Compliance risk management in banks and financial services as a distinct discipline is young and evolving. While compliance as understood in the narrow sense of complying with authority has been in place for many years, the various dimensions and nuances added due to the exponential increase in the complexity of the financial world have brought compliance risk and thereby active compliance management to center-stage. This demands that active compliance risk management be treated as a discipline in its own right. There isn’t enough literature and comprehensive reference yet in this space. This book essentially seeks to fill that gap.

The book consists of five sections:

1. The first section discusses the “Why” of compliance: it makes a business case for why active compliance management as a strategic intervention and positive alignment with the organization’s business model will enhance the bottom line.

2. The second section deals with “What”: it breaks free the compliance definition from its narrow confines of merely being compliant to take it to its fullest potential. It explores connections with other risk areas, specifically reputation, legal risk, and governance, and what that means to the customer.

3. Deals with “Who”: it covers the entire ecosystem of compliance stake holders not just the designated compliance officers.

4. Is the “How”: viz. operationalizing active compliance right from policy statement to various compliance models, training and all the way to reporting. This section explores the multidimensionality of complex banks & financial Services in the form of multiple legal entities, multiple jurisdictions covering multiple regulators and regulations. This section is well peppered with appropriate templates and tools to support the operationalization. It calls out the culture dimension as a focal point to active compliance management.

5. The final section talks to the “Risk” aspect of compliance and takes a comprehensive look at compliance risk right from the risk sources to risk identification, its measurement, mitigation, monitoring, action tracking for remediation and the regulatory dialogue. Compliance risk measurement is the youngest to be called out in the family of risks and the book suggests some approaches for the same.

SALONI P. RAMAKRISHNA has nearly three decades of experience in financial services, both as hands-on professional as well as a solutions architect and contributor to the industry dialogue. She has been invited to share her thoughts and views on industry trends surrounding compliance, risk, customer centricity, performance, and data management in the analytics space by national and international banking and finance forums.

Saloni's ideas have appeared as articles and quotes in newspapers, journals, magazines, and television interviews. She has presented papers at national and international seminars and conferences. Since 2012, she has been a columnist for one of India's leading monthly magazines.

She is currently a Senior Director with Oracle. In her role she frequently interacts with top managers of banks, consulting professionals, financial services bodies, and senior regulators across multiple countries.

Preface xi

Acknowledgments xiii

About the Author xv

Opening Notes xvii

Design and Structure of the Book xix

Part One Introduction to Compliance in Financial Services

Chapter 1 An Overview of Compliance in Financial Services 5

Chapter 2 Compliance in the Twenty-First Century 25

Part Two The What, Why, and Who of Compliance

Chapter 3 What is “Compliance”? 53

Chapter 4 Why is Compliance Needed? 83

Chapter 5 Who are the Players in the Compliance Universe? 121

Part Three The How of Compliance

Chapter 6 Compliance Framework 159

Chapter 7 Operationalizing Compliance 183

Part Four The Compliance Risk Dimension

Chapter 8 Exploring the Concept of Compliance Risk 213

Chapter 9 Compliance Risk Management 239

Part Five The Real World of Compliance in Financial Services

Chapter 10 Real-Life Issues of Managing Compliance in Financial Services 273

Chapter 11 Lessons Not Learned 291

Chapter 12 Practical Solutions to Some Important Operational Challenges 315

Closing Notes 325

Index 335