THE CHALLENGE OF REGULATION AND COMPLIANCE5 July 2012Leas Bachatene – Vice President, Managing Director Asia PacificThomson Reuters Governance Risk & Compliance
THE REGULATORY DELUGERULES OF BUSINESS AREBEING REWRITTEN 2
REGULATORY ACTIVITY TRACKED 2010-2011*Note: Tracked activity includes document changes, announcements, and enforcements by regulators.
WHAT WEALTH MANAGERS NEED TO KNOWCOMPLIANCE CHALLENGES 4
THE CONSEQUENCES OF NON-COMPLIANCE• Increased fines and enforcements• Reputational damage with clients, prospects, and your market• Imprisonment and loss of license Fine/Date Institution Agency Imprison Violation mentJune UK & US Barclays $ 453M Libor Rate Manipulation28 RegulatorMay JP Morgan CFTC TBC Poor Corporate Governance30 Raj Rajaratnam, head DOJ, SEC, $102.8MOct of Galleon Group Manhattan 11 yrs Insider trading2011 hedge fund DA prison DOJ, Facilitated and concealed wireAug Barclays PLC Manhattan $298M transfers to and from blacklisted2010 DA countries
THE CONSEQUENCES OF NON-COMPLIANCE• Increased fines and enforcements• Reputational damage with clients, prospects, and your market• Imprisonment and loss of license Fine/Date Institution Agency Imprison Violation ment Facilitated and concealed wireMay Royal Bank of Scotland DOJ $500M transfers to and from blacklisted2010 countries “Improper payments” in a numberFeb Daimler AG DOJ, SEC $200M of jurisdictions, including Africa,2010 Asia, and Eastern Europe DOJ,Jan Falsifying wire transfers destined Lloyds TSB Manhattan $350M2009 for Sudan, Iran and Libya DA
OVERVIEW ON COMPLIANCE CHALLENGES • FATCA is what seems to be causing the banks the biggest challenge • Regulators in Asia are getting a lot tougher about approving wealth management products and looking at the miss-selling procedures in place • Singapore’s brought in a new code of conduct for private bankers and Hong Kong there are much tougher rules now for structured products • In the less developed financial centres, there is an issue of regulatory uncertainty and barriers for foreign banks. • FCPA and UK Bribery Act • Dodd Frank still a work in progress and still haven’t finalized drafting how the rules will reach overseas. However, those rules and the other new rules on derivative trading coming in across Europe and Asia mean that banks will have a lot of operational work to do to connect all their trading systems up to central clearing houses and trade repositories.
TRACKER AND POLICY MANAGEMENT SOLUTIONS– Dynamically link policies to the underlying rulebooks– Easily manage version and hierarchy control– Enable easy sharing through intuitive workflow and update distribution– Evidence policy adoption (through RecordKeeper)
SCREENING SOLUTIONS (NEW)– Initial and on-going screening against an unrivaled and unique data set, built by our own research team– Ensure client and customer identity with Electronic Identity Verification– Screen for potential risks with Adverse Media searching– Understand the risks associated with Politically Exposed Persons– Gain a deeper understanding of clients, suppliers & partners in emerging markets– Monitor transactions– Screen vessels against sanctions and enforcements
TO DO MORE WITH LESSCOMPLIANCE AS ACOMPETITIVE ADVANTAGE 15
So what are the three things you should do? • People and expertise • Culture is probably the most important aspect of implementing GRC and the board and CEO needs to set the tone at the top. • The right expertise, and providing the right training is critical. One of the most effective ways of improving governance and compliance quickly is training employees in the standards expected of them by the company – • Companies have learned that their employees can be the largest source of risk, they also learn that changing employee behaviour is the best way of managing risk and can be your first line of defence. 16
So what are the three things you should do? • Insist on “Better Information not More Information” Our mission at Thomson Reuters is to provide better information. Of those 15,000 regulatory updates that Thomson Reuters track from 300 regulators around the world every year (an average of 60 updates) a day, which is the one that if missed could put your business at risk? • Standardise processes and better controls around your risks, prioritising where the largest risks are and placing standard controls and checks in place – driving growth whilst ensuring standards are maintained is the primary goal of any GRC workflow and control tool 17
2012 SPECIAL REPORT – THE STATE OF REGULATORY REFORM QUESTIONS 18