The Future of Compliance Jobs

What every Compliance professional has to consider now

“I’ve seen the future of Compliance and it ‘s not looking good for my profession.” – Head of Compliance for an International Bank after attending a RegTech presentation.

I had meant to write this article for a while now and started drafting yesterday, so it was a bit of a surprise when I found an article in the Financial Times this morning, which in large parts at least, discusses exactly the same subject. Well, I must be up to something, but to be fair I’m by far not the only one.

The bottom line of the FT article is basically that thousand of Compliance jobs are at risk because of automated compliance systems using artificial intelligence. Following the financial crisis, banks had increased the number of Compliance staff significantly and according to an estimate from Citigroup the cost for the banking industry is about $270 billion each year. That is the equivalent of 10% of the overall operating costs.

The article correctly points out that many financial institutions had responded to the growing number of regulatory demands by simply increasing their headcounts. However, there are also those institutions that do not have joined the hiring spree with staff that is simply overwhelmed by the obligations of compliance officers. Even for the first group of banks the picture seems to be the same though: everyone laments the sheer amount of new regulations and the struggle to implement the new rules.

So, while the FT article focuses on the cost savings for the financial institutions that RegTech could bring, the new technologies will also be beneficial for Compliance staff, too, as they actually might receive a breather as routine tasks will be covered by automated systems. The downside, of course, is that this will inevitably lead to people being made redundant as machines do their jobs.

Hence, chances are that we are going to see an entirely different picture in the not too far future and I’m talking about ten years or even only five years from now. Already plenty of RegTech firms provide excellent solutions ranging from monitoring to reporting to client & counterparty identification for AML/KYC or Due Diligence purposes, for instance, but even legal and regulatory gap analysis, a job that is still done in many banks with simple spreadsheets. RegTech solutions will replace many of the daily and periodic tasks of compliance professionals through the use of Big Data analytics and Artificial Intelligence.

Figures from recruitment firms already indicate that we’re past the peak of compliance recruitment, which has been unlike most other areas in financial services the only one steadily growing over the last couple of years. Wall Street last year saw a reversal of this trend with many banks reducing their numbers and it is likely to continue in this directory for four reasons:

1) The Cost of Compliance: considering the already high cost of doing business with a view to regulatory obligations, banks cannot continue to throw more bodies at the problem;

2) Saturation: while there are still many new regulations about to come, some financial institutions believe there seems to be a light at the end of the tunnel. Even amongst those who do not support the idea that Trump or Brexit might result in a trend towards more deregulation, there is the idea that the worst may be over;

3) Outsourcing: also, financial firms have already moved or outsourced some of the more routine tasks to cheaper alternatives; and lastly

4) RegTech, which is as a likely to be the real game changer.

What does it mean for compliance professionals then? Similar to the trend we have seen in general employment markets, so will the compliance industry undergo a similar process of polarisation: as in manufacturing or clerical jobs, Compliance professionals that look after tasks that can be easily automated will be forced out, while those that are highly skilled with particular experience or those that can leverage technology for more productivity may actually thrive. Because do not be mistaken, RegTech will not make the Compliance profession redundant, but merely mean that it will undergo a profound transformation. A technological understanding to build the bridge between RegTech and the specifics of an institution will be in high demand, but equally will be specialisations in terms of knowledge and as a result, a compliance officer might actually be able to focus on the real issues.

So, it’s not the end of the Compliance profession –  just as we know it.

Lavanya Rathnam

Lavanya Rathnam is an experienced technology, finance, and compliance writer. She combines her keen understanding of regulatory frameworks and industry best practices with exemplary writing skills to communicate complex concepts of Governance, Risk, and Compliance (GRC) in clear and accessible language. Lavanya specializes in creating informative and engaging content that educates and empowers readers to make informed decisions. She also works with different companies in the Web 3.0, blockchain, fintech, and EV industries to assess their products’ compliance with evolving regulations and standards.

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