On February 5, 2025, we hosted a panel of evolving regulatory expectations, whistleblowing protections, and corporate culture are reshaping financial compliance.
We’ve summarized the key insights from the fireside chat below, and you can watch the full discussion here.
Panel
Firms must adapt to meet the regulator’s emphasis on culture
Culture has become a focal point for regulators, with the Financial Conduct Authority (FCA), making it clear that a strong corporate culture is key to reducing all kinds of misconduct, both financial and non-financial. In a recent speech, Emily Shepherd, CEO, FCA, underscored the importance of culture, where the system should look to provide both accountability and security”. Shepherd warned that:
“Poor culture spreads like an infectious agent, impacting the health of an entire organization.”
The fireside discussion reinforced this, highlighting that firms with a well-defined compliance culture tend to outperform those that rely solely on regulatory mandates. Mark Taylor noted that successful firms create an environment where employees feel empowered to raise concern and self-report without fear.
He explained that firms must go beyond rulebooks and embed compliance into their values through implementing open-door policies and psychological safety. In turn, this will encourage better decision making. By cultivating a culture of second chances, firms can create more resilient compliance teams.
Senior Management Regimes must encourage accountability without deterring talent
Also key to fostering compliant culture are senior managers, which cues the entry of the Senior Managers and Certification Regime (SMCR), which was designed to hold senior executives accountable for misconduct. However, some argue that it has made senior roles less attractive due to increased personal liability.
Mark Taylor stated that there is a fine line between accountability and deterrence. If the risk of personal liability becomes too high, talented individuals may avoid these roles altogether. The FCA has acknowledged these concerns, with recent consultations exploring potential reforms.
Whistleblowers still face career risks
Calling out bad behavior can also be limited by the lack of incentivization to report. While in the U.S. financial incentives are offered to whistleblowers, the UK has lagged behind in providing meaningful protections, resulting in cultures where whistleblowers face retaliation, career damage, and legal battles.
The fireside discussion encompassed how firms too often treat whistleblowing as a compliance obligation rather than a safeguard for ethical business practices. The panel emphasized, once again, that companies must create environments where employees feel safe reporting their concerns. Perhaps firms must look to strengthen internal reporting channels to encourage early intervention.
The question now is, are the rules becoming too restrictive?
Regulations surrounding the prevention of financial crime have also been criticised for preventing and blocking the pathway to certain financial freedoms.
Recent debates have sparked interest into the bank account closures of ‘Politically Exposed Persons’ (PEPs) such as Nigel Farage, and renewed scrutiny of how financial institutions handle PEPs. Under current rules, banks must conduct enhanced due diligence on PEPs, but many argue this has led to de-risking, which would mean the exclusion of individuals deemed high-risk, rather than a balanced case-by-case assessment.
PEP classification can be seen as a blunt instrument as, although it is necessary to mitigate financial crime risk, regulators must ensure it does not become a tool that is inadvertently results in exclusion. Taylor and Viall that a more nuanced approach, focusing on actual risk rather than blanket policies, would be more effective.
Can regulation and growth coexist?
A recurring theme throughout the discussion was the balance between regulatory oversight and economic growth. The FCA has expressed a commitment to reducing regulatory burdens where possible, but firms worry that deregulation could lead to increased risk.
Mark Taylor argued that rules must be proportionate and effective, potentially creating an outcomes-based regulatory model, where firms are judged on their compliance effectiveness rather than strict adherence to prescriptive rules.
The future of compliance is cultural
The key overarching theme of the discussion was that compliance is no longer just about policies and procedures – it’s about people.
As regulatory expectations evolve, firms must embrace cultural transformation, ensuring that ethical behavior is embedded at every level. With the FCA doubling down on culture, the speakers concluded that firms must look to adapt not only to avoid regulatory scrutiny, but to remain competitive in an increasingly transparent financial landscape.
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