Building a strong culture in financial services

Culture has always been vital to an organisation’s reputation and long-term success, and it remains central to how regulators supervise financial services firms.

A culture of ethics and integrity doesn’t happen by accident, and it needs more than policies and procedures. It requires a strong agreement about the purpose, vision and values of the business, and a solid commitment to follow them, even when it is difficult to do so.

Ultimately, every employee within the organisation, whatever their level, must share a clear purpose to do the right thing and must feel able to speak up if they think something is wrong.

Credit Suisse Fined $475 Million For Murky Mozambique Loans Spent On ‘Kickbacks’- Forbes
NatWest faces £340m fine after admitting ‘money-laundering’ failings - The Guardian
Lloyds Bank fined £90.7m for misleading home insurance customers – The Independent
‘Rotten Culture’ Pervaded HSBC Forex Desk, High Court Trial Hears – Financial Times
Goldman Sachs to pay $3bn over 1MDB corruption scandal – BBC News

These are just some of the recent headlines of misconduct within financial services, and there are many more. (See more in Concerning Conduct, our quarterly articles of recent culture and conduct cases).

But let’s remember what’s behind the fines. Because each of them involves decisions made by real people.

It could be a systemic failure in market conduct or perhaps one or more employees failing to report a concern. It could be deliberate misconduct due to misaligned incentivisation structures or a simple error due to a failure to identify a compliance risk.

Whatever the reason, one thing is clear. Without a strong culture, businesses are at substantial risk of reputational and financial damage. 

The last few years have seen significant changes in the way that we live and work, and one of the lasting impacts of the global pandemic could be a shift to hybrid working.

This brings huge potential benefits for staff in terms of inclusion, work-life balance, and productivity.

However, regulators, such as the FCA, have also highlighted potential challenges such as isolation, difficulties in supervision and barriers to speaking up. As hybrid working arrangements develop, firms need to consider the communications issued by regulators to ensure that they have identified and addressed the potential risks for the business (you can find out more about the FCA’s expectations for firms by clicking here).

So, as organisations navigate the practical and regulatory challenges they face, training has never been more important:

• For compliance and financial crime professionals – to make sure they stay up to date, develop their skills and utilise the latest risk management techniques
• For senior managers – to help them understand their role in developing and nurturing a healthy culture and demonstrating cultural leadership
• For employees – to make sure they know how to do the right thing and understand the potential consequences of poor conduct

But remember, training is about more than just raising awareness. Engagement is key – otherwise, it will not have an impact on the firm’s culture. This was recently demonstrated by the action taken by KPMG Australia and its regulator in response to widespread cheating on online training tests.   

Michael Sacks started his career as a lawyer, advising on UK and international regulation. In 2005, he set up a global compliance training provider which developed online and classroom training for major financial groups, regulators and multi-national companies. As one of the lead subject matter experts, he delivered compliance training on a wide range of regulatory topics, including financial crime, market conduct, information security and conduct risk.

Michael has worked with regulators and industry bodies, including the FSA (now FCA), the JMLSG and the BSR/UN Global Compact, to develop training and awareness initiatives in relation to major legal and regulatory events. He is also the author of ‘Financial Services Regulation - A Practical Guide’ which was endorsed by Sir Callum McCarthy, former Chairman of the FSA.