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Enhancing Compliance and Record-Keeping for Non-Financial Misconduct: A New Era in Financial Services

A headshot of Dr Nathalie Aurby-Stacey, Head of Regulatory Affairs & Compliance at Custodia. Dr Aubry-Stacey is the author of the piece looking at the FCA response to non-financial misconduct in the financial services sector.

In the wake of increased regulatory focus on non-financial misconduct within the financial services sector, particularly highlighted by the Financial Conduct Authority's (FCA) recent initiatives and inquiries into sexism, bullying, and discrimination, the importance of robust record-keeping and data analysis has never been more evident. Compliance departments will have to consider the possibility of expanding current record-keeping and data analysis practices, originally designed to capture financial misconduct, to effectively gather data on non-financial misconduct.

Expanding Record-Keeping and Data Analysis

Traditionally, the finance sector's compliance efforts have been predominantly focused on preventing and detecting financial misconduct, such as fraud, insider trading, and market manipulation. Internal compliance systems and processes have been finely tuned to track anomalies that may indicate misconduct. The UK regulators’ recent consultation paper, including the issuance of surveys to firms in the insurance sector and beyond, signal a shift towards an equally rigorous approach to non-financial misconduct. This includes behaviours such as sexual harassment, bullying, and discrimination, which can severely impact workplace culture and, by extension, the integrity of financial markets.


To meet these regulatory expectations, record-keeping and data analysis practices will need to be significantly expanded. This expansion is not merely about quantity but also capabilities. For example, compliance departments will need to develop systems capable of detecting and recording incidents of non-financial misconduct, analysing communication data for inappropriate language or behaviour, and monitoring the use and outcomes of non-disclosure agreements related to such misconduct.

Implications for Compliance Departments

For compliance departments, this shift represents a substantial broadening of responsibilities and required expertise. Departments will need to ensure they have the right tools, technologies, and trained personnel to monitor a wider array of communication data sources. Our capture, validate, and archiving service, CC1, enables compliance departments to capture business data such as HR, and CRM as well as communication data to ensure compliance departments are ready to review all types of misconduct. Moreover, CC1 API opens up the possibility of normalised data being utilised by advanced communication surveillance tools that can identify and flag potentially problematic communications based on predefined criteria, such as the use of specific words or phrases associated with bullying, discrimination, or harassment.


Moreover, compliance teams must be prepared to handle the sensitive nature of the data involved in non-financial misconduct cases. This requires establishing compliance processes that respect privacy and confidentiality while ensuring thorough investigation and reporting processes. The compliance function will also need to work closely with other departments, such as human resources, to align on policies and procedures that address non-financial misconduct comprehensively.

Adapting Lexicons for Future Searches

Adapting and refining lexicons for compliance searches is critical in identifying non-financial misconduct effectively. This entails developing and continuously updating lists of keywords and phrases that reflect the evolving language surrounding bullying, discrimination, sexual harassment, and other forms of misconduct. Compliance departments will need to balance the breadth of these lexicons to capture relevant data while minimizing false positives that could overwhelm investigative resources.


Furthermore, recognising regional differences and cultural nuances in communication styles is essential to ensure the effectiveness of these surveillance tools. What may be considered inappropriate or offensive in one cultural context might not hold the same connotation in another. Thus, compliance teams must tailor their surveillance parameters and lexicons to reflect these variations, ensuring that the monitoring efforts are both accurate and respectful of diversity.


The push towards better visibility and control of non-financial misconduct within the financial services sector is a clear mandate from regulators like the FCA, and welcomed by the market. Expanding record-keeping and data analysis beyond traditional financial misconduct parameters presents challenges but also an opportunity for compliance departments to play a pivotal role in shaping a more inclusive and respectful workplace culture. By leveraging CC1 technology and adapting internal strategies to meet these new demands, compliance functions can contribute significantly to the industry's efforts to eliminate non-financial misconduct.


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