September 7, 2022 | Jennifer Clarke
Estimated reading time: 7 minutes
5 ways that CUBE solves compliance officer accountability nightmares
The environmental, social and governance (ESG) movement has been cemented high on the regulatory agenda. First, we saw regulators tackling the ‘E’, but as time ticks on we’re seeing an increased focus on the ‘G’.
The overarching movement now is on of ‘T’ – transparency. Investors are no longer happy with patchy information about their investment vehicles, they want to know where their money is going, what their climate credentials look like, and how their senior managers are being held to account.
For an overview of emerging individual accountability regulation, see here.
For some, the prospect of individual accountability in the event of non-compliance is a worrying one. Though it’s not an entirely new concept, the parameters for liability are becoming stricter. Thankfully, advanced regulatory technology (or RegTech) such as CUBE is here to allay personal accountability woes. We’ve listed the 5 ways that CUBE can help you sleep better at night:
1. Have complete oversight of end-end compliance
Non-compliance often occurs where issues or tasks are able to fall through the gaps. Take, for instance, the case of ex-compliance officer Arnold Feist who, in February 2022, faced a $25,000 fine and 2-year suspension for failing to properly oversee his employer’s anti-money laundering program.
The Financial Industry Regulation Authority (FINRA) found that for the five years that Feist had presided as a compliance officer, his company had failed to meet regulatory expectations. In particular, Feist had failed to familiarise himself with the company’s day-to-day operations and to properly supervise AML analysts.
The issue here was not necessarily that Feist was wilfully negligent or wilfully non-compliant, but rather that he did not realise that the compliance operation he was responsible for was not sufficient.
How CUBE helps you
CUBE enables compliance officers to have oversight of the entirety of the regulatory change process – from beginning to end. You’ll receive alerts when new regulations or relevant content is published.
That content will be classified, translated, standardised and put into a regulatory inventory where you can attach labels, tag colleagues and assign tasks.
In the background, CUBE is using AI to ensure both regulatory relevance and any new or altered regulations are mapped to your internal policies, procedures and controls.
If you want to, you can lift up the bonnet and see how the technology is working underneath. CUBE ensures that no stone is left unturned for regulatory compliance, so the chances of gaps appearing are significantly reduced – and the chances you’ll be held responsible are even less.
2. See who is responsible for compliance ‘missteps’
SEC Commissioner, Hester Pierce, recently set out what a CCO liability framework could look like. In doing so, she noted that many compliance officers may fear “facing liability for someone else’s missteps” – which could dissuade individuals from applying to the role.
A report by research centre, Pomenon, in 2022 uncovered nearly 7,000 incidents of insider threats across the 12-month period from 2021 to 2022. Of these, 26% could be attributed to a “criminal insider” while a whopping 56% were caused by “incidents relating to negligence”. In large organisations, it’s no wonder errors occur – it’s not easy to keep tabs on everyone.
Most companies use some sort of workflow to assign tasks to compliance team members so they can see where the buck stops. These systems are often an afterthought – ill-maintained and seldom checked. Some companies (if the rumours are true) continue to use Excel spreadsheets to track individuals’ responsibilities.
These systems allow room for error and, in the event that something does go wrong, are difficult to unpick. That’s why CUBE has developed an integrated workflow.
How CUBE helps you
CUBE’s workflow capability permits users to assign tasks to other users. If there is a change in regulation, for instance, you can assign the next steps to the relevant person – setting deadlines for completion.
Not only does this allow you to have oversight of the tasks your employees are working on in one place, it allows you to see a clear audit trail of responsibility in the event that something goes wrong.
So if, as Commissioner Pierce put it, someone does “misstep”, you know who it was and where the buck should stop.
3. Have confidence that you’re getting it right
As in the above case of Feist, non-compliance may not always be malicious non-compliance, it may simply be that gaps go unnoticed or unmanaged for such a period that closing those gaps becomes an untenable task.
Often times, compliance officers are confident that their processes and technology is working until a bad actor or regulator shows them that it is not. This leaves compliance officers in a perpetual state of worry – ‘have I done enough?’ You may lack confidence in compliance.
How CUBE helps you
CUBE, through automation and machine learning, minimises room for errors and reduces gaps and false positives. Our industry-leading AI has been trained for over 10 years on high-quality data sets. What this means is it’s been told what is right and what is wrong, over and over, for 10 years – with SME validation at the end.
With CUBE, you can be sure that you’re capturing relevant information and that it’s been precision-mapped to your internal policies, procedures and controls – without stopping for tea breaks or getting distracted.
So, while the rest of your team can spend time focussing on tasks up the value chain, you can be confident that your regulatory compliance is running in the most efficient, accurate way. It’ll help you sleep at night.
4. Free up time for high-value compliance tasks
Regulatory change management isn’t always easy or time efficient. Tracking, capturing and managing global regulatory change, if done manually, can take hours. If the regulation isn’t in English, it’ll need translating – this might see you liaising with teams of specialist translators before you’re even able to assess what the latest regulatory change entails.
For those who continue to use manual processes or outdated GRC technology, the regulatory change process can be arduous, ineffective and take up valuable compliance officer time that could be better spent elsewhere.
How CUBE helps you
CUBE allows you to free up time. It uses AI and automation to streamline what is, in essence, a laborious manual process. CUBE’s technology does in seconds what it takes an individual a month to do.
In near-real time, CUBE uses AI to capture the entire regulatory internet, translate it into English, makes sense of it, and map it to your internal policies, procedures and controls. It’s constantly up to date, and allows you to pull auditable reports whenever you need.
What does this mean for you? It means you get your time back. So, instead of managing spreadsheets, translators or trawling the internet for relevant regulations – it’s all at your fingertips. So you can spend time implementing effective compliance programs, ensuring they’re up-to-date and operationally effective.
5. Know what’s around the corner, so you can get ahead of regulatory expectations
Reactive compliance has fallen out of fashion in recent years. Driven by increased market competition and a shift in investor preference, firms are turning to proactive compliance – implementing tools that enable them to comply ahead of time and gain a competitive edge.
Companies that kick compliance into the long grass, hoping they won’t get caught, are finding themselves falling increasingly out of favour in a world of knowledge-fuelled investors. Reactive compliance is often an area in which regulated entities fall behind. It’s not always a conscious choice, however, some compliance teams are so busy they don’t have the opportunity to come up for air and see what’s happening in the wider world.
How CUBE can help you
If ‘ignore it and it’ll go away’ resonates with the attitude of your compliance team, it may not be long until you’re coming under fire. Moreover, it’s likely to be compliance individuals rather than the company itself that feels the force of regulatory action.
CUBE can ensure you stay one head of regulation with effective horizon scanning across 180 countries in 60 languages. It tells you the regulations that are relevant now, as well as the obligations you’ll have to comply with in future.
Horizon scanning means that your compliance team has time to prepare for regulatory change, for instance giving you time to collect data you’ll need for upcoming reporting requirements. It gives you time to breathe, and time to implement well-thought-out processes, rather than patching up gaps.