Compliance

Why we should all aspire to become compliance officers.

One has to question the value of ticking countless boxes across seemingly endless amounts of documents ad nauseum, but that’s what compliance is these days and the process is completely out of control. The demands for simply opening a bank or investment account are akin to being asked for our shoesize, wanting to get three witnesses to verify that shoesize, getting our mothers to certify the shoesize, having a notary sign off on said shoesize and getting all of that done in wet ink, in triple copy, hand delivered on pink paper, in A4 and with the approval of god himself, witnessed by an angel.

Of course, there are bad apples and that’s what the system is designed to weed out. There are tax evasion structures, companies that are under investigation, people who have declared bankruptcy, and others who are intent to defraud. By making things really difficult, and asking for the same information over and over again, you will eventually find out if something does not match. The problem is the cost that is imposed on the rest of us. Clearly, the lawyers, accountants and trustees who we need as part of the process do not work for free. There are also opportunity costs as our time and energy would be of much better use elsewhere.

Compliance has taken over the entire financial services industry. Every investment manager has to have an internal compliance officer. Moreover, there need to be systems in place, processes that are approved and staff that are trained to prepare and file all the required documents with the relevant regulatory bodies. Every transaction needs to be reported and the data must be compiled in a way that is compatible with the supervisory infrastructure. Every interaction with the client needs to be documented and all the information stored securely, privately and confidentially. It all adds up to a very large annual bill and part of the reason why the overall fees in wealth management are still relatively high.

The best way to deal with anything related to compliance is to accept that there is no way we can win. There is no logic involved and the master of the universe is he or she that will tick the box or not. We either have the information or we don’t and not even pretty please with sugar on top (Pulp Fiction, 1994) will ever persuade someone to take the risk that anything should ever go wrong. Remember, when you are in compliance the upside is that nothing happens. The downside is getting the blame for something with disastrous consequences, because of data that was amiss and the evidence is there forever.

So, the next time you are about to yell and scream as you try to get your latest utility bill signed off by the local solicitor yet again, think of the proud, the few, the men and women who are upholding our system of justice and upon whose broad shoulders rests the functioning of the entire world´s financial system.