Whether it’s Consumer Duty rules, diversity and inclusion targets, or nonfinancial misconduct, every pressing issue in financial services compliance today comes down to culture.
This can’t be a tick-box exercise, but must be part of everything you do, said Julie Ampadu, chair of the U.K.’s Association of Professional Compliance Consultants (APCC) during a Q&A session with Compliance Week.
Q. What is the APCC?
A. The Association of Professional Compliance Consultants was started 20 years ago and now has 150 members, all of whom are compliance consultancies supporting approximately 22,000 of the U.K.’s 56,000 regulated financial service (FS) firms. Our members help firms to navigate the complex regulatory landscape. Some have a long-term relationship with clients and others come in for specific projects, for example when there is regulatory intervention, to deliver training, or advise on an application for authorization.
Q. When did you get involved?
A. I became a director six years ago and chair about two and a half years ago. All our directors are volunteers and we are all compliance consultants. We are different from the other FS trade associations, because we have clients in a range of FS sectors. This gives us a bird’s-eye view of the whole regulatory landscape and how it affects every type of regulated FS firm. We are useful to the regulators, because we can share what firms are finding challenging and bring these themes to the regulators’ attention. The regulator will ask us for support in the work that they do, so it’s a highly collaborative relationship.
Q. What are firms finding most challenging?
A. All the major concerns relate to culture. The Financial Conduct Authority’s (FCA) Consumer Duty, aimed at ensuring that all financial products are fair to consumers, has been the main topic on our clients’ minds for some time. The most recent significant issue was the closed products deadline on July 31 and the requirement for the first annual report on the Consumer Duty to be approved by the board.
This regulation is all-consuming. If firms view it as a tick-box exercise they are missing its fundamental purpose, which is to create a healthier culture. Firms naturally focus on the rules, but the FCA’s overarching aim is to improve FS culture so customers get a better service. Consumer Duty is the latest in a series of initiatives to promote this. The most important thing is for firms to demonstrate that improvements are meaningful and lasting.
The FCA is listening and wants to understand what firms are doing to embed a better culture. It’s therefore impossible for firms to meet a Consumer Duty deadline and then forget about it until next year. Culture must be constantly nurtured. It’s about who you are as a business. Everything feeds into it and firms and their clients evolve constantly.
The FCA is currently reviewing a selection of Consumer Duty board reports and we are also expecting analysis following its review of its Diversity and Inclusion consultation paper from September 2023. The regulator particularly wants to widen FS diversity of thought and experience. This, together with its project on nonfinancial misconduct, also feeds into FS culture.
There are some exemplary firms out there doing great work, but also many that are lagging. The important thing is not to get bogged down in rules, but to view the whole culture dispassionately and gain an objective overview, which is where compliance consultants can help. The FCA doesn’t see culture as a single project, but as the fabric of a firm, so culture is an overriding expectation of every part of regulation, even when it is not explicitly mentioned.
Q. What are the key skills for a compliance consultant?
A. Too often compliance consultants are seen as tick-box checkers. In fact, our main skills are communication and collaboration. We must be able to influence and help firms that are struggling so they can make the best decisions themselves. For example, a consultant wouldn’t write a firm’s Consumer Duty board report, but we can provide guidance and help to interpret the expectations of the FCA.
Culture and behavior are fundamental to what we do. We can ask clients whether their people are behaving the right way and whether they have the right mindset. If a firm has to submit a notification to the regulator, we can help them to understand the actions they need to have internally and the approach they should take so the FCA is confident they are dealing with the issue. The firm must do the work itself, but we can support it.
We also go into schools and colleges to educate young people about careers in compliance. Most people “fall” into compliance jobs. This is why the APCC is working in partnership with The Association of Governance, Risk and Compliance (AGRC) to develop a level 6 compliance qualification for compliance consultants, as there is currently no formal career path for those in compliance who want to become consultants. Our work is important and we need to attract and train the next generation.
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