There is hardly an industry where compliance is more important than in the financial services sector. This includes investor-oriented investment advice, product information, complaint management, data protection, insider trading, market manipulation, market transparency, money laundering prevention, compliance with sanctions, extensive internal and external reporting obligations and much more.
Today, effective compliance work is an integrated function in business operations: it provides advice on projects, monitors functions and advises on the elimination of weaknesses. The existence of an effective compliance organisation also helps the institute to ward off penalties and fines.
Regulatory authorities regard compliance departments as their extended arm and have granted themselves extensive rights to information. While initially only the provisions of the WpHG were subject to compliance audits, more and more requirements were added, especially through MiFID II. The supervisory authorities specified them through MaComp, MaRisk and various FAQs. Today, every new law and regulation assigns monitoring and reporting duties to the compliance function and compliance is included in every major project.
I started my own business in 2017 with the idea of managing compliance-related projects on a freelance basis and taking on interim tasks in this field. My company is called Stefan Kortenbusch Financial Services Compliance. Over the years I have gained a lot of experience and the diversity of clients and tasks means that new ones are constantly being added.
Compliance ensures that laws, guidelines and internal regulations and work instructions are observed and that relevant risks are systematically recorded and disclosed. The compliance function protects companies from all industries, but especially companies in the financial services sector, and their employees from damage that may result from non-compliance with laws and guidelines. For example:
Even if the compliance function cannot prevent any misconduct, the very existence of an effective compliance organisation is considered to be exculpatory. By advising the business units and being involved in certain operational activities, compliance helps to prevent damage from occurring in the first place. Compliance is very familiar with the prevention paradox. Damage that has not occurred is difficult to quantify and those who are critical about the cost of compliance might find that the money spent for preventive compliance measures was wasted since the damage didn’t occur at all. However, what would be the alternative?
“If you think compliance is too expensive, try non-compliance.” (Paul McNulty, ex-US Deputy Attorney General)
The importance of an effective compliance function becomes clearer when it is non-existent or fails. Fines can be enormous, as is regularly seen. In international cases they often run into hundreds of millions of euros or dollars, not even counting the collateral damage caused by a battered public and regulatory reputation, the constant involvement of entire departments in defending against fines and the loss of customer relationships.
Compliance can, if it is conducted comprehensively and competently, make a significant contribution to averting the many risks typical of the industry. This is the added value to which I feel personally committed.