Compliance Monitoring

High profile examples of misconduct in financial services, such as PPI mis-selling and LIBOR manipulation, demonstrate the difficulties of identifying, or even understanding, significant risks on the fringes of ‘core’ business areas. In both cases, neither the businesses (the first line) nor the Risk or Compliance functions (the second line) identified the risks and missed the opportunity to manage the risks appropriately.

A thorough compliance monitoring programme – testing the effectiveness of controls and conducting deep dives in certain areas of a business – can be an effective tool for identifying as yet unknown or little understood risks, as part of a wider risk management framework.

Here we look at the key issues to consider to ensure the effectiveness of your compliance monitoring programme.