The reality is it's impossible to eliminate non-compliance, especially if an employee decides to commit acts deliberately. However, certain red flags could signal non-compliant behaviour. If we know what those non-compliance warning signs are, we can be alert to prevent them from happening.
Warning signs of non-compliance
We attempt to identify these red flags, look at why people might commit violations, and address how we can manage the people dimension of compliance.
1. Deliberate non-compliance
Knowing the reasons why someone is deliberately non-compliant can give an indication of misconduct. Understanding what motivates people to deliberately breach compliance is not always easy. However, some examples include:
- Lack of pay rise, bonus or promotion - the individual feels aggrieved and wants to punish the company
- Pressure to meet targets - causes a person to fiddle with the numbers or ‘bend’ the rules
- Greed and a perception that they can get away with it
- Serious monetary concerns
- Acceptance of small theft as ‘no big deal’
2. Unintentional non-compliance
Some examples of why a person might commit a violation unintentionally include:
- Blissful ignorance of the rules
- Errors caused by a lack of training
- Failure to report breaches due to lack of time or lethargy
- Failure to take action ("Compliance is a job for compliance")
- Poor training
- An ambiguous or ineffective tone from the top leads to mixed messages
- Errors caused by overwork/understaffing
- Errors caused by a momentary lapse of care and diligence.
It could be that an employee isn't aware they have committed a violation. External parties may have targeted them for ways to breach your compliance walls. Or, they may find themselves in an impossible position where they can't get themselves out of trouble - like in the well-documented Barings Bank case.
3. Personal red flags for non-compliant individuals
Some personal red flags may indicate a higher risk of non-compliance. The presence of two or more of these warning signs in the same person could indicate an even higher risk.
- Living beyond their means - their clothes, car, house, and holidays are all financially out of reasonable reach compared with their salary
- Indebtedness - always asking for overtime or looking for a second job
- Substance abuse - known or suspected to have become dependent on alcohol or drugs, and their work has become careless
- Gambling - known or suspected to be gambling (in person or online), boasts of winning to colleagues and shows intermittent signs of living beyond their means and indebtedness
- Never away - doesn't take more than two or three consecutive days off or continue to work remotely when on leave
- Weekend or evening word - always willing to stay late or work at weekends when there is no incentive to do so
- Overly protective of clients - never wants anyone else to speak or deal with certain clients, never allows anyone access to certain client files, becomes uncharacteristically angry if someone attempts to do so
- Lack of training - never completes their compliance training or attends workshops (even when mandatory) and/or regularly fails training assessments
- A disgruntled employee - one overlooked for promotion (often consistently), with no regular pay increases or bonuses.
Of course, just because someone appears to be flaunting their money a bit more, or appears to have a problem with alcohol, doesn't mean they must be up to something non-compliant.
The majority of the time, it will have nothing to do with compliance. However, it's important to know that these could be red flags for non-compliance.
4. Compliance vulnerabilities in job roles
In addition to personal factors, certain roles are more vulnerable to non-compliant acts. Job role vulnerabilities can heighten the risk of non-compliance by providing opportunities to employees who are motivated to carry out such acts deliberately or those who may commit them unintentionally due to a lack of care or understanding.
Some examples are:
- Account/Relationship Managers - may execute a client's instructions without taking notice of the risk that they are laundering money
- Sales/Marketing/Procurement - could give or receive bribes to win business, secure or provide contracts
- Customer management staff - vulnerable staff could be bribed by a criminal to provide details of the firm's customers
- Counter staff - could (deliberately or unintentionally) allow fraudulent withdrawals or transactions, money laundering deposits, or facilitate identity fraud and account takeover.
How to manage the people side of compliance
Attaining 100% compliance is an enormous task for your company. But there are steps you can take to get close to your 100% goal, including:
- Do not ignore personal red flags
- Increase your scrutiny where an employee with red flags is working in a vulnerable job role
- Maintain adequate staffing levels
- Beware of departmental cliques where team members are overly close
- Communicate a clear and strong message of compliance that is endorsed by senior management and the Board
- Proactively identify, investigate and analyse the most minor acts of non-compliance, for example, an employee who repeatedly fails to complete compliance training.
Mitigating the risk of unintentional non-compliance by training staff and ensuring they are aware of their responsibilities is one step towards compliance that a firm can achieve.
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