Welcome
…to the 53rd edition of house and Happy New Year (western style) to all our readers! 2019 was a tumultuous year in many ways. Geopolitical factors which really do hamper hiring decisions were at an all-time high last year with the US/China trade war, Hong Kong protests, Brexit, German Elections, Indian Elections and finally the Christmas UK Elections!
However, the hiring didn’t stop completely at the end of 2019! With key moves at Bank of America where Dinesh Sadarangani moved up to become APAC Head of Compliance, replacing Jonathan Phillips. Former Credit Suisse Managing Director Rayson Tan joined British FinTech sensation Revolut in Singapore as their new Head of Compliance and the Hong Kong Jockey Club announced Moray Taylor-Smith as their new Head of Corporate Security, joining from HSBC.
In the UK we also saw big moves at Legal and General Investment Management where Camille Blackburn has joined from Aviva Investors in London as their new Global Chief Compliance Officer. Finally, Tim Langton joined KPMG in London as Head of Compliance from BP.
2019 - A bad year for Investment Banking Compliance Officers….but there is hope…
2019 was a really difficult year for compliance officers within the Investment Banking sphere. A ten-year boom in hiring for compliance officers following the GFC in 2009 came to a fairly abrupt stop last year. A ‘regulatory light’ political environment coming out of the US; an end to a period of litigation and remediation; and a focus on cost cutting through technology and outsourcing solutions saw many of the bulge bracket investment banks make serious cuts to their departments, especially at the MD level, most notably within US Investment Banks.
However, we think that many banks over cut and initial meetings this year suggest there will be some hiring at the Director and Managing Director level. A large part of the reason why this will happen is a more compliance aware business, who have been pushing back to ask for more effective compliance resources and we have seen a return to an interest in the traditional advisory compliance officer. Speaking to contacts in front office roles, many were no longer being served by a dedicated compliance officer on the trading floor or sitting with the business. Compliance had become an audit function and in some cases questions had to be logged at a central email, akin to taking a ticket at the passport office and waiting your turn (often for days). Compliance officers need to be visible and the business need them to work with them as individuals now carry a lot of personal risk. We have already seen a demand for compliance officers who can talk to the business, want to engage and don’t want to hide behind an office door checking their inbox!
2019 - The rise of the machines…..
…but which machines? and did they really work?
In nearly every meeting with senior regulatory professionals last year, the key theme that emerged was that they were going to invest in technology. But words such as Data Analytics, Machine Learning, Artificial Intelligence, even Robotics were exposed with great enthusiasm.
Whilst we are very much in agreement that technology and data will take over a lot of the more mundane tasks of the compliance officer, we have not seen a drastic reduction in the number of staff in compliance departments, especially at the Associate and junior levels where the robots and artificial intelligence solutions were due to take over.
I am sure there have been major technological changes made to the compliance departments of many firms, but we have yet to sit down with anyone who has said. ‘Yup, 50 staff eliminated, all the work is now down by a team of Robots.’
We think a consolidation will happen this year and one or two pieces of technology will win out and become the industry norm especially in areas such as surveillance and KYC, and should have an effect on headcount.
Predictions - China, China and China and the rise of the Crypto compliance officer.
China
Compliance hiring in China is set to see a huge increase in 2020. As international firms increase the size of their operations exponentially following the relaxing of rules on foreign ownership. Goldman Sachs, Morgan Stanley and UBS have all indicated that they will increase the size of their Chinese operations.
Similarly, as Chinese companies and businesses begin to aggressively expand into foreign markets in an international environment where compliance is emphasised, they find themselves in a rush to ensure the implementation of a thorough regulatory structure to prevent major economic losses, and perhaps most importantly to protect their international reputation.
To achieve this, Mainland regulators have begun to urge financial institutions under their control, to make a greater effort to not only embrace international compliance procedures, but to cooperate with relevant authorities and their implied legal obligations. To elaborate, as of 2018, penalties issued by China’s Central Bank, the Peoples Bank of China (PBOC), against AML and CTF violations had risen 41% from the previous year, amassing a total of 189.3 Million Yuan in sanctions. Furthermore, the government have, in close cooperation with the Ministry of Human Resources and Social Security, undertaken substantial efforts to formally list ‘Compliance Officer’ as a new and legitimate profession within China, with speculative figures displaying their need for up to 500,000 said professionals in the foreseeable future. Their actions clearly demonstrate China’s increased efforts to paint their regulatory procedures in a more positive light, a keen strategy aimed at alleviating any possible risks opposed to the Belt and Road Initiative; a tactic all the more prevalent given rising tensions brought about by the trade war with the United States.
The Chinese Government appear to have clearly learned their lesson after the regulatory problems surrounding Huawei and ZTE late last year. Since then, the demand for professionals in fraud, sanctions, and AML procedures have risen a staggering 80%, as have the average pay packages for relevant professionals with said expertise. Furthermore, since 2018, an overwhelming majority of China’s State-and privately-owned enterprises have adopted a renewed and far more thorough compliance structure, although the impacts of their regulatory reform upon the nation’s lucrative economic productivity are yet to be seen…
In conclusion, Chinese Compliance Officers will be a red-hot commodity in 2020…
Crypto
Crypto Compliance Officers was the in thing in 2019, Noah Perlman being the highest profile move, joining crypto exchange Gemini from Morgan Stanley in New York. In Hong Kong, seen by many as the capital go crypto trading Angelina Kwan and Vivien Khoo joined Bitmex and Benedicte Nolens joined Circle. A lot of the hiring in the crypto space was made to enhance the legitimacy of this fledgling industry. One might also say it was an attempt to stave off incoming litigation. The crypto word has largely avoided regulatory scrutiny for now as like most of us the regulators didn’t really understand this mythical product. We anticipate a few major regulatory cases in the months to come, which will have an affect on several crypto currencies, and thus the continuation of the crypto compliance officer.
Crypto Compliance Officers was the in thing in 2019, Noah Perlman being the highest profile move, joining crypto exchange Gemini from Morgan Stanley in New York. In Hong Kong, Bitmex has been hiring at all levels, most notably Angelina Kwan and Vivien Khoo, while Circle hired Benedicte Nolens.
A lot of the hiring in the crypto space was made to enhance the legitimacy of this fledgling industry. One might also say it was an attempt to stave off incoming litigation. The crypto world has largely avoided regulatory scrutiny for now, as like most of us, the regulators didn’t really understand this mythical product. We anticipate a few major regulatory cases in the months to come, which will have an effect on several crypto currencies, and thus the continuation of the crypto compliance officer.
Any amount of regulatory skepticism/anticipation surrounding cryptocurrency in APAC and Greater China, somewhat mirrors the sector’s state of affairs in EMEA.
As of the 10th of January, Britains Financial Conduct Authority (FCA) will actively monitor AML and CTF within companies related to, or otherwise invested in the crypto-sphere, as a means to determine whether these business are actively compliant with the industry’s relevant regulations and legal requirements.
As a result, the roles of Crypto Compliance Officers within the UK going forward, will actively involve the identification and assessment of risks in relation to possible AML or CTF threats, while developing a set of policies and controls to conduct adequate due diligence, so as to ensure these threats do not come to fruition.
Recent regulatory action towards crypto on part of the FCA, comes in response to their June 2018 warning of cryptocurrency’s direct threat to market integrity, and its potential unsuitability to small time public investors. As a result, while the FCA continue to consider the restriction of crypto-trading amongst retail investors, they have come to acknowledge the role of crypto-assets as predominantly decentralised exchange tokens, that up until recently did not fall directly under the FCA’s regulatory scope. However, given the progressive nature of the organisation, we foresee the FCA’s stance towards crypto to not change too much over the coming year, as British regulators will aim not let compliance effect innovation, especially before Brexit…