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The biggest challenges facing compliance in Asia

Steven Carroll
Steven Carroll
Managing Director, ASEAN, Refinitiv

Increased regulatory crackdown on misconduct, technology disruption and talent shortages represent three major challenges facing compliance in Asia. Ahead of our 2019 ASEAN Regulatory Summit, find out how financial institutions can manage these risks at a time when regulatory divergence continues to prevail in the ASEAN region.


  1. Key challenges facing compliance in Asia include a heightened enforcement focus on tackling misconduct and ‘rolling bad apples’, increasing pressure to understand and address disruptive technologies, and continued talent scarcity in the profession.
  2. In addition, continued regulatory divergence in the region costs financial institutions on average 5-10 percent of their annual turnover.
  3. These issues will be discussed at the 2019 ASEAN Regulatory Summit in Singapore, a leading regulatory event in the region bringing together over 800 senior risk, compliance and investment professionals.

Against the backdrop of increased regulatory divergence, three themes are shaping how financial firms approach risk management and compliance in Asia.

These challenges around misconduct, disruptive technologies and talent shortages are nothing new, but recent market developments have exacerbated all three.

A consistent theme impacting financial compliance in Asia is regulatory divergence. According to an international study, 5-10 percent of annual turnover (approximately US$780 million) in the financial sector is consumed by costs related to differing regulatory frameworks.

These issues will be addressed at the 2019 ASEAN Regulatory Summit, where more than 800 senior risk, compliance and investment professionals will gather to hear how technology and data can be leveraged to drive regulatory compliance, as well as financial innovation and inclusion in the region.

Watch: What regulatory change will have the biggest impact on financial markets in Asia?

Tackling misconduct

For more than a decade, regulators have striven to alleviate misconduct. And while authorities have made much progress, there is room for further improvement.

Two developments across the region are noteworthy.

These are Australia’s Royal Commission into industry misconduct and Hong Kong’s decision to implement the Financial Stability Board’s recommendation of monitoring ‘rolling bad apples’ – professionals who avoid exposure and punishment by moving from one firm to another.

In both instances, regulators called for wholesale changes in the way misconduct is monitored, managed and reported.

Most significantly, both stated that ultimate responsibility rests with senior management, who could now face punishment for these acts. This is significant, as executives can no longer plead ignorance of such events.

But regulators upping the ante will only get them so far. Authorities need greater support from market participants. Unless boards and senior management instil a culture of honesty and integrity across the entire organisation, misconduct will prevail.

To meet this challenge, various solutions have been put forward. Aside from cultural adjustments, removing supervising staff who oversaw operations when failures occurred and compensating ethical behaviour are measures that can lead to genuine change.

Steven Carroll Quote. The biggest challenges facing compliance in Asia

Technology – an opportunity and risk

Much has been written about the positive impact RegTech innovation is having on the compliance industry. On the one hand, teams are able to operate more efficiently and cost-effectively, while on the other, they might spot anomalies that would otherwise go unnoticed.

Yet the introduction of novel technologies such as AI and blockchain, coupled with increased cloud adoption, is challenging both compliance teams and regulators.

Financial institutions, in particular, are having to grapple with issues related to legacy systems, cybersecurity and data quality. Teams are turning to third-party technology specialists for assistance and expertise.

But such action does not come without its challenges. By relying on niche service providers for mission-critical applications, firms could be exposing themselves to information and data security risks far greater than they appreciate or know of.

Furthermore, in the event that a leading cloud provider implodes, the impact on the financial services industry would be catastrophic.

Regulators are aware of this, and are considering measures to counter these threats. So far, there has been little insight as to what they may do. And while most firms rely on a number of cloud providers, they should nonetheless be wary of regulators’ interest in this topic.

Talent trap

The proliferation of novel technologies is demanding new skill sets. This has raised demand for compliance staff who are tech-savvy.

Such expertise, however, is in short supply. Growing numbers of Chinese securities firms, with branches established in Hong Kong and elsewhere in the region, require a greater compliance talent pool, as do new initiatives like Open Banking that are being piloted in various jurisdictions.

With firms and regulators seeking to bolster their teams, today’s shortage of talent has spurred a wave of ‘job-hopping’, with compliance personnel looking to profit from their role’s increased market value. Reports claim such professionals can demand salary raises of up to 40 percent when switching to a new firm.

Firms are getting caught out, and need to respond with hiring and retention strategies that do not only ensure staff are paid fairly, but also go beyond conventional compensation schemes. More flexible working arrangements are one such solution. Another is remote working.

Steven Carroll Quote 2. The biggest challenges facing compliance in Asia

Regulatory divergence

Compliance expertise will be crucial in the region, where regulatory divergence will not be disappearing any time soon.

Refinitiv continues to partner with senior compliance executives across the industry to provide the content and technology solutions that allow them to maintain effectiveness while remaining compliant with a complex web of financial regulations.