Banks trimming compliance staff as US$321 billion in fines abate

Royal Bank of Scotland Group is preparing to eliminate as many as 2,000 jobs, checking new customers for suspicious traits as it digitises the process.
Royal Bank of Scotland Group is preparing to eliminate as many as 2,000 jobs, checking new customers for suspicious traits as it digitises the process. PHOTO: BLOOMBERG

LONDON (BLOOMBERG) - Global banks are paring back staff tasked with detecting wrongdoing for the first time since the financial crisis, ending a hiring boom that accompanied US$321 billion (S$449.2 billion) in fines, as technology replaces employees and penalties wane.

Royal Bank of Scotland Group is preparing to eliminate as many as 2,000 jobs checking new customers for suspicious traits as it digitises the process. Other lenders are also replacing compliance staff with computers as they face pressure to cut costs, including UBS Group, according to a person familiar with the matter, who asked not to be identified because the matter is private.

"The overall number of people in compliance is absolutely reducing," said Ms Anne Murphy, head of United Kingdom financial services at executive-search firm Odgers Berndtson. "Banks are better able to deal with regulatory requirements. They'll always need people to provide judgment, but a lot of monitoring and surveillance activity can be automated."

Banks globally have paid US$321 billion in fines since 2008 for regulatory failings from money laundering to market manipulation and terrorist financing, according to data from Boston Consulting Group.

The related hiring spree for compliance staff comes to a close as banks move past the worst of their misconduct charges and dwindling revenue necessitates the use of technology to control costs at departments once protected from cuts.

"Panic mode is over now," said Mr Harry Chetwynd-Talbot, a consultant at headhunter Hedley May who specializes in compliance hiring. "It's the only part that's been immune to cost pressure since the crisis. Now organisations are looking at massively inflated risk, compliance, legal functions and thinking 'we haven't solved the issue yet, but the answer isn't to just chuck more people at it'."

RBS has about 2,000 staff running know-your-customer checks, and will be able to eventually automate that function and only keep a few people to handle issues, chief financial officer Ewen Stevenson told analysts last month. The cuts would represent as much as 2 per cent of RBS's total headcount, which stood at about 79,000 at the end of 2016.

Deutsche Bank CEO John Cryan said in early February that the current boost to his firm's anti-money laundering staff won't be permanent as certain procedures that need to be carried manually will increasingly be replaced by digital processes. The lender has already scaled back its hiring plans.

Zurich-based UBS is using technology to lower headcount at its compliance department, said a separate person with knowledge of the matter.

Meanwhile New York-based JPMorgan Chase plans to keep its compliance headcount steady in Europe, while hiring selectively, according to a person with knowledge of the matter. While technology will replace jobs in the future, it will be critical for banks to keep some internal policing roles, according to Mr David Carbery, a specialist in executive-compliance hiring at search firm Shadowhound.

"The positions that are safe for the foreseeable future are the front-line compliance officers - those on the trading floors offering advice," Mr Carbery said.