Podcast | S3E3 Conflicts of Interest: Kelly-Ann McHugh

TRANSCRIPT

Kimberley Cole 0:01
This is Risky Women Radio – a show to connect, celebrate and champion women in risk, regulation, and compliance. Sharing insight and perspectives from the most influential members of our global Risky women network on the latest developments, we need to think about, the challenges we should all talk more about and the innovation we are most excited about governance, risk, and compliance. Bringing together the hundreds of senior women professionals already connected with a new emerging group of leading women and men. I’m Kimberley Cole, your chief risky woman.

Kimberley Cole 0:41
This episode is brought to you in partnership with MyComplianceOffice with clients in over 80 countries and employees around the world. MyComplianceOffice is committed to delivering affordable easy to use compliance technology. Thank you MyComplianceOffice for your support of Risky Women Radio.

Kimberley Cole 1:03
Welcome to Risky Women Radio. Today’s risky woman is Kelly-Ann McHugh. For those who listened to my intro into season three, you will know that Kelly-Ann will be hosting some of the episodes for Risky Women Radio this season. Kelly-Ann is the director of Asia Pacific for MyComplianceOffice based in Singapore. She’s a passionate business leader focused on technology, risk, and compliance and today we’re going to talk about conflicts of interest. Welcome, Kelly-Ann.

Kelly-Ann McHugh 1:32
Thanks Kimberley, it’s great to be here.

Kimberley Cole 1:34
Before we get stuck into conflicts of interest. Can you tell us a little bit more about MyComplianceOffice and what your business focus is?

Kelly-Ann McHugh 1:43
Yeah, absolutely. So MyComplianceOffice is a leading provider of conduct risk solutions. And in fact, we provide a global software as a service platform for managing conflicts of interests, gifts, and entertainment, personal account dealing and last year, we opened our office here in Singapore. Because we saw the need in this region to really address the market so so that’s sort of why I’m here is to grow the business within APAC.

Kimberley Cole 2:14
So MyComplianceOffice recently conducted a survey, which I think will be of great interest to many of our risky women. So before handing over the reins to Kelly-Ann I wanted to seek her expert opinion and hear the results of the MyComplianceOffice survey into the conflicts of interest. So before we get into that, what are some of the key discussions you’re currently having with your customers?

Kelly-Ann McHugh 2:37
So our customers, global customers often, both in financial services sector and the corporate sector, and the conversations we have with our customers around conflicts of interest or anything from a simple challenge around personal account dealing complaints, paper based processes, they’re getting too many statements and confirms particularly at this time with with COVID, lots of people investing in the market or selling out of the market. And so they’re really challenged by paper based processes for that, but equally other areas, so outside business activities or gifts and entertainment where they’ve had policies and procedures in place for a long time. But they may not actually have a systemized process for managing it. They don’t understand where the trends are going in the gifts and entertainment space. And that’s what really led us to this particular survey was some customers asking us well, what are you seeing in the market because you’ve implemented so many technology systems? What are you seeing in terms of the trends around rules and processes to mitigate risks from the extraterritoriality of the likes of UK Bribery Act and the FCPA? So that’s sort of what led us to this gifts and entertainment report.

Kimberley Cole 3:58
Yes, so I think it’s very, very interesting. Globally, regulators are asking organizations to review their corporate entertainment and gift guidelines as part of a lot of, you know, tougher governmental stances on anti bribery and corruption. So it’s, it’s definitely topical. Can you tell us a little bit more about the survey demographics and sort of the scope of the survey?

Kelly-Ann McHugh 4:25
Yeah, absolutely. So in terms of the survey itself, it was a reasonably equal split between the different regions, so 34% of our respondents were from APAC, 27% from Europe and the Middle East, and 39% from the United States. So reasonably even split, 75% of the respondents were from financial services firms with a large proportion of those being banks. Sorry, 34% were banks and then 23.5% were asset managers and fund managers essentially. And that’s probably because a lot of our customers are in that space, the rest were corporates. I don’t actually have the numbers of the number of respondents at this point in time. But we’ll certainly be running this again, and then hope to get more results and more details as the years go on in terms of trends.

Kimberley Cole 5:30
Right. So the survey was divided between gifts and entertainment and hospitality. Were there any surprises in the specific category’s results that you would like to highlight?

Kelly-Ann McHugh 5:41
Yeah, there were a few different insights. So one area of compliance in this space is around entertainment. So where you might be providing, taking a client out to an event, whether it’s a sponsored event that you’re hosting as a company or to an external event. I thought it was interesting that 22% roughly said it was up to manager discretion as to the cost or the fee that was associated with that entertainment. They hadn’t actually set a limit for the amount that was paid, the dollar value against that event. 21.9% also said that that fee when they did set a limit was between 100 and $250. And which seems reasonable. And but then most European companies actually limited entertainment to be between 50 and $100. So there’s different policies everywhere around the world. But I did think that was interesting. Only 22% says, you know, it was up to manage discretion in terms of entertainment. Go large if you want to, if your manager says it’s okay.

Kimberley Cole 7:03
That’s very interesting to see that variation. Do you think there is adequate focus on this area from most of the companies that you’ve been speaking to?

Kelly-Ann McHugh 7:13
Yeah, I mean, globally, there has been over time, I think people may have become complacent about a gifts and entertainment policy. And we’re seeing some interest, certainly globally in conflicts of interest anyway, in the last 12 months, the regulators have picked up on lax processes around the likes of personal account dealing the FCA put out a watch on that last year, I think Australia has done similar to say that, and actually the SFC did too, processes in place in these organizations were just too relaxed, probably too much paper and not enough systematic processes. But look, most companies have a policy and they provide training when employees are onboarded. There seems to be a lack of ongoing training with real, live examples of this, and we’ve seen some recent bribery and corruption cases in Asia, which demonstrate that training is not strong enough in this space, around what’s right and what’s wrong when dealing with, you know, politically exposed persons that you might be entertaining to win a deal. So I think there is some room for improvement here. And what was also interesting is particularly with this dollar limits approach, and the various and various different responses, we got, the only real rules at least that I know of, that are specific in this space is almost like the US broker dealer rules where they’re very specific about and de minimis values and how you know, when you have to declare a gift, whereas everywhere else in the world, it’s a little bit vague, and it’s really about the organization, setting a policy about, well if you give or receive this gift, is it likely that you’re going to have to have a future commitment to that client? You know, are you promising something in return for that gift that you’re giving or receiving? So, there is some improvement to take and I think just to carry on on that a little bit here in Asia, there is a focus on gifts and entertainment because we have so many religious and sort of holidays to celebrate throughout the years so gifts and entertainment policies in Asia have to be specific around, you know, gifting periods like lunar you Lunar New Year and and Diwali, etc. There’s, there’s obviously rules and policies organizations have to put in place for that.

Kimberley Cole 9:47
So that’s interesting. Um, what are some of the results or the the sort of best practices I guess more that you’re saying the companies are putting in place around gifts and entertainment?

Kelly-Ann McHugh 10:00
Yeah, so I’ve got sort of five and best practices. One, policies should have clear dollar limits for giving and receiving gifts and entertainment. And the emphasis there on both gifts and entertainment, I think the more specific you are, the easier it’s going to be for an employee to comply. Number two, and have detailed examples of what is considered a gift versus entertainment and what is allowed and not allowed in your policy. Be specific about it. Number three, define a policy for your approval process. But not just approvals in general for pre-approval, a number of organizations and in fact, 65% of the organizations in our survey said that they did require pre-clearance processes for giving or receiving gifts and entertainment. Number four, to ensure the policy matches your industry and region, so do describe risk events that have occurred in the past and what would constitute a conflict in your organization. Like the example I mentioned around Lunar New Year, Christmas, Diwali gift giving what is the dollar value you’re allowed to give or receive? And, and number five, of course, implement a technology system so compliance can easily monitor, approve and review and record, and record, you know, there’s many enforcement cases, surveillance that regulators are doing, the more you can easily demonstrate what your individuals and organization have been giving or receiving, the better.

Kimberley Cole 11:44
That’s great, a very clear, easy to follow top five tips for all of the risky women who are listening. So what should companies consider implementing to assist their conflicts of interest program?

Kelly-Ann McHugh 11:59
Yes, from a conflicts of interest perspective, you need to obviously have the policy defined in the first place. And following that policy, you do need to train and educate your staff on what that policy means and not just once when they onboard, but regularly. When there is a scenario that’s occurred in the market, and that might be related to your industry reeducate them with, you know, a 10 minute training session as to what that might mean if they were to do that in their organization. And number three, implement technology to make it easy for your employees to actually declare that they’ve given or received a gift. The MCO platform allows you to do your pre-clearance process and record the actual gifts that you gave or received, and then report on that as an organization. It means that from a compliance officer’s perspective, you’re not manually receiving an email or a document or reviewing an expense report. You can actually have that automated completely which, which is useful from a reporting perspective. So, that would be my few tips.

Kimberley Cole 13:08
Yeah. So I was gonna ask about, you know, how technology was assisting. So that’s, that’s, you know, really interesting. And obviously, through MyComplianceOffice, there’s a there’s an excellent, you know, workflow tool that companies can use. What are the changes that you’ve seen over time? How is the industry evolving? And how is technology really starting to, you know, play a part?

Kelly-Ann McHugh 13:31
Yeah, I mean, so traditionally in this space, even if I think back to some of my previous employers, it was manual, or it was just a policy, there was not really this approach of actually declaring the gift or entertainment received, you might tell your manager, but they go meh it’s okay. Whereas when you put a policy and technology in place, you can actually see the compliance occurring. So technology for gifts and entertainment perspective our system allows you to do a pre-clearance and to either automatically approve or deny that request based on your policy. So even you know, in a paper based system entering a $30 gift might be painful because somebody has to review that and it definitely is most likely you’re not going to cause a conflict. But if you allow, you have a technology system, you can enter that $30 gift or entertainment in the system. It’s recorded, it can be found later on. And that’s important from a record keeping perspective, but it doesn’t cause any pain on the compliance officer because it was automatically approved. So our technology can help to take that burden off and administrative officer, HR or compliance when it comes to gifts and entertainment.

Kimberley Cole 14:56
Well, it sounds like there was a lot of interesting points that you’ve really managed to uncover and perhaps dig into and identify some, you know, best practice for the industry. So this is going to be an annual survey now is it?

Kelly-Ann McHugh 15:09
Yeah, we hope so. Absolutely. So this was just the beginning. We’re just, you know, our very first survey, and we’re happy to see the results. I think we will absolutely do this again. It’s good to see where trends are going in the in the space.

Kimberley Cole 15:25
Absolutely. And for anyone who would like to see the full survey report, you can go to the MyComplianceOffice website. We’ll also put the details here in the show notes of Risky Woman Radio. Thank you very much for listening to this episode. And please stay tuned for the upcoming episodes where you will enjoy hearing Kelly-Ann on the other side of the microphone, and she is going to be speaking to some other fabulous risky women so definitely stay tuned for the rest of Season Three and enjoy. Thank you so much for listening to us.

Kelly-Ann McHugh 16:05
Absolutely, very much so looking forward to it. Thanks Kimberley.

Kimberley Cole 16:09
Thank you for listening and please go to the MyComplianceOffice website and download the survey to get the full results.

Kimberley Cole 16:17
Thank you for listening to this exciting episode of Risky Women Radio to connect, champion and celebrate women in risk, regulation, and compliance. I’m Kimberley Cole, based in Hong Kong. For more information on the Risky Women global network, head to our website, in the Episode Notes and please be part of the ongoing conversation by subscribing to this podcast, connecting with us @RiskyWomen on Twitter or even reaching out to me directly by email.