Why use a compliance consultant?

When it comes to the subject of using consultancy firms, companies and individuals within the same company have differing views on the pros and cons of seeking outsourced compliance support. In this article, Jayne Donnelly, Compliance Associate in boutique regulatory compliance consultancy, fscom interviews recently appointed Senior Manager Dipesh Patel to explore the topic further. Dipesh, you’ve been at fscom for almost six months now. With over 18 years experience in the financial services sector specifically in supporting payments and FX firms, how are you finding being on the other side of the fence now that you are working as a consultant? It’s been great and a welcome challenge! I’ve known fscom for a number of years now, having used their (now our!) services in firms in the non-bank payments sector where I’ve held senior compliance management positions. I’ve been able to bring my own industry expertise and apply it in a practical sense when dealing with clients. Clients respect the fact that I genuinely understand the challenges they are facing because I’ve been there and done that. Now working on the other side, as a consultant, has allowed me to continue to expand my subject matter expertise and develop a more in-depth understanding of the rules and regulations than ever before. It provides me with consistent exposure to areas such as new applications for authorisations. I particularly enjoy the variety of the role which has given me exposure to different client types and business models. Have you used a consultancy firm in your previous roles and for what projects?  Yes, frequently! I’ve used consultants for a variety of reasons. The first and probably the most common was for Anti Money Laundering (AML) audits. It’s always been a banking partner requirement to submit an AML audit report but I’ve always found it to be a great tool to benchmark where an AML programme is against the regulations, understand where the deficiencies are and outline the priority areas. It also allowed me to create an implementation plan based on the audit findings which helped lay key actions out for the year ahead. Also – as the findings and ratings decreased on each annual audit, it demonstrated the improvements that were made year on year. I took great satisfaction in that! Other projects I have used compliance consultancy firms for included a PSD2 regulatory review covering areas such as safeguarding arrangements and open banking requirements; assistance with REP001, REP017 and REP108 reporting; understanding appointed representative requirements; and assistance with payment services and investment applications. By using a compliance consultant, I was confident that I was receiving guidance that I could trust. I have also attended many workshops offered by consultants. One that springs to mind was the Brexit workshop delivered by fscom where they brought together a number of experts from EEA regulators. This workshop provided us with the opportunity to speak with them and ask the many pertinent questions on our minds at the time in relation to Brexit. In your opinion, why would a firm hire a consultancy firm? The most obvious reason is that a firm is seeking guidance. Firms partner with consultants to gain access to subject matter expertise. A Head of Compliance may also require an external opinion to support their own view and add validation to their guidance to implement enhancements to the compliance framework. The landscape is always changing and being updated, for example the need to perform a safeguarding audit and have a wind-down plan in place is relatively new. There is also new guidance such as that on vulnerable customers. Consultants can also provide temporary expertise. If a firm requires roles to be filled on an interim based, such as Head of Compliance or MLRO, a consultant can hold this position. This might be relevant to a firm applying for authorisation and may require the role to be filled whist recruiting for a permanent hire! Did you ever feel reluctant to use a consultancy firm? No, I never felt reluctant to use a consultant, but I can understand why there would be reluctance by some people. Someone may feel that hiring a consultant is perceived as having a lack of knowledge and understanding. The reality is that in an ever-changing regulatory landscape, you are not expected to know the full extent of the regulations. A consultancy firm can assist with the interpretation of the new and existing rules and regulations and how to apply them. Traditionally the cost is seen as expensive, and the feeling is that the consultant does not know the business model. The reality is there are several firms out there, outside of the traditionally well-known consultancy firms that specialise in specific sub sectors of the financial services industry and bring that experience to bear on the project they are working on by predetermining potential issues and having workable proven solutions at the ready. They can also use their experience of working with similar firms to benchmark against best practice. Therefore, firms should feel confident using boutique consultancy firms with sector specific expertise at a very competitive price. It is certainly less expensive than hiring new compliance staff, training them up and the time and costs that comes with new full time employees! So, just to pull out the key points, what do you believe are the overall benefits of hiring a consultant? A consultant is a subject matter expert that provides an independent and objective view. Tasks can be delegated to a consultant by drawing on their experience to perform those ad hoc tasks that you do not have the time or resource to do, for example application for authorisation, creating a wind-down plan or advising on how to deal with vulnerable customers. Annual AML and safeguarding audits are also common projects that can be performed by external, independent consultants. A huge benefit of hiring a consultancy firm is that its their job is to keep up to date and understand the regulations and how they are to be implemented practically in industry. This is especially critical now with the tsunami of regulations over the last couple of years. We constantly horizon scan for new regulatory updates and events that could impact financial firms. This includes being members of trade associations such as the Association of Professional Compliance Consultants (APCC) and by doing so we are adhering to our own code of conduct and collaborating with our peers on various initiatives while engaging with the regulators. Another advantage of using consultants is gaining the benefit of their ongoing day to day relationship with the regulators and comfort of answering the regulator’s questions. My final thoughts on firms that are considering hiring a consultancy firm is this: a consultant should be seen as a business partner who can help you stay on top of the regulations and assist with enhancing your compliance control framework. A good compliance consultant should help augment a compliance professional’s abilities allowing a fast and successful response to new regulatory requirements. It is therefore important to select a consultant that understands your sector and business model; and that you can build an ongoing relationship with – this is of particular relevance as a consultant is on your side, so can assist you better if you are completely honest and open with them. Boutique compliance consultancies such as fscom take pride in being deep domain experts in specific sub sectors. The team is multi-disciplinary and is built purely to work on regulatory compliance, financial crime and cyber security for the payments, trading and broking, cryptocurrency, retail banking and asset management sectors. If you decide to hire a compliance consultancy firm, it is important to do your due diligence and consider what sort of support your firm needs and the level of service you require.

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