2 Oct 2018

The Scope and Evolution of Compliance

The Association for Financial Markets in Europe (AFME) and EY has today published “The Scope and Evolution of Compliance”. The report considers the role of the compliance function within wholesale investment banks and the potential challenges and changes it faces in its structure and approach.

It outlines the key considerations for banks’ compliance functions as they seek to adjust and enhance their roles in response to the changing nature of the business and regulatory expectations.

To address these challenges, the report offers possible responses and discusses the optimum resource model for compliance:

For example:

  • There is an opportunity for compliance to transition from its traditional role into one that provides enhanced strategic advice to senior management. This includes increased oversight of 1st Line Control Function surveillance and testing as a 2nd Line Control Function, greater use of business data to analyse and provide insights to senior management on changing risks and controls, and a greater influence on the management of the regulatory risk framework as a whole.

  • Compliance will become more data and technology dependent as budget challenges and operating effectiveness encourage innovation-driven transformation. But, people and human judgement remain important.

There will continue to be significant debate about what the optimum resource model for compliance functions should be, given the challenges as well as the opportunities they face. We hope this report can make a useful contribution to those ongoing discussions.