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Perspective
01 October 2016

Compliance: A priority for ECAs

General Counsel and Head of Compliance at UK Export Finance
Compliance risk management should be a priority for any export credit agency. Lucy Wylde outlines how the UK’s export credit agency is taking steps to further strengthen the assurance provided around compliance risk.

For any export credit agency (ECA), following the highest standards of governance, accountability, transparency and risk management should be an imperative. For UKEF, as a UK government department, not only is it a public policy objective to avoid financial loss from transactions tainted by corruption, but to avoid unjustifiable reputational risk through failure to comply with all applicable laws and regulations.

As an ECA and a government department, we have many compliance obligations. These are drawn from a large number of laws, UK government policies, regulations and international agreements. They are as wideranging as the Bribery Act 2010; international sanctions legislation; the Equality Act 2010 protecting our employees from discrimination in the workplace; the Equator Principles governing our environmental, social and human rights due diligence; the OECD Arrangement; and, of course, the responsibilities we have as a member of the Berne Union.

An independent compliance function

UKEF has always had policies and procedures in place to manage risks, but we wish to further strengthen the level of assurance by providing a more holistic oversight of all our compliance processes. To this end UKEF has committed resource to an independent compliance function, which coordinates the oversight of the controls in place to help ensure compliance with the regulatory framework within which UKEF operates.

In line with our holistic approach, we have chosen to adopt a compliance policy with a wide remit that encompasses all our compliance responsibilities whilst at the same time ensuring that we meet our core responsibilities as an ECA and government department. Specifically, our goal is to adopt standards that reflect best practice in the financial services sector.

The compliance function acts as a contact point for other UKEF staff responsible for elements of compliance, and provides guidance and advice to staff across the business to support them in meeting their compliance responsibilities. The objective is to ensure the department is fully engaged and equipped, has the right controls in place and thus is an exemplar of best practice in compliance.

The compliance function also works closely with other assurance providers within UKEF. These include UKEF’s operational risk function, which oversees the management and mitigation of risks relating to our ability to fulfil our statutory purpose, achieve the financial objectives set by HM Treasury, adhere to international agreements or manage other legal risks. Taken in tandem, compliance and operational risk management provide a second line of defence, with internal audit providing the final link in UKEF’s assurance framework as the third line of defence.

Best practice is not static and so we meet with external organisations, seeking input from their compliance functions on control enhancements and exploring how we can adapt and implement these strategies at UKEF. By seeking out improvements made by others we can help ensure that we are at the forefront of industry developments.

Compliance culture

To be successful, compliance needs to start at the top of any organisation. Overall responsibility for UKEF’s compliance therefore sits at the highest levels within the department, including our board and executive committee, which is made up of the most senior staff including the chief executive officer. Our executive committee is charged with demonstrating leadership in compliance through their own individual roles as well as overseeing and assessing the effectiveness of how compliance risk is managed in UKEF. It approves our compliance policy and is responsible for communicating, implementing and ensuring it is followed. In my role as general counsel, I also act as the head of compliance, with responsibility for instilling a compliance culture across the entire department.

While it provides a greater and more robust level of assurance, simply having a compliance function is clearly not enough. The Basel Committee on Banking Supervision has made it clear that compliance can never be the responsibility of a single individual or select group of individuals. Whilst our culture of compliance starts at the top with our board and executive committee, it therefore involves each member of staff playing his or her part in fostering a climate of honesty and integrity and ‘doing the right thing’.

As a result, compliance is one of our five departmental objectives, from which all staff then draw their own individual objectives, sitting alongside other high-level priorities such as performance, efficiency, teamwork and brand. The compliance team is implementing a communication and education plan to help ensure that this is the case and a culture of compliance is embedded across the department.

Robust risk management, rigorous governance and strict adherence to laws and international agreements are an integral part of UKEF’s ethos as well as our business activities. As the head of compliance I am confident that our compliance function will play a key part in providing us with assurance that we meet our responsibilities as an ECA and contribute to developing best practice across the ECA field.

Lucy Wylde

General Counsel and Head of Compliance

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