OUTSOURCING THE COMPLIANCE FUNCTION
With the rise in the number and complexity of regulations, there is an associated requirement for competent and knowledgeable compliance staff to ensure that firms meet their regulatory obligations and avoid penalties, prosecution, failed business strategies, and damage to reputation and brand. Increased resource requirements due to significant changes in regulatory environments are having significant impact on operating costs. Industry best practice suggests that an adequate compliance programme should include a ‘top down’ approach where senior management demonstrate a compliance culture and tone.
Adequate resources focussed on the compliance function with customised policies and procedures, readily available for review and implemented within the operating practices of the firm as well as ongoing staff training and an annual review with stress testing to assess the effectiveness of the policies and procedures also contribute to an adequate compliance programme, the cost/benefit evaluation of which can be complex.
How does one quantify the benefits of the strong corporate governance that regulations encourage in the form of enhanced internal systems and controls? Or indeed how can one assess the benefits of not having to pay out compensation as a result of maintaining high standards of regulatory compliance?
Compliance is not a revenue generating business function. However, it is a core component of managing occupational risk and successfully executing business strategies. Good compliance arrangements normally result in improved efficiency and business process efficiencies generally lead to reduced costs. There is even an argument to suggest that money spent ‘saving’ regulatory fines and supporting the firm’s good reputation justify the costs. Whilst hiring an employee might make sense when a firm needs to benefit from multiple skill sets within limited staff numbers, some firms are turning to outside experts to provide the compliance function.
Demand for compliance systems and talent has raised the cost of maintaining compliance infrastructure. Even with proper funding, an organization’s ability to scale up compliance operations may be limited by the availability of adequately qualified people to an in-house compliance function.
In contrast, external providers focus on developing and maintaining the required knowledge as a core competency, often by hiring former regulators and compliance officers and developing industry-aligned talent pools. External providers also bring their process frameworks, knowledge from performing similar services for other clients, and accelerators to the delivery of value-based compliance outsourcing services There are significant benefits of outsourcing the compliance function.
1. What are the benefits of outsourcing the compliance function?
Outsourcing allows a firm to tap into a specialist skill set where the compliance function can be performed more efficiently. It avoids the fixed cost and the management issue of hiring a full-time employee to perform the function in-house and allows more flexibility with regards budgeting within scale. Outsourcing also demonstrates a degree of independence from the business, required by regulators.
2. When can a firm not outsource?
In certain circumstances, depending on the scale and nature of a business, a Regulator would consider it inappropriate to outsource the whole function of Compliance.
3. Is it possible to outsource certain functions?
Outsourcing part of the compliance function may be an alternative worth considering when coping with talent shortages and sub-optimal compliance processes whilst addressing shifting compliance demands. However the firm remains responsible for compliance with legislation applicable.
4. What can a firm not ‘outsource’?
Even though a firm can outsource certain services it cannot ‘outsource’ responsibility. As far as any regulator is concerned, a firm will be held accountable for any breaches committed by its service provider, on the basis that it should have appropriate systems and controls in place for supervising the outsourced arrangement.
OUTSOURCING VS IN-HOUSE
5. How can we help?
If you would like to discuss any of the issues raised above, please do contact us. We provide comprehensive assistance to help you understand your regulatory obligations. We offer both outsourced money laundering reporting officer services and compliance officer services. Additionally, we can create bespoke money laundering and compliance manuals for your firm and design and implement both a risk based anti-money laundering programme and a Compliance programme with policies and procedures. We also offer initial and ongoing staff training.
Who we are
Rethink is a boutique accounting, audit, advisory, compliance and tax advisory firm with offices in Dubai and Abu Dhabi (ADGM), focused on providing businesses of varying sizes with timel y, proactive, and customized business solutions from start-up and earl y development to the latest stages of a business lifecycle.
We offer tailored regulatory expertise and focus on guiding clients to reduce the risk of non-compliance across a wide range of compliance services and regulatory advice. While we focus on compliance consultancy services including advisory, training and process improvement, we do not just tell you what to do, we give you practical ways to make things work for your business.