What every compliance professional needs to know

Written by Katharine Leaman on Tuesday August 24, 2021

Almost every regulator possesses rules on protecting customers’ monies and assets. Most of these regulators have also issued some form of sanction, either publicly or privately, to businesses they regulate for inadequately protecting these monies and assets.

Despite such regulatory action, the pandemic has served only to exacerbate the global trend of a deliberate or inadvertent lack of protection for customers.

Regardless of whether you believe your business is diligent in this area, a growing number of compliance officers, alert to trends and gaps in their knowledge, are undertaking refresher training to ensure they are cognisant of indicators that could put their customers at risk.

But why is the protection of customers’ monies and assets so important?


Providing protection for customers

Customers are at the heart of every business; without them, a business simply cannot exist. The relationship between a business and its customers, therefore, is critical. Financial services firms supply intangible products and services to their customers, requiring from the customer a high degree of trust, and from the financial institution, responsible conduct.

When engaging a financial services business, a core but often unspoken assumption by the customer is that their monies and assets will be safe. It is the responsibility of the business to meet that basic customer expectation.

For the business, that means the separation of that which belongs to each customer and that which belongs to the business, often referred to by regulators as segregation.

Segregation is a core part of regulatory regimes that provide protection for customers and is the cornerstone of protecting customers’ monies and assets.


Maintaining market confidence

When a customer requests a withdrawal, they expect the financial services firm with whom they are engaged to return their monies or assets promptly and intact.

There are occasions where market conditions or the nature of the underlying, such as property, makes meeting this expectation difficult. However, these difficulties should only arise in situations that are already well understood by the customer.

Day to day, there should be no reason for delays. Customers do not expect to be brought into debates about contracting parties, operational problems, issues with third-party suppliers or any other disruption that could stymie their withdrawal.

Returning customers’ monies and assets promptly goes to heart of confidence in financial services markets and helps maintain trust.


Being operationally resilient

Nevertheless, from time-to-time, businesses experience sudden, unexpected shocks beyond their control or forecasting. The global pandemic and the 2008 financial crisis are both apposite examples from recent history.

Some of the underlying issues of these global crises occur surprisingly regularly but on a much smaller scale – for example, an office destroyed by fire, a business failing, processes breaking down, technology being inept and vacancies building up.

Customers do not expect to feel the impact of any of this disruption. Their expectation is that your business be resilient and in possession of contingency arrangements so that your service to them is unaffected.

Operational resilience may be the latest new buzzword, but it’s nevertheless what your customers expect and what you must strive to achieve.


Maintaining trust

When Lehman Brothers filed for bankruptcy in 2008, its customers expected their monies and assets to be returned to them promptly. For some customers, however, it took over a decade to receive what was legally theirs.

Unresolved industry issues, such as the protracted legal wrangling of Lehman’s failure, are extremely damaging; they encourage in customers a loss of trust and confidence and is detrimental to trust between market participants.

Running a business that meets customer and market expectations enables you to contribute to the trust and confidence that your customers expect.

As a professional compliance officer, you should be aware of the need to keep your knowledge up to date. As the world emerges from the pandemic and starts to resume normal activity, there couldn’t be a better time to refresh your awareness of protecting customers’ monies and assets.

Some people find this a difficult or complex area of regulation and shy away from learning more. But ICA, experts in explaining complex and challenging areas of regulation to its members, can help detail in simple terms how you can shield the monies and assets of your customers with the ICA’s course dedicated to monies and assets.

By taking the course, you will realise that the greater the awareness of how to protect customers’ monies and assets across your business, the better your customers will be served.

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