Compliance staff has had a first taste of the advantages of home office, previously out of reach for them for reasons of banking secrecy, data security and cybersecurity. This will have wet their appetite, says Ralph Ebert in his essay for finews.first.

This article is published on finews.first, a forum for authors specialized in economic and financial topics.

The outbreak of the coronavirus has opened Pandora’s box: questions and concerns in society, as well as the search for a new understanding and order of the social cohesion, have emerged. And finance is suddenly facing challenges it has never encountered before.

Compliance is strongly affected, having for decades been driven from one wave of regulation to the next. The banks had to respond quickly to safeguard the orderly, internal procedures in times of crisis.

An example from practical experience: normally, the opening of a client relationship requires the signatures of all the involved offices – from the central registry to compliance and the onboarding-committee; and all this for a wide array of internal documents.

«Loan- and client-onboarding committees were maintained via secure video-conferencing»

The regulation on the due diligence of banks and the Swiss money-laundering laws leave little room for judgment with respect to client identification.

All the more welcome was it when Finma at the beginning of April allowed for a temporary easing of identification on a risk-based approach until July 1, 2020: it extended the 30-day-deadline in case of missing authentication to 90 days.

And there are further glimmers of hope: small- and medium-sized private banks can adjust flexibly and at short notice, their core procedures, despite a low degree of digitization: loan- and client-onboarding committees were maintained via secure video-conferencing and decisions implemented in a digital validation procedure via email.

«The crisis shows clearly to what degree traditional private banking and compliance have reached a turning point»

The home office also brings new opportunities, as banks were able to make available to clients important resources at off-peak times and across time zones.

The crisis shows clearly to what degree traditional private banking and compliance have reached a turning point and how digitization was more or less enforced to remain competitive in times of cost and competitive pressure.

Other professions have not only kept clients thanks to digital innovation and even managed to win new target groups: schools are opting for online training and even yoga and language courses are gaining in recognition in the virtual reality.

«This was absolutely key to enable a change of direction in the digitization of private banking»

The more or less enforced digitization however also holds in store challenges for the Swiss financial market: staff in the home office mean a higher risk for cybercrime, data protection and compliance. Finma and the Swiss Bankers Association are working to adjust regulatory concepts to provide digital solutions in the long term.

The Covid-19 crisis has engendered a decisive change of direction through the new sympathetic coexistence. This was absolutely key to enable a change of direction in the digitization of private banking – and thereby the necessary cooperation with innovative fintechs. Partnership and working together have replaced distance and mistrust.

«A large part of internal procedures remain half-automatic and not properly connected»

Compliance can be a big winner of the crisis because a large part of internal procedures remain half-automatic and not properly connected. Only a few firms have invested a lot of money on big data or concepts based on artificial intelligence or self-learning machines.

Many compliance staff in past weeks have enjoyed the advantages of working from home for the first time. Home office has long been out of reach for reasons of banking secrecy, data security and cybersecurity. This will have wet their appetite and increased the need for compliance to offer such work models in the future.

At the same time, it will help find highly qualified compliance staff who previously were deprived of such hybrid models due to the existing reservations about working from home.

Ralph Ebert, a German lawyer, is active in legal and compliance for big and private banks with 15 years of experience. He currently works as head of compliance at Banque International à Luxembourg (BIL) in Switzerland. He previously worked in Seoul, Montreal and Paris, before moving to Switzerland in 2008. He worked for companies including BNP Paribas, Credit Suisse, UBP and Credit Agricole Indosuez. He specialized in the fight against money laundering. He also focuses on the integration of regtech solutions, consequences for compliance and the modern compliance culture.

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