The Tribune

By DEREK SMITH

As I ran along the Cable Beach strip contemplating why I decided on a vigorous “speed repeat routine”, as I embarked on my second week of a year-long journey towards running my first full marathon, I was stopped by Bahamian-born, now-Washington DC domiciled, Reuters business writer Katanga Johnson. Amid our thought-provoking conversation on changes within the global regulatory environment, on which he writes extensively, one position stood firm – that the compliance function is statistically one of the fastest-growing professions, and one of the few where growth is expected in 2021. Yet many aspiring compliance professionals are seemingly unaware of its complexities and, more importantly, its processes versus speed.

Just as running a race requires a science, compliance, too, requires a skillful and methodical approach. Irrespective of the jurisdiction or industry, there are rules, regulations and guidelines that shape the environment that an institution must be compliant with to avoid - at a minimum - unwanted regulatory pressure or fines.

Within the Bahamian financial services sector we have experienced a host of Acts, regulations, guidelines that have been truly transformative. An example of one such transformation is the Digital Assets and Registered Exchanges (DARE) Act 2020 that came into effect on December 14, 2020. DARE acknowledges digital ledger technology while simultaneously bringing regulations to the issuance, sale and trade of digital assets in or from within The Bahamas.

Other notable examples were detailed in the August 2018 notice by the Central Bank of The Bahamas, which detailed the replacement of the Proceeds of Crime Act 2000; Financial Transactions Reporting Act 2000; and the Anti-Terrorism Act 2004 by the Proceeds of Crime Act 2018; the Financial Transactions Reporting Act 2018; and Anti-Terrorism Act 2018, respectively. Additionally, the Financial Transactions Reporting Regulations 2000 and the Financial Transactions Reporting (Wire Transfers) Regulations 2015 (“the Wire Transfers Regulations”) have also been replaced with new versions.

Based on the above, and for good corporate governance, I wish to provide three tips as your institution designs its pathway for being compliant with our jurisdiction.

Evaluate your risk position

The risk assessment must be your starting point. Based on the size, business channels, vendor complexities, customer geographical spread, services offered and more, this assessment - once it is designed and implemented, and managed and monitored effectively - will give you the sobering reality on your institution’s exposures but also how to mitigate them. From that point, an action plan can be designed and must include all internal stakeholders as well as shareholders.

Regulatory Gap Analysis

In my article entitled The fine art of reducing sanctions, released in July 2020, I explained: “A strong regulatory compliance framework can be the distinguishing factor for whether your institution survives.” Compliance officers must be acutely aware of the policies and procedures of their institution, while simultaneously making themselves aware of changes in laws, regulations, directives and standards. If a gap is identified between the internal environment and the external environment, actions, owners and timelines should be established and properly documented. Costs and human resources must be taken into account before deploying the aforementioned.

Create a Compliance Plan

The results of your risk assessment and regulatory gap analysis will generate key aspects of the compliance plan. It is important that the compliance plan be agile yet consistent. This will provide your institution with the knowledge and details needed to remain informed of changes, both internally and externally.

Conclusion

In short, compliance is an opportunity for an institution to understand itself on a deeper level, then grow and evolve. The pathway to being compliant may be vigorous, filled with evolving pitfalls and occasional costs but, with robust risk and compliance structures, these apparent obstacles can be turned into opportunities that lead to profits. Institutions must trust the compliance process rather than speed in reacting. The compliance process is built to be proactive versus reactive.

NB: Derek Smith Jr is the compliance officer and money laundering reporting officer (MLRO) at Higgs & Johnson, and former assistant vice-president of compliance and money laundering reporting officer at an international private bank. His professional career started at a major accounting firm and has spanned more than 15 years, including business risk management, compliance, internal audit, external audit and other accounting services.