Table Of ContentTable of Contents
Advance Praise
Title Page
Copyright
Dedication
Preface
Acknowledgments
About the Author
Opening Notes
Design and Structure of the Book
Part One: Introduction to Compliance in Financial Services
Chapter 1: An Overview of Compliance in Financial Services
A Brief History and Evolution of Compliance
Chapter 2: Compliance in the Twenty-First Century
Drivers of Compliance
Broad Areas of Regulation and Supervision in Financial Services
Major Bodies That Define Compliance Boundaries for Financial Services
Part Two: The What, Why, and Who of Compliance
Chapter 3: What Is “Compliance”?
Compliance in the Context of Banking and Financial Services
Understanding the Semantic Maze of Compliance
Interconnects
Chapter 4: Why Is Compliance Needed?
Why Regulate?
Why Comply?
Consequences of Noncompliance
Cost-Benefit Analysis of Active Compliance
Interrelationship between Business Model, Strategy, and Compliance
Active Compliance—a Strategic Tool in Value Creation, Preservation, and
Enhancement
Chapter 5: Who Are the Players in the Compliance Universe?
The Universe of the Financial System—A Bird's-Eye View
Primer on Major Players in the Financial System
Stakeholders of the Compliance Universe
Compliance Roles
Part Three: The How of Compliance
Chapter 6: Compliance Framework
Managing the Compliance Maze
Chapter 7: Operationalizing Compliance
Operational Framework
Points to Note
Compliance Culture Dimension
Part Four: The Compliance Risk Dimension
Chapter 8: Exploring the Concept of Compliance Risk
Defining Risk
Overlap of Financial Risks and Compliance Risk
Compliance Risk—An Introduction
Defining Compliance Risk
Subcategories of Compliance Risk
Compliance Risk and Organizational Complexity Scale
Chapter 9: Compliance Risk Management
Risk Appetite
Risk Identification
Risk Assessment
Risk Mitigation
Risk Monitoring
Risk Remediation
Compliance Risk Reporting
Regulatory Dialogue
Part Five: The Real World of Compliance in Financial Services
Chapter 10: Real-Life Issues of Managing Compliance in Financial Services
Myths vs. Reality
Overlaps and Conflict Zones
Some Important Distinctions
Chapter 11: Lessons Not Learned
Real-World Examples
The Shifts
Chapter 12: Practical Solutions to Some Important Operational Challenges
Challenge: Building Business Integrity into Organization's Fabric
Challenge: Building Compliance-Aware Organization (CAO)
Challenge: Compliance Reach to All
Challenge: Managing Regulatory Dialogue
Closing Notes
Regulatory Coherence
Compliance Coherence
Building a Learning Organization
Index
End User License Agreement
List of Illustrations
Chapter 1: An Overview of Compliance in Financial Services
Figure 1.1 Simplified Picture of the UK Regulatory Framework
Chapter 2: Compliance in the Twenty-First Century
Figure 2.1 Objectives of Regulation
Figure 2.2 Classes of Regulation
Figure 2.3 Twin Peak Supervisory Model 1–Australian Model
Figure 2.4 Twin Peak Supervisory Model 2–The Netherlands Model
Chapter 3: What Is “Compliance”?
Figure 3.1 Regulatory Focus on Fair Treatment of Customers through Product Life
Cycle
Figure 3.2 Compliance Semantics—Conceptual Set
Figure 3.3 Compliance Semantics—Operational Set
Figure 3.4 Compliance Interconnects
Figure 3.5 The GRC Venn
Chapter 4: Why Is Compliance Needed?
Figure 4.1 Structural Regulations
Figure 4.2 Enforcement Options
Figure 4.3 Relationship between Noncompliance and Enforcement Options
Figure 4.4 Value of Fines Imposed by FSA across Years
Figure 4.5 Proportion of Fines Imposed by FSA across Years
Figure 4.6 Number of Fines Imposed by FSA across Years
Figure 4.7 Comparison between Amount of Fines and Number of Fines Imposed by
FSA
Figure 4.8 Business Consequences for Organizations
Figure 4.9 Business Consequences for Individuals
Figure 4.10 Different Cost Classes
Figure 4.11 Indicative Benefits
Figure 4.12 Relationship between Compliance and Revenue Maximization
Chapter 5: Who Are the Players in the Compliance Universe?
Figure 5.1 Ecosystem of Finance
Figure 5.2 Assets of Financial Intermediaries—20 Jurisdictions and Euro Area
Figure 5.3 Financial Assets
Figure 5.4 Movement of Funds from Savers to Users
Figure 5.5 Fund-Raising—Sample Options for Firms and How the Investor Is
Compensated for Funds Made Available
Figure 5.6 Global Financial System
Chapter 6: Compliance Framework
Figure 6.1 Compliance Program Components
Figure 6.2 Compliance Maturity Scale—Macro-View
Figure 6.3 Compliance Program Maturity Matrix
Figure 6.4 Strategic Framework
Figure 6.5 Broad Blocks of the Compliance Universe
Figure 6.6 Structural Framework
Figure 6.7 Sample Hierarchical Structure
Figure 6.8 Sample Matrix Structure
Figure 6.9 Compliance Calendar Sign-Off by LOBs and Support Teams
Figure 6.10 Sample Annual Plan and Implementation Sign-Off
Chapter 7: Operationalizing Compliance
Figure 7.1 Operational Framework
Figure 7.2 High-Level Compliance Process Flow
Figure 7.3 Obligations Register Template
Figure 7.4 Obligations Register Template Continued
Figure 7.5 Regulatory Change Management
Figure 7.6 Breach Management
Figure 7.7 Compliance Breach Report Template
Figure 7.8 Compliance Breach Report Template (Continued)
Figure 7.9 Representation of Communication Stakeholders
Figure 7.10 Representation of the Reporting Map
Chapter 8: Exploring the Concept of Compliance Risk
Figure 8.1 Compliance Complexity Scale
Chapter 9: Compliance Risk Management
Figure 9.1 Compliance Risk Classes or Blocks
Figure 9.2 Compliance Risk Identification Tools
Figure 9.3 Compliance Risk Assessment Process
Figure 9.4 Compliance Risk Scorecard Build Flow
Figure 9.5 Unadjusted Risk Score (Graphic)
Figure 9.6 Risk Score Adjusted for Risk Factor Significance
Figure 9.7 Remediation Standards Matrix
Figure 9.8 Reporting Levels and Possible Content
Chapter 10: Real-Life Issues of Managing Compliance in Financial Services
Figure 10.1 Over- and Under-Regulated Segments—Sample Representation
Chapter 11: Lessons Not Learned
Figure 11.1 Compliance Reporting Structures
Chapter 12: Practical Solutions to Some Important Operational Challenges
Figure 12.1 Communications between Compliance Staff and Regulators
List of Tables
Chapter 2: Compliance in the Twenty-First Century
Table 2.1 Comparison of the Macro- and Micro-Prudential Perspectives
Table 2.2 Sample List of Regulations
Table 2.3 Regulatory Models
Table 2.4 Federal Financial Regulators and Organizations of United States
Table 2.5 Objective, Content, and Tools Used in Prudential and Financial Conduct
Table 2.6 Agency Roles in Macro-Prudence through the Economic Cycle
Chapter 3: What Is “Compliance”?
Table 3.1 Illustrating the Five Aspects with a KYC Example
Chapter 4: Why Is Compliance Needed?
Table 4.1 Stylized Comparison of Selected Structural Reform Proposals
Table 4.2 Foreign Corrupt Practices Act (FPCA) Fines Structure
Table 4.3 Comparison between Amount of Fines and Number of Fines Imposed by SEC
Table 4.4 Year-by-Year SEC Enforcement Statistics
Table 4.5 Sample Costs by Cost Classes
Table 4.6 Indicative Cost Items for a Technology Initiative (Systems Costs)
Table 4.7 Benefits of Positive and Active Compliance
Table 4.8 Cost-Benefit Analysis
Table 4.9 Building Blocks of Business Model
Table 4.10 Operationalizing Business Model
Table 4.11 Compliance and Business Model
Chapter 5: Who Are the Players in the Compliance Universe?
Table 5.1 Characteristics of the Components of the Financial System
Table 5.2 Indicative Market Structure and Sample Instruments
Table 5.3 Global Foreign Exchange Market Turnover (net-net basis,i daily averages in
April, in billions of US dollars)
Table 5.4 Financial Intermediaries and Their Functions
Table 5.5 Functions at a High Level of Financial Intermediaries
Table 5.6 Market Participants
Table 5.7 Compliance Stakeholders
Chapter 6: Compliance Framework
Table 6.1 Indicative Compliance Areas
Table 6.2 Outline of Compliance Charter
Table 6.3 Sample Compliance Coverage
Table 6.4 Risk Activities Outside the Scope of Compliance Department
Table 6.5 Compliance Department—Expectations
Table 6.6 Sample of Responsibilities of Different Role Holders
Table 6.7 Sample of Responsibilities of Different Role Holders
Chapter 7: Operationalizing Compliance
Table 7.1 Sample Registers of Compliance
Table 7.2 Compliance Master Structure
Table 7.3 Obligation Master Structure
Table 7.4 Compliance Risk Master
Table 7.5 Controls Master
Table 7.6 Breach Master
Table 7.7 Training Master
Table 7.8 Communications Master
Table 7.9 Reports Master—Reports to Be Submitted to the Compliance Department
Table 7.10 Reports Master—Reports to Be Submitted by the Compliance Department
Table 7.11 Remediation Master
Table 7.12 Compliance to Obligations Map
Table 7.13 Risk to Control Map
Table 7.14 Breach to Remediation Mapping
Table 7.15 Responsibility Mapping
Table 7.16 Complaints Master
Table 7.17 Breach Management Master
Table 7.18 Reporting Level Based on Breach Severity
Chapter 8: Exploring the Concept of Compliance Risk
Table 8.1 Causes of Noncompliance
Table 8.2 Consequences of Noncompliance
Table 8.3 Map of Consequences of Noncompliance to the Sub-Risk Categories
Table 8.4 Subcategories of Compliance Risk
Table 8.5 Compliance Complexity Scale with Added Dimensions of Regulators
Chapter 9: Compliance Risk Management
Table 9.1 Risk Identification Map
Table 9.2 Geography View across Financial System Abuse
Table 9.3 Sample of LOB (Line of Business View)
Table 9.4 Comparison of Risk Profile across Two Time Periods
Table 9.5a Impact Scale
Table 9.5b Likelihood Scale
Table 9.5c Inherent Risk Computation
Table 9.6 Heat Map of Inherent Risk
Table 9.7a Design Effectiveness Scale
Table 9.7b Implementation Effectiveness Scale
Table 9.7c Heat Map of Control Assessment
Table 9.8 Template for Residual Risk
Table 9.9 Compliance Risk Fitness Barometer
Table 9.10 Sample of Residual Compliance Risk Report
Table 9.11 Building a Scorecard
Table 9.12 Metrics for Each of the Risk Attributes
Table 9.13 Example of Compliance Risk Scorecard
Table 9.14 Example of Compliance Risk Scorecard
Table 9.15 Example of Compliance Risk Scorecard
Table 9.16 Summary of Compliance Risk Scorecard
Table 9.17 Unadjusted Risk Score (Tabular)
Chapter 10: Real-Life Issues of Managing Compliance in Financial Services
Table 10.1 Myths and Facts of Compliance
Table 10.2 Three Lines of Defense Model
Chapter 11: Lessons Not Learned
Table 11.1 FSA Fines 2014
Table 11.2 FDIC (Federal Deposit Insurance Corporation) Failed Bank List
Table 11.3 Fines Table—Individuals Fined 2013
Table 11.4 Fines Table—Companies Fined 2013
Chapter 12: Practical Solutions to Some Important Operational Challenges
Table 12.1 Severity Frequency Matrix
