The document discusses the challenges of balancing business profits and regulatory compliance in the financial services industry. It notes that regulations aim to protect investors, ensure fair markets, reduce risk, and prevent financial crime. Regulations have increased in number and complexity due to factors like new technologies and globalization. Compliance is more difficult as products and criminal opportunities become more sophisticated. Firms must carefully manage risks and consider options like reducing, transferring, accepting, or avoiding risks. An effective compliance framework requires strong oversight, independence, training, and a culture of compliance from the top-down. There is no single solution, as what works for one firm may not work for another.

1. The Challenge with
Regulations; Striking a
Balance Between
Enhancing Profits and
Ensuring Compliance
Sam Gibbins
International Compliance Association

3. Regulatory Objectives and the
Concept of Regulation
• To protect investors
• Ensure that markets are fair, efficient and
transparent
• To reduce systemic risk
• Protect financial markets from financial crime
• Maintain consumer confidence in the financial
system

4. Factors that Shape the
Regulatory Framework
• Regulatory failure
• Influence from international communities
• Domestic and international political pressure
• The development of complex products
• The evolution of new technologies, such as the
Internet or mobile payments as a delivery channel
for products

5. Advancement Theories
• Products becoming more complex, harder for
regulators to keep up
• Increasing numbers of individuals buying
increasingly more complex products
• Ever expanding number of avenues for illicit and
criminal activity in financial services

6. The Guardian
January 4th 2013
Otto Bruderer, a managing partner of
the bank, told a New York court:
"Wegelin was aware that this conduct
was wrong… From about 2002 through
to about 2010, Wegelin agreed with
certain US taxpayers to evade the US tax
obligations of these US taxpayer clients,
who filed false tax returns with the IRS.”

7. It’s a wide spectrum…

8. securitymanagement.com
April 27th 2012
•‘Morgan Stanley maintained significant
internal controls designed to prevent
such corruption’
•The policies were updated regularly
and employees were trained in FCPA
compliance
•Records showed that Morgan Stanley
trained Peterson on the FCPA seven
times during the time frame of the fraud
and reminded him of FCPA rules 35
times

9. Libor – the gift that keeps on giving!
www.bbc.co.uk
February 6th 2013
•Fines in the millions for a wide
variety of financial services firms
•Huge reputational damage
•Individual prosecution cases?

10. The Economist
February 9th 2013
The double edged sword
that is technology!!!

11. FT.com
October 23rd 2012
•Increasing connectivity
and cross jurisdictional
business activity
•More avenues to make
revenue
•More avenues for
compliance to fall down

12. The Changing Face of Regulations
• Cross border
• Increasing in number, increasing in complexity
• Adapting faster than they ever have
• Greater desire for ‘follow through’ with regards to
illicit activity
• This is not ‘even’ across all nations!
• Easier to find breaches?
• Customers more willing to look for alternatives
• The game of Hide and Seek is much more difficult
these days…

13. Importance of Complicity with
International Frameworks
New FATF money laundering guidance
February 16th 2012
The international Financial Action Task Force has issued substantially revised
guidance on money laundering legislation
www.stepjournal.org
October 12th 2012
Singapore cracks down further on tax evasion
www.hubbis.com
October 18th 2012
Singapore to criminalize tax evasion by
July 1st 2013
www.mountainvision.com

14. All businesses face a multitude of risks
– but the financial services industry
has more than its fair share – and so
risk management is crucial.

15. Impact and Probability Risk Map

16. Strategic options for dealing with risks
Risk reduction ways of reducing likelihood/probability
– improve prevention and control
measures
Risk transfer to another party
Risk sharing link with another
department/organisation
Risk avoidance e.g. by ceasing activities in, or not
entering, a particular area
Risk acceptance & an informed decision to accept
management likelihood/probability

17. Strategic options for dealing with risks
Risk deferment e.g. not entering a new market at this
time, wait and see how it develops and
reconsider
Risk limitation limit scale or scope of
commitment/activities/investment
Risk mitigation put in place a plan that accepts risk but
also deals with damage limitation

18. Key Compliance Framework Issues
• Ultimate responsibility for compliance rests with
senior management
• The compliance function is developed and used
by senior management as a critical tool,
complementing other key risk management
functions such as internal audit
• The compliance function is independent but
sufficiently close to business operations to be
effective

19. Key Compliance Framework Issues
• The compliance function is instrumental in
embedding a strong compliance culture
throughout the organisation
• The compliance function ensures ongoing
compliance with regulatory requirements or at
least is capable of timely remedial action

20. Compliance Culture starts at…

21. … the top.
Chatswood Consulting Ltd
www.chatswood.co.nz

22. It’s official: establishing a culture of compliance in the
workplace – and communicating it clearly – can help you
earn a get out-of-jail card in the courtroom.
www.morecarrot.com
July 19th 2012

23. • There is no ‘one size fits all’ solution
• Firms need to assess what they need, and how
best to achieve this
• What is best for your competitor may not be
best for you
• There is no perfect answer!

24. Contact Information
Sam Gibbins
Director
International Compliance Association
sgibbins@int-comp.org
+65 6500 0012