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MODULE 1 UNIT 2
The roles and
responsibilities of the
compliance function
Table of contents
1. Introduction
3
2. Compliance frameworks
3
3. Roles and responsibilities of the compliance function
4
4. The human element of compliance
6
5. The scope of compliance
7
6. Conclusion
8
7. Bibliography
8
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Learning outcomes:
LO4: Outline the roles and responsibilities of the compliance function.
LO5: Review the scope of compliance.
1. Introduction
This set of notes introduces one of the most valuable tools in a compliance officer’s arsenal:
compliance frameworks. It also explores the roles and responsibilities of the compliance
function that these frameworks seek to enable, and how the scope of compliance in an
organisation shapes the mandate, resource allocation, and responsibilities of the compliance
function.
2. Compliance frameworks
Compliance frameworks are suggested guidelines, processes, principles, and practices that
enable a compliance function to meet its mandate. This course draws on concepts from the
ISO 19600 framework and the Generally Accepted Compliance Principles (GACP) framework,
among others. These two frameworks serve the following purposes:
•
ISO 19600: Conceived by technical committees at the International Organization for
Standardization, this framework “provides guidance on compliance systems and
recommended practices” (International Organization for Standardization, 2014:V
para. 7). This framework is an international standard and, as such, applicable globally.
This means that the tools and methodology that underlie the ISO 19600 can be applied
wherever you are in the world, and to any organisation.
•
GACP: The GACP combines recommendations from the ISO 19600, the King IV Code,
and the ISO 31000 – which focuses on general risk management – to outline a more
“practical approach to regulatory compliance” (Compliance Institute of Southern
Africa [CISA], 2018:1). The GACP is also aligned with other codes of best practice
published globally by similar bodies.
You can learn more about CISA and the GACP by watching Video 1, which features the CEO of
CISA: Rianné Potgieter.
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Video 1: CISA and the GACP framework. (Access this set of notes on the Online Campus to engage
with this video.)
The ISO 19600 and the GACP compliance frameworks provide a common point of reference
for compliance and allow practitioners to adopt similar principles and concepts in their
approaches to compliance management. Each organisation has different compliance
requirements, burdens, and risks. There are a number of factors that cause variation between
organisations and their management of compliance risk. However, what is more relevant here
is that two organisations operating in an identical market (i.e. regulated by the same
regulatory universe) can have very different responses to their regulatory universe. This may
be because the resources allocated to compliance practitioners and their operations are
different, the systems and structures of their organisations may be different, or there may be
different levels of compliance training and awareness within the organisations.
Effective compliance frameworks give compliance practitioners, who operate in the
compliance function, the tools to perform their functional duties. These duties are introduced
in the following section.
3. Roles and responsibilities of the compliance function
Unit 1 introduced the mandate of the compliance function, which is to assist the governing
body in meeting its compliance obligations. In order to fulfil the mandate of the compliance
function, compliance officers tend to assume several roles and responsibilities. The Basel
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Committee on Banking Supervision (BCBS, 2005:13-14), for example, states that the
compliance function is responsible for the following:
•
Advice: Providing advice on compliance matters to the senior management of the
organisation
•
Guidance and education: Teaching employees about compliance matters, and
drafting policy guides and other training materials
•
Identification, measurement, and assessment of compliance risk: Proactively
monitoring the various risks and risk drivers for the organisation and suggesting
amendments to measure them
•
Monitoring, testing, and reporting: Monitoring and testing compliance, and reporting
the results to the relevant parties
•
Statutory responsibilities and liaison: Communicating with external bodies, which is
especially relevant when such communication is mandated by legislation or
regulations
•
Compliance programme: Executing the overall compliance programme, which refers
to all the activities and initiatives established and run by the compliance function
Interactive infographic 1 illustrates how these roles and responsibilities are executed in a
compliance officer’s daily work.
Interactive infographic 1: The roles and responsibilities of the compliance function. (Access this set of
notes on the Online Campus to engage with this interactive infographic.)
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To download the transcript for this interactive infographic, right-click here and choose “Save
link/Target as”.
The roles and responsibilities outlined in the interactive infographic allude to how important
it is for compliance officers to have soft skills. Compliance officers need to be able to place
themselves in the shoes of others who do not understand the need for compliance and convey
it to them in terms that they can understand. They must be able to alleviate fears and anxiety
around process changes and training. Soft skills are crucial in anticipating, preventing, and
mitigating the human element of compliance, which is the ever-present possibility of human
error.
4. The human element of compliance
Compliance officers can build seemingly infallible controls that should, in theory, prevent any
risk of non-compliance. However, sometimes human nature prevails, and individuals
compromise these controls through human error. In Video 2, James Leach describes the
human element of compliance.
Video 2: The human element of compliance. (Access this set of notes on the Online Campus to engage
with this video.)
To download this video, right-click here and choose “Save link/Target as”.
To download the transcript for this video, right-click here and choose “Save link/Target as”.
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By now, you may have realised that the scope of compliance extends beyond considering only
formal legislation and regulations; it entails taking on various roles and responsibilities to
achieve the compliance function’s mandate. Compliance officers must be involved in all facets
of compliance, because there are overlaps across these facets and relationships between
them. The section that follows illustrates the scope of compliance with reference to certain
facets of compliance.
5. The scope of compliance
So far, this set of notes has elaborated on the complexity of compliance by exploring the roles
and responsibilities of compliance officers, which must be undertaken in all parts of an
organisation and in all facets of compliance.
As mentioned in Unit 1, overlaps in compliance management exist between corporate
governance, the law, human resources, and risk management. Compliance isn’t just about
establishing and maintaining systems of control. Compliance officers must consider the
structure and processes of an organisation, which fall within the domain of corporate
governance, because they can introduce regulatory risks. The law informs the regulations that
an organisation must abide by, and often the regulations associated with the legislation are
far more relevant and introduce a greater degree of compliance risk to the organisation than
the legislation itself. While handling corporate governance, risk management, and legal
obligations, compliance officers must also manage people and relationships.
Legislation and regulation:
The content in this course will often make reference to legislation and regulations, which are
frequently conflated. Therefore, it is important to understand how they differ.
Legislation refers to an act that has been passed by Parliament. Legislation usually defines
broader rules, while regulations are means or processes that individuals or organisations must
adhere to in order to be compliant with the broader rules (Collier-Reed & Lehmann, 2010:11).
Consider Section 22 of the Companies Act, 2008, which prohobits reckless trading. Among
other requirements, it states that companies cannot trade when they are insolvent, and that
a commission can isssue a notice to show cause for why they cannot trade. Conversely, the
Companies Regulations, 2011 – which supports the Act – describes specific requirements for
addressing “reckless trading or trading under insolvent circumstances” in Section 19. One of
these requirements is that a specific template should be filled out by the relevant commission,
which will then be sent to the company that is suspected of trading illegally.
You will learn more about the law and compliance in Modules 4 and 5.
The compliance function is not confined to one department and, in larger organisations, it is
sometimes segmented and distributed throughout the organisation. The interactive
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infographic introduced you to the roles and responsibilities of the compliance function by
illustrating what a compliance officer’s duties might look like. Each of these duties requires
specific resources and skills. Guidance and education, for example, require a compliance
practitioner to create an opportunity for stakeholders to learn about compliance
management initiatives in the form of workshops, forums, training interventions, or simple
meetings. The scope of compliance is broad, and the nature of compliance is complex;
therefore, it is essential that the compliance function is well-resourced and equipped to fulfil
its mandate.
Explore further:
The following two resources explore the role compliance officers play in ensuring companies
remain legally compliant. The first resource looks at 27 Financial firms which failed to provide
their customer relationship summaries (Form CRS) to retail investors in a timely manner. The
consequence was a total levied penalty of $910,092 as charged by the Securities and Exchange
Commission (SEC).
The second resource provides an example of VW neglecting the Triple Bottom Line. This is a
regulation concept that posits that companies should focus on more than just financial gain.
The Triple Bottom Line maintains that companies should focus on their social and
environmental impact too. VW failed to do this when they neglected the people and planet
through false online advertisements and the selling of vehicles that emit harmful substances.
6. Conclusion
This set of notes introduced you to the roles and responsibilities of the compliance function
and what this means for the scope of a compliance officer’s work. Has the material covered in
this module changed your perspective on compliance management? The discussion forum in
this unit gives you the opportunity to reflect on the perspectives you and your peers have on
compliance management.
7. Bibliography
Basel Committee on Banking Supervision. 2005. Compliance and the compliance function in
banks. Available: https://www.bis.org/publ/bcbs113.htm [2019, November 18].
Companies Act, No. 71 of 2008. 2008. Available:
https://www.gov.za/documents/companies-act [2019, September 19].
Companies Act, 2008. Regulation. 2011. Government gazette. 34239. 26 April. Government
notice no. R351. Pretoria: Government Printers.
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Compliance Institute of Southern Africa. 2018. Generally Accepted Compliance Practice
Framework. Gauteng: Compliance Institute of Southern Africa.
International Organization for Standardization. 2014. Compliance management systems –
guidelines. [ISO 19600:2014(E)]. Switzerland: ISO.
Lehmann, K.H. & Collier-Reed, D.W. 2010. Basic principles of business law. Rev. 2nd ed.
Durban: LexisNexis.
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