“This is Nigel, and he’s here to present the anti-money laundering training. You may not think it’s particularly relevant to what we do but we have to do it.”
With several years’ experience in delivering compliance and regulatory training, and a career as a Compliance Officer before that, I am aware that not everyone shares my enthusiasm for compliance and regulation, but it was still disheartening to be introduced to a roomful of trainees with these words! Such incidents are, thankfully, extremely rare – our clients are generally very supportive of the work we do in training their employees in relation to their regulatory obligations. However, that introduction caused me to reflect on what firms understand the purpose of such training to be, and what effect, if any, they expect it to have on their employees.
In many jurisdictions certain types of compliance-related training are mandatory. Thus, for example, within the UK firms that are subject to the Money Laundering Regulations must:
take appropriate measures so that all relevant employees … are
(a) made aware of the law relating to money laundering and terrorist financing; and
(b) regularly given training in how to recognise and deal with transactions and other activities which may be related to money laundering or terrorist financing.
In this case, the regulations do not stipulate the format or length of training, and only define content in broad terms. As a result, firms meet this obligation in a myriad of ways, ranging from intensive programmes of learning and testing (often delivered via E-learning ) to occasional face-to-face training sessions, and every variation in between. However, compliance or regulatory training is often not confined to those topics in which there is a specific legal obligation. Even where no such obligation exists, many firms commit significant amounts of time, energy and resource to training their employees on compliance and regulatory issues.
Training and ‘Box-Ticking’
This begs the question of whether such training is successful. The answer to this question must, surely, depend on how success is defined, and hence what objective the training was intended to achieve. In my experience, there is, too often, a view among trainees that compliance training is primarily done to ‘tick a box’. In other words, someone in authority (whether external, such as a regulator, or internal such as the firm’s senior management) has decided that employees should be trained, and the purpose of the training is, therefore, to allow the company to tick this box – to demonstrate that it has ‘compliant training’. If this is the goal, then it is unsurprising that a firm would look for the most efficient way to meet this objective – most efficient here typically referring to the lowest cost and least disruptive to the employee’s workload.
Taking the anti-money laundering (AML) example above, from a practical point of view it is relatively straightforward to give an employee information on the law relating to money laundering, and potential indicators of money laundering activity. The advent of low-cost eLearning options means that such factual information can be provided to an employee (perhaps with the addition of a short test) with very little expense and in some cases the process can be completed in a matter of minutes, minimising the impact on the employee’s workload. Within training circles such methods are sometimes referred to as the ‘sheepdip’ approach – the training may not be particularly tailored (or even relevant) to an employee’s actual day to day activities but from the perspective of someone who simply wants to be able to tick a box it ‘gets the job done’ in as painless a manner as possible.
However, it is worth pausing to ask what such training is likely to achieve in reality. Does undertaking such a programme actually mean that an employee is any more likely to recognise and, perhaps more importantly, respond to suspicious activity on the part of a client? Is an employee who has spent a few minutes completing an online module on AML really more likely to raise questions about the activity of an important and highly valued client? In short, can compliance training actually change employees’ behaviour?
As a trainer, I would (obviously) want to answer ‘Yes’ to that question, but there are many grounds for pessimism. The last few years have been marked by a series of scandals relating to different forms of misconduct by financial services firms. In each case, particularly those involving large international companies, it seems highly likely that the firm concerned had an extensive programme of compliance training. The firm could, presumably, provide evidence that the individuals involved had completed the training, and may even have passed a test or assessment, and yet such training was ineffective in preventing the individual’s misconduct.
Training and Culture
Of course, to a large degree conduct within a firm, including misconduct, relates to the question of firm ‘culture’ – a subject which, to judge by the number of speeches and other pronouncements being issued, has been occupying the minds of financial regulators worldwide. The wider question of company culture – how it is defined, and what determines whether a firm’s culture supports or undermines its efforts to meet its regulatory obligations, is beyond the scope of this piece. However, to take a simple definition of company culture as the norms of behaviour within a firm (sometimes articulated as ‘how things are done around here’), it is helpful to pose the question – what effect, if any, does compliance training have on establishing or reinforcing those norms? In other words, does compliance training make a meaningful contribution to the development of a culture which promotes good conduct over misconduct, ethical behaviour over unethical behaviour?
In a useful article entitled ‘Ethics Training’*, Thomas Eberlechner surveys a range of research findings relating to the value, or otherwise, of such training. He observes that training employees on ethical issues have a long history, but that ‘doubts about the efficacy of these measures, however, abound.’ He goes on to review some of the different approaches that can be used, and comments: ‘Naturally, not all methods of ethics training are equally successful.’ So, what are the most effective approaches for firms to take? In particular, how can firms move beyond a ‘sheepdip’ approach which focuses on ticking the box of ‘compliant training’ to training which actively promotes compliance? For Eberlechner, the conclusion is clear: ‘Only interactive and personally engaging methods will lead to tangible outcomes among participants.’
Hallmarks of Effective Training
What are the hallmarks of such training? The article reviews the research evidence and lists several characteristics of successful training, including the following:
- It should increase financial professionals’ awareness of actual ethical issues. In other words, rather than simply trying to teach the ‘right’ answer for a specific compliance or regulatory question, training programmes should make trainees aware of the ethical issues which will potentially arise throughout their career.
- It should provide participants with practical frameworks. Trainees should be encouraged to consider how to make ethical decisions, not simply to learn the ‘correct’ course of action. For example, a decision tree approach might encourage trainees to begin by asking ‘Is the proposed conduct legal?’ before moving on to consider ‘Is the proposed conduct ethical?’ or ‘Is it in the best interests of the client?’.
- It should focus on concrete, relevant issues. The training material should cover realistic scenarios that are relevant to the individual’s role within the organisation, rather than generic issues of business ethics.
In addition to these characteristics, Eberlechner identifies a further feature regarding the format of successful ethics training:
Ethics courses should focus on creating an interactive climate that actively encourages participation. Experience-based learning approaches that provide real-life applications are especially appealing to participants and effective … The focus of these discussions should be in active decision making rather than on passive lectures.
Thus it is not only the content of ethics, or compliance, training that is important but also the format, and the context in which it takes place.
To return to our earlier question, can compliance training change behaviour? Despite the presumed failure of past training within the industry (as evidenced by repeated episodes of misconduct), there are indications that such training can have a meaningful impact on behaviour. However, the evidence suggests that to be effective, training should consist not only of the transmission of information but of a learning experience in which trainees apply ethical decision-making frameworks to scenarios which are recognisable from their day-to-day activities.
Is the widespread adoption of such an approach to training a realistic proposition? The answer to that question will depend on the commitment of firms to move beyond ‘compliant training’ as a tick-box exercise to ‘training for compliance’ – a commitment that I, as a trainer, hope firms will be able to make, and to act on.