Money and brains are flowing into Asian FS compliance

This report from Reuters touches on why Asia is providing new fertile ground for Western lobbyists and public affairs consultants in financial services regulation. Spending on compliance in financial services reached USD89bn for firms operating in Hong Kong, Singapore, Japan and China in 2013, according to estimates by law firm Berwin Leighton Paisner and Oxford Economics research group. In more mature regulatory regimes – UK, Germany, France, Spain, Italy – the spend for the same period was USD68m.FCA - framework

This phenomenon is a boon for more than just the public affairs coterie. Anyone in the financial services learning domain – training, e-learning, events – should have one eye on the Asian market for a couple of reasons.

As pointed out in the Reuters piece, regulation in Asia is still conducted behind closed doors. The government decides what it wants, the regulator creates the rules and the regulated firms are the last to know. Information flows from the practitioners up to the authorities, the authorities interpret it and hand back the results. The regulatory process is not open for discussion and this goes against the grain of statutory developments in Europe and the US, where practitioners are more involved in the process, ideas are shared, and there are specialists on both sides of the table. For regulation to take hold and become effective in Asia, it needs to become a more open process and Western trainers, lawyers, consultants and lobbyists can help Asian firms to meet this.

Furthermore, while the European regimes are advanced, developed and based upon the existing legal and operational structures, their Asian equivalents are newer and, in some jurisdictions, undeveloped. A culture of compliance exists in the bigger, multi-national and non-Asian firms who may already follow the higher standards of compliance set by the US, for example. But in many firms, a culture of compliance simply does not exist. Employees know there are rules in place to prevent insider trading, market manipulation, money laundering, bribery and corruption, but many think the rules do not apply to them, or that breaking the rules is without consequence. And the legal advice they receive may be skewed towards hiding rule breaches, rather than applying the regulations.

Education on compliance is fundamental to building a compliance culture. The  different cultural approaches to diplomacy and relationships in East and West, however, underpin the success or failure of new approaches.

 

 

 

 

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