s
internal policies and external regulations in a regular
and influential way.
Companies have historically approached compliance
training as a once-a-year process, but with
regulations, procedures and internal corporate
procedures constantly evolving, employees need
more repetitive education in order to stay abreast of
ongoing requirements. New approaches, such as
MicroLearning, focus on delivering training in small,
specific modules in order to maximize retention of
information.
• Effective Technology: There is no one-size-fits-all
approach to compliance education, so companies
need to create a customizable framework that
appeals to the needs and learning styles of different
employees. E-learning programs that leverage
interactive use cases, videos, games and quiz
questions that cater to a specific user’s job function
have proven to be an extremely effective way to reach
the digital-savvy employee.
Incorporating mobile-friendly elements allows
individuals to more easily remain on top of
requirements through their mobile phone or tablet,
and videos can be integrated for visual learners to
learn more effectively. All of these components are
key elements that make up an effective compliance
program.
A robust course completion tracking and reporting
system is essential to simplify the administration
process, monitor employee participation and drive
high completion rates. This provides additional
benefit for a company should an issue arise and
can be offered as evidence if regulators question
company behavior or intentions.
• Incentives: There is no denying that corporate culture
reflects what managers reward. By developing
suitable compliance incentives, management can
demonstrate their commitment to compliant and
moral conduct. Just like any aspect of business, an
employee will be more motivated if there is potential
for personal and professional gain.

8. This is a longstanding position that the Securities
and Exchange Commission (SEC) has supported for
years. In 2004, then SEC Director of Enforcement
Stephen M. Cutler said, “Make integrity, ethics and
compliance part of the promotion, compensation
and evaluation processes as well. For at the end of
the day, the most effective way to communicate that
‘doing the right thing’ is a priority, is to reward it.”9
• Incident Reporting and Case Management:
Incident reporting and case management is an
important aspect of a compliance program to
ensure a company is able to track and address any
misconduct. Being aware of non-compliance is half
the battle when it comes to mitigating risk.
Some employees wish to remain anonymous when
reporting misconduct, while others want a personal
response or some type of acknowledgement.
An effective system offers a variety of options for
employees to report an incident. Reporting options
can be offered via an online web portal, automated
phone system, live operator or a combination of the
three for a thorough incident reporting system.
Many businesses have inconsistent methods for
incident reporting case management that begins
with multiple concern reporting lines and continues
with the high volume of affiliated spreadsheets and
notes stored in various, disconnected locations.
This exposes a company to additional risk that
could be otherwise avoided. A more streamlined
incident reporting and case management platform
equips an organization with one cohesive enterprise
control system used to collect, manage and resolve
incidents across the entire company. Collecting all
incident information in a consistent manner helps
organizations quickly determine appropriate actions
based on the level of risk presented to them.
CULTURE OF COMPLIANCE: HOW COMPLIANCE CAN AFFECT CORPORATE CULTURE FOR THE BETTER 8

9. CULTURE OF COMPLIANCE: HOW COMPLIANCE CAN AFFECT CORPORATE CULTURE FOR THE BETTER 9
Conclusion
Research shows that “building a culture of compliance” was one of the top trends across
the compliance industry in 2015, meaning higher ethical standards and behaviors are
only going to continue to grow in importance.10
Regulatory pressure is not going to let up
any time soon, and scrutiny will only continue to increase around what organizations are
doing to ensure the highest level of compliance.
As we have seen from recent rulings in related lawsuits,
there is a heavy price tag placed on the value of a truly
effective compliance program. Organizations need
to go beyond simply adhering to rules; they need to
find ways to make compliance an unalterable part of
corporate culture to ensure maximum protection.
Ensuring that a company has its finger on the pulse
of changing laws and regulations can help proactively
steer that organization toward a successful and fruitful
path. Effective technology, widespread organizational
standards and continuous education will help set a
positive and rewarding culture of compliance across a
company and promote a competitive advantage over
industry peers.

10. CULTURE OF COMPLIANCE: HOW COMPLIANCE CAN AFFECT CORPORATE CULTURE FOR THE BETTER 10
© 2016 Thomson Reuters S030107/1-16
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1
http://www.bbc.com/news/business-34324772
2
http://www.wsj.com/articles/toshiba-accounting-scandal-draws-record-fine-from-regulators-1449472485
3
http://www.wsj.com/articles/no-more-regulatory-nice-guy-for-banks-1419957394
4
http://www.nytimes.com/2015/04/16/business/dealbook/britain-fines-bank-of-new-york-mellon-185-million-for-
compliance-failures.html
5
https://risk.thomsonreuters.com/sites/default/files/GRC03463.pdf
6
https://www.wsgr.com/publications/PDFSearch/law360-0515.pdf
7
https://www.gsb.stanford.edu/insights/ed-dehaan-how-rebuild-trust-after-scandal
8
https://www.dlapiper.com/en/us/insights/publications/2015/11/how-does-an-antitrust-compliance-program-meet/
9
https://www.sec.gov/news/speech/spch120304smc.htm
10
https://risk.thomsonreuters.com/infographic/top-compliance-trends-for-2015
REFERENCES