Financial Services - Making Practical Sense of your Compliance Obligations

Compliance teams are having a very difficult time of late - the rate at which regulatory compliance is changing in some firms is enormous. Teams are being forced to work at a rate which is simply not sustainable in the long term.

Contrary to popular belief Covid-19 isn’t the cause of all the problems – of course, it has accentuated and highlighted them, but there were already issues with keeping up with compliance obligations. Add to these the complications that come with introducing a successful compliant remote working team and in pulling together the required – likely sensitive – data (when processes and information required for your team to complete their tasks to the best of their ability are spread across many different platforms and systems), and you have a very difficult job for the team to keep up with and maintain.

Throughout this Whitepaper we will explore the key challenges you are likely facing in the financial sector around compliance, risk, and regulatory change. We will then explore a more modern approach to compliance, the FCA standards that you are obligated to abide by, and how - if performed correctly - a Digital Transformation could help your organisation to become fully compliant all of the time, with a lot less hassle.

It is apparent that the way things are being done in regard to compliance simply isn’t good enough, and it is high time to try something new. A Digital Transformation is the answer. Not only can it help your organisation to stay compliant, but it can also – if implemented correctly – deliver value to your business in other ways.


The current compliance landscape of the financial sector

Regulations in every sector are constantly changing – especially in the modern age. Due to this, your compliance obligations in the financial sector can be very difficult to keep up with, let alone adhere to. With this pace has come a rise in both the complexity of the obligations you must abide by and the cost involved to make it possible. Investments in regulatory change have increased to a point at which business owners are being forced to use a vast portion of their ‘keep the lights on’ budget just to remain compliant.

A lot of this expenditure is spent on updating Legacy systems (systems that are either no longer supported by the vendor or are not being used on their most updated version). Legacy systems can make for a very insecure workplace, because using an app that isn’t supported by the vendor means that they are no longer ensuring the latest security measures are implemented – making that app an easy target for a cyber criminal, or – in an efficiency mindset – meaning that your team aren’t getting as much as possible from the app (because the newest version likely has usage improvements alongside security ones).

Another big part of this expenditure has involved people. Organisations in the financial sector are investing in employees who are entirely dedicated to compliance and risk management, and with this demand the remuneration costs are far more expensive than they were previously, especially with firms struggling to fill those all-important roles.


Rising compliance costs, increased pace of regulatory change, and big changes are on the horizon

As we have already stated, firms in the financial sector are working very hard to ensure they meet their compliance obligations – and some are struggling - so the expected further regulatory change on the horizon could be difficult to bear. There are potentially new rules being announced in 2022 and beyond regarding the SFTR (Securities Financing Transactions Regulation). In addition to this potentially brand-new set of rules to follow, firms are also facing the possibility of significantly increased enforcement of them. Last year some of the biggest companies in the world were subject to fines from the FCA (Financial Conduct Authority) – more on them later - for not remaining compliant to their obligations; ¹Lloyd’s bank were fined £64m, Barclays were fined £26m, and Goldman Sachs International were fined £97m - if companies of their size and calibre can fall short of their compliance obligations, any can!

Firms are facing unprecedented times; business operations and compliance teams are being negatively impacted by regulatory changes. The new regulations and increased enforcement of them paired with the change in the way we work is putting intense pressure on teams in many firms. Simultaneously, compliance costs are soaring, and limited company funds are being diverted away from other more financially lucrative parts of the business. The way most are approaching regulatory compliance is dated and not efficient either financially or operationally – it is definitely time for a change.


The Financial Conduct Authority (FCA)

The FCA is a regulatory body that, under the Financial Services and Markets Act (FSMA), business regulated by any firm (be it non-profit, a sole trader, or a business) must be authorised or registered by them. You must be approved by the FCA to be deemed able to fulfil your duties in your role, as the FCA subject individuals to regulatory requirements which must be achieved. Once having gained approval you will have a set of requirements to abide by - let’s take a look at those now.


Your requirements once approved

² ‘Once approved you must:

  •          Comply with the Conduct Rules
  •          Report anything that could affect their ongoing fitness and propriety to us and the authorised firm via Form D (PDF in link)’

The Conduct Rules apply to everyone in the firm, not just the approved persons. The rules set a basic standard of conduct for everyone that the FCA hold people against. You can find them in detail in the COCON chapter of their handbook (also available in the link).

As the Conduct Rules apply to staff directly they will help shape the culture, standards, and policies of firms as a whole and promote positive behaviours that reduce them. The Conduct Rules represent a meaningful change in the standards that we expect from those working in the industry.

By applying the Conduct Rules to a broad range of staff, we aim to improve individual accountability and awareness of conduct issues across firms. They apply to a firm’s regulated and unregulated financial services activities (including any related ancillary activities – i.e. an activity carried on in connection with a regulated activity).

There are two tiers of Conduct rules which apply to all firms. The first is a general set of rules that applies to most employees and directors in a firm. The second tier consists of rules that only apply to Senior Managers. There is also one Senior Manager rule, SC4, that applies to NEDs who are not Senior Managers.


First Tier – Individual Conduct Rules:

1)      You must act with integrity

2)      You must act with due care, skill, and diligence

3)      You must pay due regard to the interests of customers and treat them fairly

4)      You must observe proper standards of market conduct.


Second Tier – Senior Manager Conduct Rules:

SC1. You must take reasonable steps to ensure that the business of the firm for which you are responsible is controlled effectively.


SC2. You must take reasonable steps to ensure that the business of the firm for which you are responsible complies with the relevant requirements and standards of the regulatory system.


SC3. You must take reasonable steps to ensure that any delegation of your responsibilities is to an appropriate person and that you oversee the discharge of the delegated responsibility effectively.


SC4. You must disclose appropriately any information of which the FCA would reasonably expect notice.



We will take disciplinary action against approved persons who:

  •          act in a way that is inconsistent with the rules for senior management functions.
  •          knowingly work together to breach their firm’s rules.

Our actions include fines, suspensions of approval, imposing restriction and issuing a public statement about the misconduct.

As you can see, the FCA doesn’t hold back on what they expect from you and the consequences for not meeting those expectations.


Solving your regulatory challenges

To solve your regulatory challenges you must start by first thinking about technology, as the correct technological tools implemented strategically can improve your chances of remaining compliant. This is otherwise known as a Digital Transformation, these involve predominantly using technology, but also people and processes to make a fundamental change to the way the business delivers its services. Digital Transformations should enhance both the levels of customer service your team are able to achieve and the efficiency of your entire organisation.

Traditionally, compliance teams are left out of Digital Transformations. Some business owners are under the impression it isn’t for them or they just let the opportunity pass by - this is a mistake and couldn’t be further from the truth. Digital Transformations can take place – and help improve – every part of your business. If your compliance team engages with the Digital Transformation correctly and with full commitment they have the opportunity to assist in the acceleration of the entire transformation and not just their own sector.


The Digital Transformation

The first step to a successful Digital Transformation is to learn – deepen your knowledge of how the business needs overlap with the compliance obligations of the organisation. You should use this opportunity to:

  •   Learn the Digital Transformation needs and aspirations of the business in areas such as back-office operations, what needs to change to make things easier, more efficient, and more secure simultaneously?


  •   Explore your previous Digital Transformations. What parts were a success? What parts weren’t so successful? And why?


  •   Communicate with all senior members of different sectors of the business, ask them what information they would like access to in order to make better decisions going forward.


  •   Educate! Educating your team from top to bottom is essential. They must know how essential quality data is and the important role it has, not forgetting the role it needs to play in the prolonged growth and success of the organisation.


  •   Set some goals. Identify key metrics that can be measured, track them over time, and see the results.


The Digital Transformation – The potential benefits

Commercially beneficial

By providing your team with tools that are modern, work correctly, and are as efficient as possible, they are inevitably going to be happier. When your team are happy whilst working they will work harder and therefore produce more work of a better quality. Using up-to-date tools will not only avoid the potentially business defining problems that come with using Legacy Applications but will also improve productivity and in turn your profitability.



Technology in the modern age is designed to be flexible – it is essential that it can scale up and down according to the requirements of the organisation. Recent times have only accentuated that need, when the pandemic rocked the business world to its core early last year. Many - practically overnight – introduced an at least partially remote working team, a system that could scale flexibly was important to make that sudden transition a success. Traditionally, you pay an agreed sum of money on a monthly contract for an agreed term, for a certain number of users, but if unforeseen circumstances where to require your organisation to shrink rapidly or you go through a period of sudden growth it Is important to have a modern solution that allows you to pay for what you use and not what you thought you were going to use when you signed the contract.


Increased team well-being

If your team are using poorly equipped or dated IT they are likely to have low morale. Technology that isn’t capable of doing the job is counterproductive to the success of the organisation whilst simultaneously being extremely tedious to your team, and the professionals you have employed to complete their tasks to the highest possible standard 100% of the time will have no chance of doing so. A hardworking team needs a digital experience that is ideally fast, easy to navigate, and easily learnable - even for the less IT capable.


Regulatory compliance

Arguably the most important of all is regulatory compliance. With a Digital Transformation that is completed successfully, you can ensure that your team are using best security practice when operating it - by doing so you will be compliant. Most new tech has built in security features – or at the very least add-ons – that will give you the confidence that you are secure at all times.


Compliance guaranteed

Our team of experts are here and equipped to help remedy your compliance worries. We will take the time to get to know you, your team, the way you do business, and your goals and visions for the future. Our team of experts will work together with you to find a cyber strategy that compliments the way you do business and ensures that you are constantly up to date with the latest tech that is beneficial to you, whilst simultaneously staying compliant to regulations at all times. We will help you with your Digital Transformation and educate your team on how to use the new tools at their disposal to their full potential. With our help you can introduce up-to-date tools, remain compliant, and be confident that your team are doing everything they can to aid in both. Don’t hesitate, get in contact with us and see how we can help you.


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