Brendan Leddy, Head of Compliance and MLRO at BACB, outlines the bank’s unique approach to trade finance, and why being a UK-regulated financial institution still has its merits.
Within developed markets there is an ongoing focus on compliance with regulations, running concurrently with an elevated focus on social responsibility, corporate conduct and the global fight against financial crime. The importance of these areas cannot be overstated. Senior managers and directors are expected to exercise their duties in an open, honest and transparent manner. Accountability, like a school yard bell, puts everyone on notice and ranks high on the regulatory agenda. The FCA has indicated that it is placing a focus on financial crime regimes and included it in its 2016/17 business plan. Money laundering and terrorist financing fuels political instability around the world, presenting threats to both the UK and UK interests abroad.
To successfully navigate modern-day challenges banks must understand their business, their clients and realign their strategy to balance risk and reward.
Regulators in the UK have imposed a suite of regulations leading to a revised industry architecture that requires structures be put in place to support policies and procedures. Compliance frameworks, as an ideology, once consigned to the basement are now considered mandatory fodder for Boards to mull over. Just as important as the procedural requirements is the cultural context within which they operate (this includes the financial services perspective, UK perspective and the bank’s perspective).
On a global basis, the UK banking sector accounts for nearly one fifth of all global banking activity, with the financial services industry being one of the most heavily regulated industries in the world. The UK’s reputation, built over many years, demands that the country continues to roll out the gold standard. Banks want to be based in the UK because the country has a regulatory structure in place that is admired around the world. It might not be perfect but there is credibility attached to being a UK-regulated bank.
The financial crisis empowered governments to implement sweeping changes and to re-evaluate financial market regulation. This led many banks to de-risk as the cost-benefit balance that could be achieved in certain markets and regions became unsustainable. Fines, once seen as the cost of doing business, historically in the millions but now measured in billions, perpetrated fear in the banking sector. Zero tolerance regulations compounded the problem; instead of adopting a more stringent risk based approach, many banks chose to exit certain markets and regions.
BACB Managing Director of Products and Client Coverage Patrick Gutmann says: “Good compliance is good business; our hands-on approach to our regulatory requirements safeguards us from regulatory censorship and continues to provide us with opportunities to grow our business, whilst giving our clients the assurances that comes from banking within a highly regulated environment.”
So, how can a bank evidence they are operating in line with their regulatory requirements? The answer, simply, is that it is complicated, and complicated further for developing markets where national norms differ to those of the UK. In developed markets there is a certain amount of reliance one can place on the due diligence undertaken by others on your behalf, but in dealing with developing markets there is a greater onus on the bank to undertake its own due diligence.
At BACB, employees meet and engage with potential clients. Client centricity is one of our core values – it’s our clients who make us what we are and we are proud to do business with them by creating tailored solutions.
BACB has been in existence for more than 45 years; we are small enough to care but we are large enough to create change.
CEO Paul Hartwell, at the launch of the Abidjan office in November 2016, highlighted that 10 years prior the Ivory Coast was at the sharp end of instability but is now a vibrant and engaged society with “an impressive economy, whose 8.5% GDP is the envy of much of Africa and indeed the rest of the world”.
For developing markets, a fully incorporated and conducive regulatory environment increases local and foreign investment. BACB’s knowledge of these markets and our clients stretches beyond that of larger banks. We have local expertise and a hands-on approach, which plays a major part in our ability to provide an effective and tailored service. We strive to make a real difference to our clients, wherever they are. That’s the BACB way.