The Modern Compliance Function

The compliance function has evolved significantly over the years, transitioning from a rule-focused, reactive role to a proactive, business-enabling partner. In today’s regulatory environment, compliance officers must embrace modern practices that not only ensure adherence to laws but also align with operational and strategic goals.  

In this article I explore the key characteristics of a modern compliance function and how it differs from outdated approaches. 

Moving Beyond "You'll Go to Jail" 

Historically, some compliance officers have relied on fear-based rhetoric, warning that non-compliance would result in jail time. This oversimplification does little to foster understanding or engagement. Only the most egregious breaches lead to criminal prosecutions, often involving intentional wrongdoing.  Most enforcement actions result in fines or bans, not imprisonment.  

Modern compliance officers must articulate the why behind compliance—explaining how adherence mitigates risks such as reputational damage, operational inefficiencies, or client dissatisfaction. After all most rules originate in good business sense, albeit adapted for specific markets and business types and often based on experience of things going wrong. 

Compliance should no longer be viewed as a cost centre or a barrier to business. Instead, it is a critical enabler of sustainable growth and operational excellence. By embedding compliance into day-to-day operations, businesses can unlock tangible benefits such as enhanced reputation, increased customer trust, and improved operational efficiency. A proactive compliance function helps identify opportunities, mitigate risks, and ensure that the business operates ethically and effectively. Far from being a hindrance, modern compliance enables firms to innovate confidently while maintaining regulatory integrity. 

Explaining Rules Beyond References 

Since the Financial Services Authority (FSA) first published its Handbook online in 2001, rulebooks have been readily accessible. Yet, some compliance professionals still hide behind rule citations without explaining their purpose. Quoting rule numbers or consultation papers does little to drive business buy-in.  

Instead, modern compliance requires contextualising rules: What risks do they address? How do they protect clients or enhance operational efficiency? By framing regulations as good business practices rather than mere obligations, compliance officers can foster a culture of understanding and collaboration. 

Integration with Risk Management 

The modern compliance function often sits within risk management rather than legal departments—particularly in jurisdictions like the UK. This reflects its role as an operational risk control function rather than a purely legal one.  

While legal teams focus on defending against lawsuits, compliance works to prevent breaches that could lead to regulatory scrutiny or operational disruptions. This alignment strengthens the firm’s overall risk management framework and ensures compliance has a voice at the board level. 

Data-Driven Decision Making 

Subjectivity in compliance decisions can have severe consequences, from reputational harm to career damage for individuals under investigation. Modern compliance functions rely on data to underpin decisions. Automated systems and centralised data repositories improve audit trails, enable real-time reporting, and reduce reliance on error-prone email chains. 

Technology also allows for better monitoring and proactive identification of risks, making compliance more efficient and effective. 

The Need for Specialisation 

Compliance is now both broad and deep. Generalists manage policies and conduct risk assessments, while specialists handle areas like transaction reporting or market advisory.  

Smaller firms often lack the resources for such expertise in-house and may benefit from external consultants who bring tailored knowledge and support. 

A Seat at the Table  

Compliance is no longer an afterthought—it has a seat at the boardroom table. Whether represented by a Head of Risk and Compliance or another senior figure, this shift underscores its strategic importance.  

Compliance is now seen as an enabler of sustainable growth rather than a barrier to business innovation.