Global Compliance Enforcement During C-19

It probably wouldn’t surprise many readers to learn that regulatory enforcement activity has fallen materially during the first six months of 2020, as regulators refocus their activities to deal with COVID-19.

What surprised me was that despite this reduction in enforcement activity the costs associated with fines has increased by 50% during the first quarter. It stands to reason, that these fines relate to enforcement activities conducted prior to COVID-19. According to Corlytics, global regulators fined firms a total of $3.1bn in the first Quarter of 2020. Still, thats a hefty increase.

As firms come to terms with operating, principally with many of their employees working from home, Senior Managers could be forgiven perhaps for relaxing compliance diligence. It would appear that the evidence would support this decision, because the regulators are dramatically reducing the amount of enforcement activity?

Unfortunately, the regulator is at liberty audit firms activities and hold them to account relative to the legislation current at the time. In the case of the FCA, the regulator has specifically stated that with the exception of some relatively minor concessions, it is business as usual. In other words, all firms operating in the UK FinServ markets, regardless of COVID-19, still need to operate as diligently as they did pre-COVID-19.

When one analyses the 2020 enforcement fines, by regulatory category, “Record Keeping” is the hands down loser with well over $1bn of the fines in this category.

If one also looks at the control failures cited in the 2020 fines, Compliance Monitoring & Oversight was almost double that of the 2nd item, AML and Systems & Controls, Staff Training & Competency & Record Keeping all figuring strongly. I wonder how many firms have taken steps to improve these areas during COVID-19 and how many have in fact, cited COVID-19 as a factor for failing to improve or even why controls might be weaker.

In a recent webinar, 47% of risk and compliance professionals admitted that their firms had done zero training in relation to their employees, suddenly working from home. It would appear compliance monitoring & staff training will also figure pretty high in the top 5 control failures post COVID-19 as well!

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