Escalating War for Compliance Talent
Compliance professionals have become white-hot commodities at banks, reports Bank Technology News. The report states that while Sarbanes-Oxley and other regulations have driven up salaries for accountants, financial and legal staff as well as compliance officers, the current credit crisis is further exacerbating the hunt for compliance talent. Moreover, BTN notes there is a shortage of experienced managers who can tackle the intricacies associated with regulations, such as the USA Patriot Act, Sarbanes-Oxley, and federal Red Flag guidelines. As a result, recruiting efforts are intensifying.
Major regulatory developments have become critical issues facing financial, legal, risk, audit and compliance officers at publicly held companies and investment banks. Now, as firms strive to meet these requirements, executive search firm, A.E. Feldman, reports that compliance professionals are on the front lines. As a result, a number of finance and accounting jobs, particularly business valuation jobs, are opening up. Opportunities currently exist for senior-level professionals with expertise in the preparation and maintenance of financial, accounting and statistical reports. Specifically, accountants with expertise in analyzing financial information and assisting in Sarbanes-Oxley documentation and testing of processes and procedures are in high demand. Investment banks also need senior-level Compliance Officers who can ensure compliance with regulatory and group requirements and make certain that anti-money laundering (AML) processes and systems meet regulatory requirements. A.E. Feldman also notes that government and legal experience are in particularly high demand.
From Sarbanes-Oxley, to the Patriot Act and the FTC’s Red Flag Rules, financial institutions must “wade through an ever-deepening regulatory swamp,” reports BTN.
The Sarbanes-Oxley Act of 2002 (SOX) was enacted in response to the high-profile Enron and WorldCom financial scandals to protect shareholders from accounting errors and fraud. The SEC sets deadlines for compliance and publishes rules on requirements. The legislation not only affects the financial side of corporations, but also affects the IT departments whose job it is to store a corporation’s electronic records.
Banks are also required by law to take steps to prevent money laundering. The Bank Secrecy Act passed in 1970 required banks to report cash transactions over $10,000 via the Currency Transaction Report (CTR). By 1986, the act of money laundering was criminalized under the Money Laundering Control Act. Fifteen years later in 2001, the U.S. passed the Uniting and Strengthening America by Providing Appropriate Tools to Restrict, Intercept and Obstruct Terrorism Act, more commonly known as the PATRIOT Act. This piece of legislation requires financial institutions to share information with the government and each other in order to identify and report any activities that may involve money laundering or terrorist activity. The law also calls for the verification of customer identity, enhanced due diligence and the establishment of anti-money laundering programs across the financial services industry.
Meanwhile, federal “red flag rules” are aimed at curbing identity theft by protecting the most sensitive data they keep on their customers, including deposit account and personal information. The regulation applies to all financial institutions and businesses that provide credit or allow payments or transactions by consumers and small businesses. The rules require each financial institution and creditor that holds any consumer account (or other account for which there is a reasonably foreseeable risk of identity theft) to develop and implement an Identity Theft Prevention Program.
That said, amid a virtual quagmire of regulation facing financial institutions, experienced compliance professionals are hot commodities.
Fierce Competition for Talent
BTN quotes a number of high-level executives who see an escalating war for compliance talent:
JPMorgan Chase CCO, Jeff Reitman, contends that good compliance officers are emerging as stars. “We’re competing for the top people in the industry,” he says.
William J. Fox, Bank of America’s Senior Compliance Executive for financial crimes in the Compliance Risk Management Division, says banks are making compliance-related projects a priority. “Banks don’t have unlimited resources,” he says. “The more the government asks us to step up, the more we have to make choices.”
Kathryn Reimann, Chief Compliance Officer of Citi’s Global Consumer Group, says there just aren’t enough experienced compliance people to go around. “These are high-stress, be-on-the-top-of-your-game-all-the-time kind of jobs. The issues come at you at a rapid pace. You’ve got to be able to multi-task. And you’ve got to be kind of a jack-of-all-trades because of the need for business knowledge, people management and compliance skills.”
Bert Ely, Principal of Financial Consultancy Ely & Co., says the higher profile role of chief compliance officers is important since CCOs must communicate how the compliance burden drains bank resources away from other more effective law-enforcement efforts.
Compensation Skyrocketing
Compliance is an expensive undertaking for banks. BTN quotes Richard Riese, Director of the Center for Regulatory Compliance at the American Bankers Association, as saying that rising demand for the limited pool of top talent is driving up salaries. “There’s a premium on people who know the regs and can work with people within the bank,” he says.
Compliance costs at the some of the nation’s top banks have grown significantly faster than net income, according to recent survey conducted by the Deloitte Center for Banking Solutions.
Deloitte finds that compliance spending grew 159%, on average, over a five-year period, with one bank stating its compliance-related spending jumped a staggering 3,200% over the last 5 years.
“Senior banking executives feel that compliance costs have drastically increased in recent years— and will likely increase further given the recent focus on mortgage lending practices,” said Don Ogilvie, the independent Chairman of the Deloitte Center for Banking Solutions.
The majority of direct compliance spending, 60%, went to compensate staff, according to survey respondents.
Despite the costs, the fight for talent makes devising a coherent recruiting and retention strategy vital, reports BTN. The report quotes BofA’s Fox as saying, he emphasizes the critical role compliance plays. BTN reports that Fox has plans to boost his 152-employee AML crew in 2008 by 33%.
