The compliance department ensures that a business adheres to external rules and internal controls. In the financial services sector, compliance departments work to meet key regulatory objectives to protect investors and ensure that markets are fair, efficient and transparent. They also seek to reduce system risk and financial crime.
These objectives are designed to support consumer confidence in the financial system. Financial services organizations also are subject to regulatory business rules that govern advertising, customer communications, conflicts of interest, customer understanding and suitability, customer dealings, client assets, and money as well as rule-breaking and errors.
Understanding the Compliance Department
A compliance department typically has five areas of responsibility—identification, prevention, monitoring and detection, resolution, and advisory. A compliance department identifies risks that an organization faces and advises on how to avoid or address them. It implements controls to protect the organization from those risks. Compliance monitors and reports on the effectiveness of controls in the management of the organizations risk exposure. The department also resolves compliance issues as they arise and advised the business on rules and controls.