Skandalis: Why compliance is critical to company success

Marios M. Skandalis, President of the Cyprus Integrity Forum and a Member of the Global Advisory Board of the International Compliance Association (ICA), explains the importance of effective compliance in Cyprus and on a global level.

Why is it crucial that companies give due importance to compliance? How can compliance have a positive impact on the efficiency of their operations?

Having an effective and, at the same time, efficient compliance function is not only crucial but critical to the success of any corporate strategy. This is because compliance is not merely a control function, as it used to be, but rather a key enabler of the strategy and a means of ensuring effective corporate sustainability. It is for this reason that the right criteria should be in place to ensure the effectiveness, efficiency and robustness of any compliance function. These include a high level of competency, critical thinking, cutting-edge technology tools, lean and transparent monitoring procedures, a preemptive approach, assurance on all compliance objectives set and, above all, seeing that the right ethos and integrity are embedded in the corporate culture.

How would you assess today’s global compliance and AML environment? Has it been impacted by global events such as the conflict between Russia and Ukraine?

The overall level of compliance and AML needs has risen dramatically around the world and across all industries during the last decade. These needs have grown, in terms of resources, technical expertise and mindset. The war in Ukraine revealed the quality of the compliance functions of professional organisations, industries and even countries. Those that were well-prepared and demonstrated a high degree of integrity suffered the least impact from the immense extent and complexity of sanctions and other forms of capital restrictions emanating primarily from the USA and the EU. I would say that Cyprus has been one such jurisdiction, since over the last decade, following the events of 2013 and the collapse of the economy, it has implemented a unique de-risking and remediation strategy across its financial services industry.

What do you consider some of the most significant challenges to compliance needs and management methods in Cyprus?

The most significant compliance challenge for Cyprus is to learn from our past mistakes. The country found itself at the crossroads of survival and extinction in 2013 and it has not only managed to survive but to thrive for two basic reasons: (1) its sincere acknowledgment of the bad practices of the past and (2) its resilience and focus on remediating and enhancing its overall governance framework, dealing a significant blow to its economy in the course of this phase. This resulted in the swift reestablishment of the country’s reputation, primarily to its key financial stakeholders in the EU and the USA. Whether this reputation is maintained or not is all a matter of how focused, resilient and ethical we remain in the future.

In what ways has new technology impacted the way companies handle compliance matters? Do you believe that the human element, including whistleblowing, will ever be completely eclipsed?

Technology has had a tremendous impact on the compliance function over the last few years, especially during the COVID-19 pandemic, given the inability of organisations to continue deploying traditional compliance monitoring techniques. We have seen the introduction of digital onboarding of clients, real-time transaction monitoring, monitoring of virtual assets through the utilisation of blockchain technologies, trade-based money laundering monitoring and the deployment of Artificial Intelligence tools in the overall compliance risk management framework. The whole basis of compliance has shifted in just a few years – from collecting as much as possible KYC documentation and ticking the relevant checklist boxes, to acquiring the necessary intelligence to digitally monitor the real transactional and reputational behaviour of all clients.

How do you anticipate corporate compliance regulations and requirements developing over the next decade?

Compliance regulations will certainly continue to grow in volume, complication and complexity. The pressure for more compliance resources will not just continue but will become even greater. The critical success factor of the compliance function will depend on how it approaches this development. A successful compliance function is the one that will eventually be established as the key function of ensuring sustainability in any corporation, with technology being the prime driver and facilitator leading to this status and the integrity level of compliance officers safeguarding a transparent, safe journey on that path.

(This interview first appeared in the February 2023 issue of GOLD magazine. Click here to view it.)