Particularly for smaller and medium-sized financial service providers, the extensive requirements in terms of legal, particularly regulatory requirements, can put a constraint on day-to-day business. There is simply not enough time left over for the core business.
In order to master these challenges, companies in the financial service sector are able to outsource tasks to third parties. This way, they can reduce their cost base and are able to concentrate on the customer and their core business.
When choosing the outsourcing partner, care should be taken to ensure that the partner providing its services has proven experience, particularly in working together with financial service providers. This saves long briefings and time-consuming queries. A written agreement should be concluded with the provider in which the tasks, responsibilities, interfaces and competences are clearly defined. When deciding whether or not to outsource tasks, internally available resources and the qualification of such as well as alternative costs must be weighed against the anticipated financial burden.
Compliance can be primarily considered as a possible area suitable for outsourcing. Compliance is generally understood to be a comprehensive system that ensures the legal integrity of the entire company. The outsourcing of this area is interesting in terms of cost. In order to meet the regulatory requirements of an appropriate compliance-management system, many different legal issues must be constantly monitored. In this regard, information must be permanently up-to-date.
As well as the constantly changing regulatory provisions (e.g. KAGB [German Investment Code] or MiFID II), the legal regulations also include general requirements. These stem from areas such as Data Protection and Taxes. So that Compliance can achieve its desired effect, namely to protect the company against damages and loss of reputation and also to release the entrepreneur from liability, it is necessary to regularly monitor whether or not the company is acting in a legally-compliant manner in all respects. This not only refers to the conduct of the management board and the employees, but also to the relationships with the customers, suppliers and third parties. A Compliance function can only release a person from liability if the responsible entrepreneur can prove that he took appropriate measures and regularly monitored these measures. If the entrepreneur is unable to do so, he has to face a higher penalty.
Companies should be aware that sensitivity to corrupt behavior has increased considerably over the last few years. Of course, this sensitivity has also been fueled by news reports concerning known cases of corruption in the German economy.
Attention should be paid not only to corruption avoidance, but also to the topic of “anti-money laundering”. Employees should receive regular training, and business relationships should be checked for any suspicion of potential money laundering in the initial contact phase. Ultimately, this is a task that must be pursued continuously. The media reports regularly on new violations of these regulations, which leads to regulatory requirements being tightened even more, resulting in an increase in costs and effort.
Apart from appointing a responsible Compliance Officer, it should be clearly and comprehensibly stipulated in a Compliance handbook for all employees which requirements are to be observed at all times. It is necessary to check on a regular basis – at least annually – by means of appropriate and effective monitoring if these requirements are being met. The results of such a check are summarized in a report and brought to the attention of the management board and, where established, a regulatory body.
The outsourcing of these tasks to, for example, a law firm offers security. Such firms are familiar with the applicable statutory and/or official regulations and can ensure that these are taken into account in their currently applicable version. Lawyers who offer these services also have extensive experience in the area of Compliance for financial service providers, meaning that they are also able to offer the company preventive advice. This way, sensitive areas can be identified as early as possible, thus avoiding statutory violations.Save as PDF
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