Best Practices in Building a Global Compliance Program

In an increasingly globalized economy, investment firms must embrace a global perspective when it comes to compliance with regulations worldwide. But doing so is no easy task.

“When implementing a compliance program in a global environment, there’s a number of challenges that organizations face, from standardization issues in terms of contractual agreements and practices to issues with respect to cross-border offerings,” said Nicholas D’Angelo, Director, Financial Services, PwC.

D’Angelo moderated the panel, in which asset managers and financial service providers from Citi, Franklin Templeton, and Putnam Investments discussed challenges in the current environment, organizational frameworks, and leading practices.

THE CHALLENGES

Stephanie Tyler, Manager, US Transfer Agent Global Risk & Control Compliance at Franklin Templeton Investor Services, LLC, zeroed in on communication challenges.

“It’s important to keep communication flowing between the different groups you deal with, whether it be legal, compliance, operations, or sales,” she said. “But that can be challenging in a multinational organization where you’re dealing with different time zones, language issues, locations, and environments, so I think that’s why communication always bubbles to the top,” she said.

Tyler also noted that it’s also difficult to hire qualified staff in some emerging markets, especially where talent pools are limited and highly competitive. “I think that goes hand-in-hand with how you don’t always know where the regulatory regime in that emerging market is going,” she said. “Sometimes it can evolve very rapidly or sometimes it could move very slowly, and you don’t know how staffed do you need to be to meet regulatory needs.”

Mark Trenchard, Director of Operational Compliance at Putnam Investments, said it’s also a challenge to understand operational costs. “It’s difficult to fully understand and appreciate what some of those costs, often driven by regulatory obligations, might be,” he said. “Are you deriving a benefit from conducting business or activities in some of these jurisdictions?”

Trenchard added that there’s typically a desire to adopt corporate-level policies throughout the company. But when you’re engaged in business activities in different jurisdictions, merging systems can be quite the challenge.

“We deployed a new HR system and, and the reality is that we have non-U.S. employees and there are different labor laws, so there’s different functionality that needs to be supported in those systems to effectively work with our non-U.S. associates through a common system that works for everybody,” he said.

LEADING ORGANIZATIONAL FRAMEWORKS

Diana Hanlin, Senior Vice President, Compliance, at Citi, said her organization takes a hybrid approach to its global compliance team. “We’re managed as a centralized function, but we have regional groups that have some autonomy and are able to adapt to local markets, which I think is critical,” she said. “The regional groups have to report back to that centralized function, keeping in mind that their goal is to understand the rules and regulations within those markets.”

Tyler said Franklin Templeton’s Corporate Policy Oversight Committee meets on a quarterly basis to share insights.

“We’re working toward consistency in our policy documentation, our approach, potential testing, and how we’re running programs in each of the different regions,” she said. “It’s great to have the chance to talk to not only the compliance folks but also legal representatives and business units to understand some of the challenges they see on the ground.”

Tyler added that flexibility is key in this era of sweeping regulatory change. “I think it’s important not to be married to your current structure or approach,” she said. “You may need to do a course correction along the way, so make sure you can make those changes fairly fluidly.”

Trenchard agreed. “There are scenarios where there’s a new requirement in a particular jurisdiction that may cause you to reexamine the whole activity itself and whether you want to continue to do business there,” he said. “It’s is important to evolve and work with your business partners to fully understand everything that needs to be done to operate effectively and profitably in a particular location.”

From a compliance and risk standpoint, D’Angelo said the last thing asset managers need to do is spend copious amounts of time gathering data — instead, they should focus on analyzing that data. And that’s where technology comes into play.

Tyler said Franklin Templeton is always open to exploring new tools, though finding a centralized platform is challenging. “We sometimes have to use different platforms to meet different regulatory market needs, so that is an ongoing technology challenge for us, especially in different regulatory markets that may be less mature,” she said. “But you just have to keep your eyes open because something could come on the market that will help you centralize those needs.”



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