The level of compliance risk facing alternative fund managers is rising and set to increase further over the next two years, according to new research from Ocorian and Bovill Newgate.
The study found that 88% believe the compliance risk facing their organisation will increase over the next two years.
Of these, 11% think the increase will be dramatic.
This increase in risk comes against a backdrop of under-resourced compliance teams and an already high level of fines.
Of those surveyed, two-thirds (64%) say their compliance management team is already under-resourced, with over half of these (34%) feeling that they are hugely under-resourced.
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The number facing fines and sanctions is already high, with 67% of respondents admitting their organisation has already been subject to risk and compliance fines or sanctions over the last two years.
A further 9% admit they’ve received an information request or a visit from the regulator in the past two years.
The research laid out the top five areas that alternative fund managers believe need investment over the next 24 months to address the issue.
| Top areas of investment needed in the next 24 months | |
| 1 | Technology (58%) |
| 2 | Systems to manage processes and procedures (57%) |
| 3 | Hiring relevant and knowledgeable personnel (53%) |
| 4 | Training (38%) |
| 5 | Outsourcing partners (36%) |
| 6 | Independent audit or health check (23%) |
Bovill Newgate co-head of UK funds for Guernsey and Mauritius Matthew Hazell said: “Firms must have a thorough understanding of their own compliance and risk needs – and any potential changes to these through growth or organisational change – in order to invest shrewdly in the right systems, processes and people to protect themselves from these future risks.
“We recommend following a ‘three lines of defence’ approach to protect their businesses – firstly, implement robust procedures, policies and training; secondly, comprehensively monitor these; and finally, review and challenge through independent audit.”
Ocorian’s ‘three lines of defence’ approach to tackle risk and compliance challenges:
- Line one: create clear and robust frontline processes and procedures, supplementing this with both online and face-to-face training programmes for staff.
- Line two: build and empower a comprehensive compliance oversight function that monitors and assesses the processes and procedures, as well as advising and supporting staff and senior managers to comply with the firm’s obligations.
- Line three: seek review and challenge of the firms AML framework via annual independent audits.
Ocorian commissioned independent research company PureProfile to conduct the global study of 101 senior executives, regulation and compliance executives working at alternative fund manager firms during January 2024.
If you’re going to slaughter the sheep first you’ve got to round them up.
So who are these alternative fund managers? Would you include Pictet or Impax? I doubt it. How relevant are the ones to which you refer? How much do they have under management?
Codswallop!
I find that compliance management or fraud
“teams” have the same average of desk or mouse pushers
as anywhere else. Give them fancy names.
I’ll float the idea that, to escape fines, the
bigger financial institutions look to pump up “cases
resolved” by harassing their insignificant clients and presenting the wonderful results to the regulators.
I now have 3 cases of Fraud Specialist antics.
Example: A client rejected a phone call because the caller could not give known numbers to call back. He tried to help the bank and emailed the suspect numbers to his bank.
The bank’s “team” then blocked his account ‘forever’.
The suspect numbers were later found to be from the bank’s own fraud team who harassed the helpful client.
Hello, detective J, sitting on his arse making up stories and harassing the customer with new hoops, then more hoops, to jump through from ‘specialists’ calling from more unanswerable numbers. True!
The ‘bank’ did that for months, passing him from
‘specialist’ to ‘specialist’ each spouting client errors now proven wrong. Blame the client!
The phone calls have at long last come to light after painful requests. Are audit crunch dates at work now that the actual drama is down the memory hole?
That table includes six not five areas that alternative fund managers believe need investment over the next 24 months.