What is compliance and what is the role of a compliance officer?

Updated: Nov 15, 2021

Compliance refers to the implementation of the requirements to ensure that the rules of the different Risk Management Systems for Money Laundering and Terrorism Financing, for the knowledge of the counterparties, are implemented within the process of linking third parties, such as clients and suppliers.


With this process, it is possible to find out about a person if they have any antecedents, if they have committed a crime, know which final beneficiaries a supplier has linked, which are the shareholders, the legal representative, the tax auditor of the company with which you contract a certain service. In general, the above allows you to get to know people and avoid being victims of impersonation.


Why is it important for companies?

In times of pandemic, some organizations have providers that were contracted virtually, of which only what is seen behind on the screen is known (most likely it is their home) and it was not possible to know the physical headquarters or office, for What other important aspects are not known as from where you are importing the materials. These types of scenarios can lead to an impersonation of a real third party, which would result in fraud or scam to the company, which can link it with money laundering and terrorist financing.


By complying with due diligence, we are mitigating reputational, operational, financial, regulatory, and money laundering and terrorist financing risks. For example, in the case of suppliers when we are evaluating what is the best option, we can have all the technical clear, but identifying all the legal and financial situations of a third regulatory aspect, the areas of corporate compliance not allow hiring, to avoid risks.


What are its benefits?

In that sense, it is possible to say that compliance has several benefits:

  • Mitigate business risks.

  • Avoid breach of rules.

  • Avoid sanctions and fines from control entities.

  • Improve the reputation of the company.

  • Improve the control of third parties at the time of their connection and generate comprehensive evaluations.

  • Shorter times and operational reprocesses.


The general responsibilities of the Compliance Officer - Compliance Officer


The general responsibilities of the Compliance Officer are based on the duty to report on possible risks and non-compliances that affect the organization but are not limited to this. It is a function that, to fulfill it effectively and adequately, requires executing a series of monitoring, control, implementation, training, and notification tasks to the company's governing bodies.


Although there is no consensus on all the responsibilities of the Compliance Officer, which may vary from company to company according to their organization chart and sector, there are some common general lines of action for the function that is included in the ISO 19600 Standard. . By way of example, the following stand out:


You must identify the obligations to which companies are subject, both from a legal point of view and also those guidelines that derive from Sector Codes or their policies or Ethical Codes. The doctrine refers to these two types of obligations as Hard Law and Soft Law, the former being those that derive from a legal mandate whose non-compliance represents an infringement, while the latter are those that the company voluntarily decides to comply with as a good sector or development practices. of good government.


You must understand the processes and procedures of the company so that you can integrate their development with the obligations in terms of regulatory compliance.


In front of the employees, the Compliance team will be responsible for providing or coordinating continuous training on regulatory compliance, as well as the figure that will provide support in the event of doubts about how to proceed or whether certain conduct constitutes or not. a violation of the company's Compliance.


In the same way, it is the person who will be responsible for the adequate communication of the Compliance Program to the employees, having to disclose any relevant information regarding compliance to the companies and deliver the Code of Conduct and the policies to which the staff will be subject.


The Compliance Officer must also contribute in the description of the Compliance obligations that are inherent to each area or position within the company, as an objective parameter in the evaluation of staff performance.

  • Complaints, grievances, and telephone or email support system.

  • Regular meetings with those responsible for processes.

  • Periodic incident reporting reports.

  • Direct support mechanisms for employees who have doubts about whether or not conduct represents a risk, before executing it.

  • Checkpoints and process controls in cases where the normal operating parameters are exceeded in which the approval of the Compliance Officer is required - Compliance Officer (For example Signing of contracts that exceed a certain amount, authorization of corporate gifts).

  • Performance indicators and compliance with the measures established to guarantee regulatory compliance and reflect the evolution of the risk prevention system.

Given that one of the sectors that can generate risks for companies is their relationships with third parties, it is also the responsibility of the Compliance Officer to identify and address the risks derived from their relationships with customers, suppliers, distributors, and external sales representatives, as well as with any collaborator. that could be considered a representative of the company.


Monitor the operation of the compliance risk prevention system and take preventive and corrective measures that guarantee its effectiveness and ensure the review at the planned intervals.


Provide advice to the organization on Compliance, either directly or through external experts.


As can be seen, it is a set of important responsibilities not only for the position but it can affect the activity of the company, and that is why it must be ensured that whoever acts as a Compliance Officer - Compliance Officer or according to a Committee for such purposes, be a person who demonstrates values ​​such as integrity, commitment, leadership, effective communication, the ability to insist and convince on the acceptance of their recommendations and deep knowledge (or access to experts in the field) on issues of normative compliance.


It should be noted that failure to comply with these responsibilities may entail not only the sanctions established by the applicable laws for the company but also personal responsibilities for the Compliance Officer who has not exercised his duty of vigilance diligently.