A substantial number of  compliance officers (about 44 per cent) lack confidence in the anti-money laundering (AML) programmes of their organisations, according to a new report.

AML programmes remain a priority for organisations, with 83 per cent of respondents choosing the programmes, said the Thomson Reuters' 3rd Financial Crime Report covering the Middle East and North Africa (MENA) region prepared in collaboration with Deloitte.

The report was released at the inauguration of the Thomson Reuters Mena Regulatory Summit organised in association with the Dubai Financial Services Authority (DFSA) and under the patronage of Sultan bin Saeed Al Mansouri, the UAE Minister of Economy.

Over a third of respondents indicated their lack of understanding of the regulatory environment was an issue, with 22 per cent pointing to the overwhelming pace and complexity of regulatory updates, the report said.

Financial crime programmes are imposing on-going and ever increasing pressure on organisations to comply with both local and international regulation. Around 65 per cent of respondents indicated that their compliance investment had increased over the past two years, while 63 per cent indicated that they expected investment to continue to increase over next two years; a substantial jump from last year’s figures of 52 per cent.

In his opening remarks at the summit, Essa Kazim, governor, Dubai International Financial Centre (DIFC), noted that the financial industry is influenced by new challenges presented by innovation as well as a fast developing regulatory environment.

“Looking ahead, 2017 will bring an element of recalibration as plans for the implementation of Brexit unravel, numerous elections take place across the globe and a call for deregulation of financial services are passed. We need to focus on how to bring new technologies, new ways of working and new sub-verticals in the financial industry,” he added.

“We are working to nurture the regulators of tomorrow and have already trained 33 UAE Nationals to become proficient in regulatory best practice as part of DFSA’s Tomorrow’s Regulatory Leaders Program. Today, around 33 per cent of DFSA regulatory staff are Emirati,” Kazim noted.

DIFC is helping form the next generation of the accounting standards through its work in the Islamic Finance Consultative Group. “We recently announced the launch of FinTech Hive at DIFC, which will bring cutting-edge financial services technology to the Middle East, Africa and South Asia markets. DIFC is also a founding member of the Global Blockchain Council that is developing new standards and platforms for financial technologies. Our challenge is to channel these technologies and developments into a responsible and well-functioning financial services system,” Kazim said.

Nadim Najjar, managing director, Middle East and North Africa, Thomson Reuters, said: “The business of compliance, which in the past was seen by many as a mere tick box exercise, has become incredibly dynamic. It has evolved into a critical, demanding role that challenges executives to stay up-to-date and conversant with regional and global regulatory change and information.”

Najjar added: “The compliance role has significantly evolved over the past few years, and today’s compliance professional requires a repertoire of competencies - agility, the ability to learn quickly and perform under pressure, critical thinking, highly evolved interpersonal ability and the character to manage senior leadership, and have a good head for details.”

“At the same time, new technologies are emerging that have the potential to disrupt how we conduct international trade, on how money will flow across borders and between businesses, and how we communicate and share personal information with each other,” he noted.  

Mandy Green, principal director, financial advisory, Deloitte Corporate Finance Limited, said: “Never has there been a more uncertain time for global economies and trade; and as a direct consequence financial institutions.  Currently, there is an unprecedented challenge for these organisations to manage financial crime risk in the face of ongoing political and regulatory change; as well responding to technology based threats.   The integration of financial crime compliance into the broader business function is absolutely necessary, rather than simply being a nice to have.”  

The opening panel of the summit addressed the influence of macroeconomic developments on the Mena region, and Mena’s influence on the rest of the world. The region is adopting a ‘wait and see’ approach to the implications of the Trump presidency on the regulatory environment, however Saade Chami, secretary general, Capital Markets Authority, Lebanon, believes that if the US administration fulfils its promises to reduce taxes and increase infrastructure, the resultant increase of interest rates by the Federal Reserve will have a pull-down effect on growth in Mena.

The legitimacy of the current financial model is being questioned by large segments of the population, which poses a risk that governments could move to a more transactional model of regulation. There was widespread agreement that the importance of compliance will continue to increase in an increasingly turbulent world.

“The culture of compliance in Financial Institutions cannot be changed simply by regulation. We need a culture change, to a more proactive, responsive compliance culture,” said Bryan Stirewalt, managing director, supervision, Dubai Financial Services Authority (DFSA).

According to the Thomson Reuters Financial Crime Report, money laundering remains the most pressing financial crime issue. Reputation continues to be one of the biggest concerns for executives, which has led to a surge in the application of risk assessment processes to measure progress. Training is becoming more important as awareness grows for the need for a specific skillset that will be able to deploy changing technology, ever increasing in terms of sophistication, to its full potential. Organisations are tackling the compliance challenge with a combination of technology, training and the reorganization of processes.

The report findings confirm that compliance professionals are increasingly cautious when choosing roles within organisations, and are seeking placements where there is active and visible support for the compliance function. In an era of increasing transparency and individual accountability, compliance personnel are choosing to work for a company where their input will be valued and they are not at risk of losing their positions because they are in constant conflict with senior management. The findings also confirm that compliance executives will have more access to technology that will be able to automate mundane compliance tasks and help reduce operational risks, the report said.

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