In 2013, financial institutions paid billions of dollars in penalties related to the financial crisis, LIBOR and other issues. This includes institutions such as Bank of America, Citigroup, J.P. Morgan, Wells Fargo (News - Alert), General Electric, Barclays and UBS. As a matter of fact, J.P. Morgan had set aside $23 billion to handle all of its legal costs in 2013.
What these settlements highlight is the highly regulated environment in the industry and the lack of full compliance awareness by these institutions. A new study conducted by Accenture (News - Alert), titled "Compliance’s Seat at the Table – Hard to Earn, Hard to Retain," highlights the shortage of skilled workforce in this area, and banks and capital markets firms expect to increase their compliance investments by 10 percent or more.
The increase in fines across borders around the world is being driven by regulators who are collaborating with each other to get higher payouts. Financial institutions can no longer hide their misdeeds in other countries and escape regulators who are after very lucrative multi-million and billion dollar settlements.
There are five key themes that emerged from the study:
- The evolution of the size and shape of compliance as institutions become more aware and the stature and role it plays within the organization
- There is to be more investment in compliance to achieve the strategic goal of the organization, revealing steady growth in spending in Europe and North America to mitigate future compliance issues
- The biggest barrier to success has been the lack of talent or the competition for available talent as the study states, "there is a fiercely competitive market environment" for talent
- Organizations have to demonstrate new ways of thinking as they confront new challenges with scarcity of talent
- Having a proactive plan to strategically address a compliance horizon that is ever widening is very important. This includes a global approach to ensure the organization meets the compliance of everyone they do business with no matter where they are
Organizations have also implemented controls with a culture of compliance throughout the business for testing and quality assurance, quality control and compliance as well as compliance training and communications. By doing so, they have addressed ways in which they can analyze and track root causes with risk assessment by monitoring and delivering compliance change projects within their compliance program.
At the end of the day, all of these rules and regulations as well as policies that are in place still have to be managed by the right talent with the right expertise. With 85 percent of the respondents in the survey stating there is a high attrition rate, this will continue to be a problem the industry will continue to face along ensuring they are compliant at all times.
"Executives will have to be more conscious of demonstrating success in order to secure further investment in talent, tools and technology to boost performance and realize their vision for compliance risk management," said Steve Culp, senior managing director, Accenture Finance and Risk Services.
Edited by Alisen Downey