EXCLUSIVE INTERVIEW & INSIGHTS
If failure results in fines – why is the risk of non-compliance not keeping us all up at night? With financial companies paying out hefty sums after scathing audits by the Financial Conduct Authority (FCA), lacklustre firms may start to sit up and take notice of how essential automated systems are for a regulation-friendly future. We sat down with Renata Hoes from Generali Investments in Luxembourg to talk about the auto-compliance monitoring system she uses on a daily basis for Compliance Monitoring, and why Compliance Officers should be valued more in the workplace.
As Head of Compliance, the role is not only multi-faceted; it puts people like Renata at the forefront of the regulations and compliance fallout. “I’m responsible for the implementation of regulations internally within our company and if anything goes wrong, my name is the one on the regulator’s list. I’m also the Data Protection and Money Laundering Reporting Officer,” Renata confirms. “These are my three main functions that keep me very busy. We have a lot of things inhouse, but we outsource too. This requires a very good oversight program to cover all entities that we outsource to. This is an area that can be very difficult and time consuming to ensure everything is running efficiently and regularly, as well as being well-documented, as required by laws & regulations when you outsource certain activities.”
At the TSAM Regulations & Compliance conference 2018, Renata presented a case study on ‘Building out a Compliance Monitoring Program’, featuring the automated Compliance and Regulatory Oversight Online system, otherwise known as CAROL. “Since working at other companies, my compliance monitoring plans have always been prepared using an Excel-based system. Using Excel, my team and I would review the laws & regulation and identify what had to be chosen as the key controls for monitoring. But, of course, you can always miss something” Renata explains. “When I joined Generali Investments in Luxembourg, we decided to take onboard a system called CAROL, which is developed by an affiliate of Luxembourg’s leading law firm, Arendt & Medernach.”
“This regulatory consultancy, named Arendt Regulatory & Consulting monitors the regulations for this system. It has been very useful for us over the past 3 years because you do not have to look at all the laws and regulations in detail to see what is applicable to you as a Management Company. Many regulations are specific to banks, investment managers, for a specific type of investment fund, money-market fund, or hedge fund. These regulations might not be relevant for us, as a Management Company. With this system, what is not applicable for our business model is not entered into the system. Therefore, if a bank uses CAROL, their control framework will look completely different to ours because they will have controls tailored to their specific business needs.”
Arguably one of the main worries (along with the cost benefit) for every asset manager is that when implementing new automated platforms, it will be too complex. A major advantage of CAROL is that the system is extremely easy to use. “CAROL is very user friendly. When I was first shown the system and told that I should fill out this field and that field and that one… at that moment, I realised that Arendt Regulatory & Consulting had their own standard for using the system – which didn’t work for me!” Renata admits. “I had my own approach, so I started to use the system the way I felt comfortable using it from the outset. I believe that having your own approach when it comes to implementing new automated platforms is the best solution because you need to feel at ease with it, otherwise you’re just not going to use it.”
Despite its user-friendly testimonial, if firms aren’t aware of how bespoke the system is compared to other platforms, they may automatically feel overwhelmed. Therefore, the case study’s demonstration was a great way to promote CAROL’s capabilities. “It does take some time to understand how to use the system. You just need to say to yourself, OK, I know from a regulatory perspective that I need to do this. So, just start filing it in as you see fit and once you start to complete it, you’ll find the best approach for you,” Renata advises. “This isn’t necessarily the approach the system is intended to be used for. You must make it adaptable for your own needs. I didn’t have the time to do it the way I was shown because the system is very conservative and all-encompassing. At the beginning, I just used it as a very simplistic tool. When you get to feel more comfortable with the system, and as your team and the company grows, it will prompt you to re-look at the tool and develop it in a new and better way, which minimises the time you spend on it.”