What Is Compliance in Business?

03/11/2022
Written by: Ieuan Leigh 

Introduction

In every business or organisation, the policies and procedures form the foundation of all operations. A structure is needed to guide a business towards best practices and give them standards to meet; without these in place, a company's processes can become inefficient and, in the worst case, dangerous. These procedures are often grouped as compliance in business, and that is the focus of this article.  

For this reason, businesses will set standards, guides, policies, and procedures to be followed. This is where compliance comes in; these procedures are followed company-wide in legal and financial services.

The term compliance refers to the act of following an order or a command or adhering to the rules and regulations of the business. So whatever standards and regulations are in place, to comply with them is the act of compliance. 

It is essential for business operations that all staff members comply with the policies set in place for the business to be successful and efficient, especially for regulated companies, as this is a legal requirement should the company be audited. How compliant staff members have been will significantly improve the outcome. And can technology in the regulated business market help improve compliance within organisations?

What Kind of Compliance?

Generally, within a business, there are two categories of business compliance. And this will be the case in most businesses. 

Regulatory Compliance

Governed by laws and regulations on a national and international level, regulatory compliance is when a business takes steps to adhere to them, they have a legal responsibility to do so.

Corporate Compliance

As well as the legal regulations in place, corporate compliance is the addition of rules and procedures to ensure compliance with things such as internal policies and guidelines. 

The policies protect not only the business itself but also the employees working there.

If an organisation or business fails to follow the compliance set in place by UK Government, they could be liable for fines, legal action may be taken against them. Severe cases would need to cease operations.

Businesses such as legal firms and financial institutes would have created dedicated compliance departments with compliance offers to monitor and maintain the business compliance policy. They would deal with things such as AML anti-money laundering and KYC know-your-customer policies when onboarding new clients, ensuring all rules and regulations are met. With varying levels of due diligence followed, it is only possible with a company compliance policy in place. You can read more about how to verify an identity here.

Compliance Department

As mentioned above, a legal firm or business operating within the legal or financial sector would have organisational structures in place, which means they would have a compliance department; also, within the department, there would be one or more officers with a chief compliance officer.

The department's responsibility is to review any potential breaches of compliance or clients they may be suspect of money laundering or terrorist financing through enhanced financial due diligence, these are a type of due diligence specific to law firms and other financial institutions. But they are also there to educate and enforce regulations and policies on staff. It is this departments responsibility to create a compliance process for the rest of the organisation to follow. They will also offer compliance training for all staff members through tailored compliance programs.

Compliance Officers

Compliance officers are compliance professionals. We mentioned above their responsibility to educate and enforce the rules and policies a company has in place, but what else do they do?

Risk Assessments

Officers will often run these assessments and identify potential risks to the business, from things such as enforcement trends, issues within the industry and often their own clients. The officers will advise senior members within the company on how to approach these situations, what to avoid and what to look out for. They will also review any potential breaches of compliance brought to them and check that customers or clients themselves are suspected of money laundering or terrorist financing. 

Create Risk-Prevention Processes

Officers not only deal with the detection of risks but also the prevention of risks. When the compliance team is aware of risks to an organisation, their role is to put policies and best practices in place to prevent these risks. The compliance team have the authority within an organisation to update and create new policies and procedures. Officers will operate with the highest level of due diligence.

Ongoing Monitoring

Determining the effectiveness of policies in place is a constantly ongoing process; with threats changing constantly, there will be a continued need to update and create new policies. Tools that allow officers to monitor their customers and notify them of any risks that may arise are crucial. Validient offers organisation monitoring for commercial clients, meaning when a commercial customer becomes bankrupt or begins the insolvency process, you will be notified as soon as that information is available. Tools like this allow a compliance department to become less reactive and more proactive regarding due diligence and compliance. 

A compliance department is only as good as its policies and how quickly it can react to potential threats. However, with the introduction of technology and software, identifying risks and reacting to them is much easier than you may think. 

Technology for Compliance

Technology and software are excellent tools for any organisation looking to improve their due diligence, reduce risks, and speed up their processes. The ability to identify and verify your clients, then monitor their entire time with you, dictates what you as an organisation want to be updated about and how you want to be notified. All these processes are automated, which means it's quicker and reduces the operational cost than doing this manually. 

The Validient platform is built around the highest possible level of due diligence. This means we allow your business to reduce your risk of dealing with new and existing clients while reducing cost and freeing up your employee's time, enabling them to work on things that are important to your organisation. 

Our tools allow for an easy audit and give you and your clients the means to communicate without needing manual intervention. We target company and individual onboardings and monitoring. 

With money laundering and other fraudulent activity becoming not only more prevalent but also more sophisticated, it is becoming essential that businesses adopt digital solutions to detect and prevent this kind of activity before it is too late. With the addition of identity verification, Validient gives you the best information possible on new and existing clients, allowing you to make informed decisions when conducting business. 

To find out more, get in touch today. We would love to show you how our software can transform your business' compliance.

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