COVID-19:
the need for a strong compliance culture

It has been a decade since the Financial Action Task Force, in its Reference Guide and Information Note of October 20101, advised organizations to adopt a culture of compliance to increase the success of their financial crime programs .

Some view the issue of culture as too vague, an intangible concept that offers no metrics to capture and measure. This intangibility means that compared to many of the other regulatory obligations, such as screening client details and due diligence, the creation of a specific corporate culture may seem too much of a challenge to implement. For many, it has been a low priority. 

There are those, however, who recognized the value in the advice and have steadily pursued a policy of compliance culture. These organizations are likely reaping the benefits of a proper compliance culture during the COVID-19 crisis for at least three reasons: faith, focus, and facilitation.

At the height of the lockdown restrictions due to the COVID-19 crisis, around three billion people were staying home. The order to self-isolate created a massive increase in online activity and rapid, extensive digitization of personal and professional lives. Organizations everywhere have had to rapidly scale up their IT systems to support teams working remotely.

There has caused substantial disruption to many workplaces around the world. Longstanding systems and protocols have been fragmented or abandoned. In a crisis such as this, it is easy to lose focus and become disoriented. Working from home, surrounded by family or housemates, lacking access to facilities such as reliable connectivity, can be incredibly stressful.

A proper compliance culture, one that has been carefully embedded and considered, dramatically helps to engender relationships of trust between team members and all through the hierarchy of the business. Under these circumstances, trust helps to reduce these stress levels. Faith in teammates, managers and direct reports minimizes the need to monitor the fulfilment of critical compliance functions. One of the benefits of a proper compliance culture is that it supports and transfers a set of values to employees that assists in sound decision-making under the most stressful of situations, regardless of the remoteness of the location.

In crisis conditions, it may be easy to overlook details, to cut corners, to push towards goals while allowing safety precautions to fall away. A crisis is not an environment conducive to careful screening and enhanced due diligence. It can be tempting to allow the detail of safety measures to slide past.

Opportunistic career criminals are counting on this, and there are several warnings of increased or changed criminal activity:

Europol reports that criminals have been quick to seize opportunities to exploit the crisis and have adapted to the new normal, or are engaging in new activities. Several factors that have prompted changes in crime and terrorism include2:

• Increased demand for certain goods including protective apparel and pharmaceutical products;
• A decrease in mobility and flow of people across and into the EU;
• A rapid spike in the number of people working remotely and relying on digital solutions;
• A massive reduction in public life which makes it easier for criminals to hide their activities;
• Increased anxiety and fear that may create vulnerability to exploitation;
• A decrease in the supply of illicit goods in the EU.
• Interpol has also reported a change in criminal activity, including a rise in counterfeit personal protection equipment (PPE) sold online.
• The FBI says that it has been alerted to an increase in attempts to steal personal and intellectual property information.
• The disruption to global supply chains has also significantly increased the exposure to third party risk as organizations scramble for continuity.

It is precisely at such a time, during a global crisis, that hypervigilance on meeting compliance obligations is required. A compliance culture supports unwavering focus on compliance processes and tasks.

As the world grapples with a ‘new normal’ defined by uncertainty and fear, keeping a step ahead of financial criminals has never been more important.

While there are several elements required to embed a culture of compliance, arguably the most critical element is that of leadership. Tone from the top, modelling of appropriate ethical behaviour and consistent messaging by senior executives and board members are all vital to a successful culture. It is these same elements that will assist the organization in transitioning to a new normal over the next months. The health crisis will be part of our lives for several months, if not years. An embedded culture will already have as standard a good system of communication between senior and middle management, and between management and teams. Indeed, a proper compliance culture is a mark of effective leadership.

In today’s dynamic regulatory environment, compliance processes and policies will likely be in a state of flux. A compliance culture, however, ensures continuity and leaves stakeholders in no doubt as to the expectations of their behaviour.

Regulators will continue to emphasize and encourage appropriate culture. They continue to issue fines where there is no evidence of concrete action taken to inculcate a culture of compliance and reduce fines when organizations have been investigated for a compliance failure but were able to demonstrate a commitment to culture. In May 2015, for example, a large global bank received a sentencing credit because they implemented a compliance culture program after an investigation by the US Department of Justice (DoJ). This resulted in a reduced fine.

For organizations that have not yet prioritized culture, this may be an opportune time to examine the requirements of embedding a proper compliance culture, during a time of considerable change and adjustment. Creating a culture is not as vague as it sounds and requires activity such as education, regular communication, incentives, and technology.

Regular workshops and e-learning programs can be very effective tools and are all easily documented.

Rahm Emanuel, former Mayor of Chicago and advisor to the Obama administration, recently repeated a catchphrase he last used during the 2008 financial crash: “never let a crisis go to waste”: perhaps compliance executives should take heed.

 [1] Use of the FATF Recommendations to support the fight against corruption, October 2010

[2] How criminals profit from the COVID-19 pandemic, Europol, 27 March 2020