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New Regulations a Liability?

The Thomson Reuters Cost of Compliance 2018 survey highlighted that 18 per cent of compliance professionals globally are concerned about compliance liability.

“The introduction of accountability regimes worldwide, such as UK’s senior Managers and certificate Regime(SMCR), Hong Kong’s Managers In charge (MIC), and Australia’s Banking Executive accountability Regime (BEAR) has had its impact on the practitioner view of on personal liability,” according to the report co-authored by Stacey English and Susannah Hammond.

The cost of compliance report makes reference to a previous survey conducted by Thomson Reuters, the Culture and Risk Conduct Survey. This previous report found that 70 per cent of firms thought that the focus on culture and conduct will add to the impact of personal liability.

Last year, David Jacobson from Bright Law wrote in the GRC Professional Magazine that then new AML/CTF rules would place emphasis on the responsibilities of the compliance officer under the AML/CTF and the announcement of the Banking Executive and Accountability Regime (BEAR).

“If the three lines of defence model is followed, is the liability for a compliance breach a collective corporate liability, or the personal liability of the chief executive, senior manager or the compliance officer?” Jacobson asked.

He suggested that under the AML/CTF act the requirement of the appointment of a compliance officer who will then be responsible for the framework could mean ‘it makes it possible for a compliance officer to contravene a civil penalty provision or be subject to a pecuniary penalty order.’

In his article, Jacobson explores other regulatory regimes and the potential implications for compliance professionals under those regimes, but in the end, concludes that it is really up to the board and management to set the tone. Holding the compliance professional accountable for a breach might indicate that the company may have some cultural challenges.

Only some liability attached Angus Young, Senior Lecturer and Programme Director in for the Department of Accountancy and Law at the Hong Kong Baptist University, does not see the development of the MIC Regime raising any concerns for the liability for risk and compliance professionals in Hong Kong, which is one of the studies that was highlighted for tightening regulatory regimes focusing on managers.

“I do not think there is much, maybe except for those doing Anti-money Laundering because of some personal liability attached for failure. But, overall, there has been no incident of compliance professional be liable for work in Hong Kong.”

For Young, compliance and the idea compliance within organisations is still developing. “Compliance in HK is still reactive and a patchwork.” Young said. “By this I mean if regulators come down hard on companies - which is rare, then compliance professionals will be pressured from their superiors. Otherwise, compliance work has more to do with creating bureaucratic procedures and reacting to matters that surface from time to time.”

Regulation driving the Professional in Hong Kong Author Aquis Search Hong Kong Compliance Survey, Gina Hui, implied that the MIC has been a boon to the compliance industry, suggesting that Chinese brokerage firms will be driving this demand in 2018.

“Compliance professionals with the ability to demonstrate both commercial acumen alongside experience gained from top tier investment banks, as well as an understanding of Chinese work culture are highly sought after,” she writes.

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