Over the years compliance and risk management have been a point of discussion for financial institutions. Digital transformation in the finance sector has a salient effect on compliance risk. A simple mistake or misconduct by an employee can lead to disastrous results and many employees lack the essential knowledge to avoid such risks. But today’s digital trends also offer new opportunities for learning solutions. So, how does the banking and consulting industry deal with compliance training for employees? Is this training enough to avoid compliance risk? What are the features of an ideal employee compliance training? What is the ultimate solution for smart learning? Find out more about smart learning solutions offered by the Knowingo learning platform.

The banking and consulting industries are developing. So do the compliance requirements, risks associated with them and risk management within a company. According to a global report by LexisNexis, the projected total cost of financial crime compliance across financial institutions worldwide is $213.9 billion following an increasing trend from previous years.

Banks and consulting firms, with their involvement in the global financial system, are subject to strict scrutiny. For instance, they must comply with regulations under Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) to avoid being penalized. According to Tech Bullion, AML fines in banks reached $1.9 billion in 2021.

In addition to fines, non-compliance may lead to serious sanctions and loss of reputation and stock value. According to Thomson Reuters, this usually puts a heavy burden on the banking and consulting industries, as well as their employees who are responsible for suspicious transaction monitoring and may individually be held accountable in case of misconduct.

Many companies try to handle compliance management by staffing. According to a McKinsey & Company report, between 2012 and 2017 the AML compliance staff have increased up to ten folds at major banks in the United States.

However, today’s education technologies and changing trends in learning offer a cost-effective solution. In an ISACA article, Muhammad Waheed Qureshi, a manager in Swedbank, states that relying on traditional approaches to address compliance risk is ineffective against the increasing diversity of the finance industry’s compliance ecosystem due to the advancement of sophisticated technologies.

Before diving deeper into the smart solutions, let’s take a look at the problem itself.

What are the common problems of compliance training?

There are two important aspects to training employees in the banking and consulting industry:

• Because of the dynamic environment in the finance sector, regulations are frequently updated, thus affecting the compliance risks. Financial services are always regulated by law which is bound to change constantly. Each change creates a compliance gap, which is a term used to address the gap between the full potential of compliance integration and the current level of compliance in an institution, assessed through employees’ current knowledge level in most cases.
• International financial institutions have to meet the needs of the local regulations. Regulations, and thus, risks may differ depending on the location, customer or service. For instance, in countries such as the United Arab Emirates, Shariah compliance must be met, which means that financial activities of a bank must comply with Islamic Law. This results in complications at inter-organisational and international levels.

According to Alexander Dill, an expert on banking regulations and the writer of the book “Anti-Money Laundering Regulation and Compliance”, a risk management framework should follow an integrated approach that identifies, assesses, controls, measures, monitors, reports, and trains employees regarding compliance risk throughout a firm. In analysing the compliance gap, he identifies employees as a ‘risk contact point’ since their negligent conduct increases compliance risk. [^1]

In short, successful compliance management and training in the finance sector must be designed to ensure the engagement of each employee.

According to the Harvard Business Review, compliance training is defined as the objective of which is to prevent misconduct by helping employees internalise rules and regulations. Recently, compliance started to be seen as one of the hard skills in finance. However, according to a Gartner survey, 20% of employees didn’t even recognise information was needed in case of a compliance obligation.

It can be argued that the ideal way to avoid negligent conduct is to close the compliance gap on the individual level by adequately training employees. Creating perfect compliance training may be tricky but here are some features that you need to know before getting started.

How to build an effective compliance program for training employees?

1. Retention

Most of the corporate compliance programs ignore retention as a basic principle of learning. The reality is that people forget if they do not retain knowledge every once in a while. The forgetting time may differ from person to person but one thing is clear - an ideal corporate compliance training program should:

• Enable learners to remaster their knowledge
• Personalize learning so that remastering occurs right on time for each learner.

2. Level/capability matching

Personalized learning is important, also because it enables capability matching. When you think of hundreds of employees their skill and knowledge levels will naturally differ. If you gather them all in the same classroom or give them a one-size-fits-all learning module, those with a higher level of knowledge will be bored and their attention to the learning module will disappear, while those with a lower level of knowledge will be frustrated because they cannot follow the intense learning material. Therefore, you need to assess the level of each learner and match their capability with their learning material.

3. Monitoring

How do you know that your employees learn something just because they watched a learning module or participated in classroom teaching? You need assessment and monitoring to make sure employees effectively learn what they need to learn. Harvard Business Review also points out that one of the biggest issues in compliance training programs is not tracking the results. With today’s digital transformation in education, it is easier to monitor the training of employees, which in the case of financial institutions also leads to more accurate risk assessment analysis. Many learning software platforms provide data analytics regarding the level of each employee. This way, compliance learning and certification are measurable and more efficient.

4. Customizing content for frequent updates

New regulations and laws are usually hard to comply with. The finance sector is dynamic and there will always be regulatory changes. So, employee compliance training in companies should be dynamic and adjustable. Software or platform used for learning should allow easy content creation and resetting the data analytics gathered from the previous learning program.

5. Time-efficiency of learning

The subtle cost of compliance is the hours each employee spends on training. Employees in the finance industry, just like in any industry, have limited time to learn. They have operational duties that need to be fulfilled and training is always a secondary purpose. However, training is still necessary in order to have proper knowledge for employees to perform their job duties correctly and to also be compliant with mandated laws. Therefore, a training program that is designed in bite-sized chunks seems like an ideal solution for employees in banking and consulting firms.

Final Notes on Corporate Compliance Programs

Compliance requires a high level of cooperation and communication between institutions and (inter)national authorities. On the other hand, intra-organisational cooperation and communication are almost as important as inter-organisational one.

Along with delivering effective compliance training, Cornerstone highlights the importance of communicating that compliance is about more than just avoiding fines. Thus, human resources and compliance managers should help employees understand how adhering to compliance standards protects the health and safety of both the individual and company, while maintaining a bridging relationship between board managers’ risk expectations and day-to-day activities of customer-facing employees.

Resources

[^1]. Dill, A. (2021). Anti-Money Laundering Regulation and Compliance. Cheltenham, Gloucestershire: Edward Elgar Publishing Limited.