Compliance and Ethics

Ethics is defined as high-level values and standards of behavior of choosing the right thing to do and they are used to teach others to do the right thing inside and outside the workplace. Compliance consists of the framework for ensuring that an organization and its employees are following the laws and regulations imposed by the Government. Compliance is based on the principles of transparency, responsibility, and integrity. Compliance and Ethics are always brought up together and regularly the question is asked which is more important than the other. In the World of Banking, there is an important correlation that exists between both.

Having a compliance program that is ethical is very important for a company. It sets a standard to be followed across all departments of a Financial Institution or Bank and promotes the fact that the environment the employees work in is positive and transparent where doing the right thing regardless of the situation is more important than making profits. This is the situation in our world today where we are seeing Banks paying the price for allowing and even getting caught involved in money laundering and terrorist financing by getting a place on Sanction Lists which can lead to the closure of the institution.

The problem remains persistent today as despite the facts there are more regulations and Laws in place to counter money laundering. We are still seeing banks getting unintentionally involved in corrupt transactions due in large part of loopholes being present in the system especially the Bank Secrecy Law that is still intact in countries such as Cyprus, Switzerland, and the Cayman Islands. They are all connected by the fact they are countries where clients can cheat the system without having to worry about getting caught. The compliance departments have their hands tied behind their backs and unable to verify if the customers’ are transparent with them or not when it comes to the information they provided them with when filling out the KYC form when opening their account.

Another important thing to take into consideration is that by having an ethical compliance program that promotes transparency and holds high regard towards Anti-Corruption. This can lead to a positive perception in the public’s eyes about the Financial Institution and gain confidence from Investors who shall in return pour more money into the institution that holds such standards without having any fear when it comes to the safeguard of their money. The training of employees when it comes to the laws and regulations of the system is one of the main ways that indicate the importance of having knowledgeable employees. They won’t be fazed by any sudden issue that comes up against them and can even be able to take action against higher-ups when they try to let an unlawful and corrupt Transaction get conducted. This is a very common situation that multiple compliance departments are facing these days when they are pressured of letting a transaction pass by despite the fact it involves either a sanctioned listed entity or individual, especially a Politically Exposed Person. Even from the Labor side of things, the presence of such a program can also attract potential employees who would want to be part of a positive and ethical working environment where they can strive and develop.

Managers can also play a part when it comes to ensuring an ethical working environment. Motivating their employees with words of encouragement on what is the right thing to do and what shouldn’t be done no matter what the outcome is even if it means missing out on potential profit is a prime example. Having an open-minded approach can also lead to more positivity and productivity all around the environment especially when the manager is open to employees’ suggestions from a business perspective and this is an indicator that the environment is not a dictatorial hierarchical system. Having motivational quotes around the office can also serve as a boost to employees to come around each day and work towards achieving their goals and strive towards constant development from a personal and general perspective.

Overall, we can conclude that despite the fact the costs of compliance are still high when it comes to compliance monetary and time-wise especially when it comes to the training of employees. Having an ethical compliance program promoting values such as transparency and integrity and that follows by the laws and regulations put in place by the government remains vital in the eyes of the public especially potential customers/investors because it provides them with peace of mind knowing that their money is in the hands of a safe and non-corrupt Financial Institution/Bank. Moreover, the presence of employees that care more about abiding by the law and doing the right thing instead of generating cash in an unethical and illegal way plays an important part In the long run. Eventually down the road, these people can end up moving up the hierarchy chain. In the future, they can end up becoming managers who install a culture that is characterized by the fact ethical values are valued above everything else. Those are the reasons that show that having such a type of compliance program is an important thing.