Lessons Learnt on Compliance and Culture Change

By Paula Cristina Spirandio, Compliance Manager, Gunvor Group

Paula Cristina Spirandio, Compliance Manager, Gunvor Group

In my almost 14 years career as a compliance professional, working across the industry from banks, oil majors, to trading houses, I learnt a few valued lessons with regards to what it takes to cause a change in a firm’s culture.

I believe that, above all, compliance must be owned collectively; everyone is responsible for compliance, from reception to senior management, and consultants representing the firm. However, the most valuable of lessons has been the fact that compliance, in order to be effective and make a change, must cascade from the top down.

A good culture of compliance must be perceived and lead from the top. Undoubtedly, firms with good leadership tend to have better reception of compliance. Good leadership understands and grasps the fact that compliance is not and should not be seen as a “necessary evil”. They understand that compliance is a long game, one that pays off at the end, and it can give you a commercial advantage edge over all.

When compliance is championed by the top, employees are more likely to accept it, pay attention to it and follow it. This is achieved through compliance being brought at the beginning of every transaction, of every deal, matter, meeting, instead of in the middle of it or at the end of it. Compliance must be seen at the table, not as a show-stopper but as a business enabler and partner, guiding the business to take the right steps, even though at times you will have to stop and walk away from businesses that do not withhold the firm’s standards. Compliance is the challenger, the business sparring partner.

I remember the reporting of a newspaper over a firm’s recent fine that mentioned that it would take at least another decade to make back the profits the recent penalty had cost the firm.

Undoubtedly, Firms With Good Leadership Tend to Have A Better Reception of Compliance

Banks are typically more willing to provide credit or a cheaper interest rate if the firm can demonstrate that it poses a low compliance risk to the bank. One of the key risks that banks look at even before any financing is discussed is the AML/CFT risk that a firm is exposed to and present to the bank. Compliance in banks has the right to veto any transaction if they deem their counterparty too risky from an AML perspective. One of the key factors they look out for is whether the counterparty has a strong compliance and governance program and if it can effectively demonstrate it.

Those in leadership who understand the basics of compliance, that being the core principles of how, when and why compliance is applied, seem to have a better commercial edge, understand the risks and therefore, understand how to avoid them.

Good leadership understands that time, along with reputation, two of the most important commodities, are saved when these principles are applied.

When leadership brings compliance to the conception of ideas, employees tend to see compliance as their partners in business, as trusted advisors and as crucial elements of the firm’s decision-making process and not as an “unavoidable measure”. The business and compliance work together to achieve a common goal; to be commercial, to be innovative, to increase revenues, to contribute to orderly markets, to protect the firm, individuals and their reputation while safeguarding earnings and while doing the right thing - there is power in good partnerships.

What I have learnt along the years is that compliance cannot only be an e-mail reminder, an annual training session, a monitoring spreadsheet, a mere presence at the firm’s trading floor. Compliance must be visible, engaging, decision making, compliance must be alive and compliance must have a voice. On top of all the above-mentioned, there must be an understanding of the firm’s needs, its commercial strategy, and compliance must be aligned with the firm’s next steps and involved in its direction of growth.

Regulation is ever-changing, it is commonly updated and society’s moral compass is evolving at an even higher pace–“the virtues of the past, are the vices of today”. The moral order has to catch up with the moral necessities of today’s environment and what was ok in the past is no longer tolerated. Our firms, regulators, the government, and society expects more of us and misbehavior will not go unpunished for long, if not now, later.

I also learnt that good behavior should be rewarded. Behavioral Science and Psychology research suggests that rewards are more effective than punishment. I am not saying that misconduct and misbehavior should be taken lightly or go unpunished. Compliance breaches must be taken seriously and without excuses. However, we cannot be narrowed minded to only think that this is sufficient. Human nature understands consequences, but, we cannot diminish the power of reward.

Finally, I learnt that compliance is a long game, where all these consistent and persistent efforts that are made over time, slowly but surely, shifts actions, change behaviors, impact a firm’s culture and ultimately pays off.