For decades, the calling which took the back seat has finally arisen. Now, the world has acknowledged the significance of the compliance officers more effectively in the lending industry. With the ever-tightening rules and regulations, the need for the compliance professionals is much felt due to the fact that the cost of non-compliance is huge as compared to the cost of compliance. It has made the lending companies to push up demand for the compliance professionals.
Economic fluctuations in the lending sector globally have posed the risk for the banks as well as non-banking financial companies (NBFCs) by causing the increase in NPA (non-performing assets), leading to stricter compliance of regulatory framework. The mismanagement by banks and financial institutions has resulted in a worldwide recession and to avert such circumstances in future, adherence to the regulations is a sine qua non. In order to avoid landing in any legal trouble, the finance companies are going the extra mile for staying well-compliant.
Gone are the times when the managers would take a decision which would later reviewed by the compliance officers, whether it’s in tune with the rules and regulations or not. The present scenario envisages the involvement of the compliance offers in the decision-making process for ensuring the effective compliance regime. The compliance operations are no longer being outsourced, but have become an integral part of the companies.
Earlier, there used to be a single regulator, but now there is a team specialized in dealing with the implementation of the regulation as the stringency of regulatory work and the plurality of laws has made it difficult for the lending sector to be fully complied.
With kicking in of the new Basel III norms from March 2019, there is an upsurge in demand for the compliance professionals. Not only the Basel III norms, but other stringent cross-border laws like FCPA (FOREIGN CORRUPT PRACTICES ACT), SOX (Sarbanes- Oxley Act), FATCA (Foreign Account Tax Compliance Act) and Dodd-Frank laws have generated the demand for the individuals who could comprehend these laws as many foreign companies, especially US companys’ subsidiaries, are currently running their businesses in India.
Also with the dawn of virtual currency like Bitcoin and e-wallet start-ups like Mobikwik, and Paytm, etc., a new dimension has been added to the finance sector which was already complicated, and even these mobile wallets, payment banks and other start-ups have further raised the demand for the compliance officers. These start-ups are hiring these compliance professionals from the inception to avoid any chances of corporate-fraud and ensure the sound working of the organization as the virtual currency is no longer unregulated and these start-ups tread in uncharted waters.
Even the investment managers, hedge funds and asset management firms are not far behind in taking on compliance specialists and hiring external consultants, as they struggle to navigate an arduous regulatory environment. The key focal point of every institute is risk, control and compliance.
The moot question is who are compliance professionals?
As compliance work requires an understanding of various laws, there is a need for a person who is well-conversant with the realm of law to undertake this job, and therefore the lawyers top the list. However, there are plenty of other institutes in India such as the “Institute of Company Secretaries of India”, Institute of Chartered Accountants of India and the like which are producing the compliance professionals. The professionals with accountancy, law and regulatory backgrounds are well suited for this job. There are many international industrial bodies, such as International Compliance Association and The Chartered Institute for Securities and Investment which are also providing the additional qualifications to the professionals.
But the dilemma lies in the fact that is there is an overwhelming demand and inadequate supply of compliance professionals because there is a need of experienced professionals who in turn solicit huge salaries from the financial institutions. However, the concept of virtual intelligence services such as virtual CFO or vCFO and virtual General Counsel or vGC has emerged in India, which would be a better alternative to compliance professionals. The main reasons for booming of vCFO and vGC are their easy accessibility, resource mobilization and providing affordable compliance services.
Due to the dearth in the supply of the experienced compliance professionals, the companies have started hiring the relatively inexperienced professionals to get the job done or the companies are moving their present employees to the position of compliance professionals. The large lenders are offering to train the new hires by way of internships or training, for instance, Goldman Sachs is providing 10 week summer placement in its global compliance division.
There is also a talent war amongst the companies. The companies in the lending sector are trying to poach the senior-level compliance officials of other companies by offering them attractive pay-grades.
What makes it further difficult for such compliance professionals is that there is a quantum of risk involved in their work which is substantial and coupled with long working hours. Their stress becomes a deal-breaker, and if anything goes wrong it’s their head which is on the platter.
Furthermore, the compliance officers need not be confined to their own domain as they need to coordinate with various other departments of the company, and thereby facing hostility from the colleagues as they are often termed as the “internal control freaks”.
The job of the compliance officials is changing rapidly as they are no longer dealing with the regular regulatory work. They also cater to assisting fund on structuring and execution of private equity transactions. With new developments every now and then, the learning opportunities are immense for young professionals who are seeking career in compliance.