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19 March 2014

Firms "must break away" from tick-box compliance culture

Content team

Companies have been warned that they must take a more in-depth approach to their compliance procedures in the future and avoid a 'tick box' mentality.

This was the view expressed by director of supervision at the Financial Conduct Authority (FCA) Clive Adamson, who told an audience of financial services chief executives this week that the fact so many organisations are still focused on simple compliance within a rigid set of rules remains a significant challenge for the industry.

By contrast, the FCA is aiming to encourage a greater emphasis on company culture and securing the best outcomes for customers.

Mr Adamson accepted that one factor that has led to the current situation was the actions of the FCA's predecessor, the Financial Standards Authority, which he noted developed a perception as a "tick box regulator" that encouraged a certain approach from the compliance industry.

"The compliance industry was built around the idea that everything will be OK if firms comply with a set of rules, and the challenge is how to move that industry to a different place, which is about looking at outcomes," he said, adding: "The fair treatment of customers is not something that can be reduced to a risk to be managed. That way leads to a tick box compliance approach."

Mr Adamson expressed confidence that companies could achieve alignment of the interests of their firm, the wider market and their customers, but warned this will only be possible if trust is built up between the regulator and the industry.

He also said that part of changing companies' culture is to stop thinking about compliance as a risk that has to be managed, which tends to lead to businesses focusing only on the downside risk in order to avoid litigation and financial penalties.

"What we are trying to say is that conduct behaviour is a result of a whole range of things, from a business strategy to staff hiring practices, business infrastructures, product design, all the way through," Mr Adamson continued.

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Content team, Bureau van Dijk

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