Danos Group
02 Aug

Cyber Risk has been a key part of the agenda for some time now with ever present and evolving threats but the highly publicised Presidential Election scandal and the start of Cryptocurrency breaches has seen its magnitude reach new heights.

Modern day bank robberies don’t happen with guns and getaway cars anymore, they happen in someone’s basement on a computer. The potential damage is widespread and the task of catching the perpetrators is complex. It’s not just money at stake (whether it be cash or crypto), it is people’s identities – and right to make an informed decision without the influence of ‘fake news’ it would seem.

No-one is safe from cyber-crime; the government with threats to national security, healthcare and their protection of sensitive data, car manufactures ensuring the driverless cars of the future can’t be taken over to the man on the street having his Bluetooth targeted or bank card read. Cyber-crime is real, multifaceted, widespread and not going away and financial services near the top of the list of those who carry the huge responsibility of being able to defend against an attack.

When even the supposedly ultra-secure blockchain is breached it highlights how serious and present cyber crime is. $731 million worth of crytpocurrency has been stolen so far this year, three times the amount stolen last year already. The biggest proportion of this was $500 million hacked from Coincheck in Japan. The reason cited by their CEO – not enough talent and experience with in their security team.

People are the most important part of fighting against cyber crime. The most talented people are needed to be able to strategise, identify issues and build out teams to address it. We’re seeing this increase in demand more than ever. It’s not only the inception of cyber risk teams and divisions within an organisation but specialist practices within consultancies. We are placing people with backgrounds in intelligence and technology who understand how a business works. They not only need to be able to mitigate current risks but keep one step ahead of emerging threats.

A recent example is our placement of Kyle Hastings at strategic advisor and consulting partner to the world’s leading financial institutions, Parker Fitzgerald. With over 20 years experience in key roles across major financial services firms, Kyle has joined the team as Practice Leader, Cyber Risk. He will be responsible for bringing together over 100 cyber security, risk management and data privacy specialists to ‘shape their strategic response to the emerging threat landscape and new global regulatory standards’.

Scott Vincent, CEO of Parker Fitzgerald said, “Kyle joins Parker Fitzgerald at an important juncture for the business and the wider industry. The digitisation of financial services means the sector is balancing the needs of embracing a sustainable digital business model as well as addressing the growing regulatory requirements and broader cyber threats to their businesses and customers. Kyle’s expertise will be vital as we continue to support our clients and grow the business.”

We agree that the pressure is only set to rise, not only as the hackers’ abilities evolve but with further regulation. The FCA has announced that it is working with the Bank of England and the UK Treasury and will unveil guidelines on crytocurrency policy later this year.

This much needed regulation will establish industry standards and companies will have the added necessity of ensuring they have the most effective policies and procedures in place to keep their stakeholders safe. It is likely to have global repercussions and we hope that the regulatory standards will promote the most robust line of defence against the increasingly frequent and sophisticated attacks and the number of successful security breaches will decline. Knowing the quality of the people we have placed in key positions and organisations we feel very positive about their ability to achieve this.

If you would like to strengthen your Cyber Crime team we’d love to help. You can reach me on: +44 (0) 20 3908 4807 pmonar@danosassociates.com

17 Jul

There is no denying that Brexit has promoted the growth of financial services in Europe and the emergence of new financial hubs in Frankfurt, Luxembourg, Paris and Dublin as companies make moves to ensure they have workable footprints in the EU after the UK finally bids a fond farewell.

It is our business to monitor all areas of the market and it seems that all the attention on Brexit has masked other contributing factors at play that would have impacted Europe’s growth regardless.

Asia has been investing heavily in European assets

A Bloomberg report showed that China has bought or invested in European assets estimated at a conservative $318 billion over the past 10 years – 45 percent more than in the U.S. during this time. While the UK accounts for $70 billion of this, there has been significant known investment in German technology, Scandinavian carmakers, Swiss energy producers, Real Estate in Paris and even the purchase of Greece’s largest port in Piraeus.

While Germany, France and Italy are calling for controls on China’s advances with an EU-wide investment screening mechanism, countries such as Greece, Portugal and Cyprus are enjoying the much-needed injection of capital.

Derek Scissors, China researcher at the American Enterprise Institute quite rightly notes, ‘the money will flow to where it is most welcome’. So, for now Europe is marked as a top destination for Chinese – and increasingly, Middle Eastern investment.

If Europe follows the US and Australia’s lead and puts investment control in place, it is likely to reduce the flow but for us, spark a new wave of compliance hiring to manage it.

Competitive taxation has been drawing investors in

Germany, Switzerland and Austria have a strong inflow of foreign holding organisations who are using tax and location advantages. Switzerland for example is in the top third of the most competitive corporation tax rates in the world, only being outplaced by off-shore domiciles.

Development of regulation has been driving hiring too

The increasing regulation in the financial services sector is not just a burden, it gives firms a chance to reshape their structure and processes to be more transparent and efficient. This change is the main driver of hiring in and many are seeking the support of specialist executive search firms to help find and attract the best compliance, risk and legal talent for the job.

London is still thriving

If Brexit was such an all-encompassing influence, we wouldn’t be seeing such a significant number of start-ups, investment and indeed hiring in the UK. The appeal of the UK consumer is so great, some companies are making moves into the UK to ensure they can still reach their British customers.

There is of course a risk that many would have preferred not to have of more foreign investors moving assets out of the UK if negotiations are unfavourable. We anticipate that more of the bigger companies will move to Paris, Dublin and Frankfurt post Brexit but London will remain the financial centre.

New doors are opening. We believe there will be significant increases in FinTech, Crypto, Transactional Banking and Asset Management. Arab, Chinese and other big investors will also open specialist hubs with high economic impact, creating new opportunities for the country.

We could be witnessing the emergence of a trend for further growth in Europe

We mustn’t forget that financial services have been expanding into Europe for over 15 years, long before Brexit even hit the agenda. Back then it was the movement of customer service operations to take advantage of lower workforce costs and overheads.

As these original locations grow and demand normalises costs, these functions are having to extend further out to new locations such as the Czech Republic, Poland, Croatia, Serbia and Hungary to be able to benefit from lower cost jurisdictions once again. It will be interesting to see if these countries develop into financial back office strongholds of the future.

How can we help?

Our network, reach and market knowledge are such that we are accommodating every unique strategic move, placing top quality talent into financial services across Europe and the UK (and indeed the world from our global offices). If you would like to utilise our services to strengthen your team please get in touch.

Ed Wacher, Associate Partner, Compliance

Tel: +44 (0) 20 3889 5756

Email: ewacher@danosassociates.com

Special thanks to Tomas Hundegger for his contribution of invaluable market insight and expertise to this article.

05 Jul

Why there has never been a better time to move in house

On October 11 2011 Alternative Business Structures (ABS), commonly known as ‘Tesco Law’ for its ease of purchase, came into effect. This relaxation of the ownership restrictions on law firms has meant that non-lawyers can invest in legal businesses and law firms themselves, for the first time have been able to consider floating on the stock market. The move gave rise to the opportunity to inject some much needed innovation and competition into the market while giving firms access to a new lucrative income stream.

True to form, things have moved slowly but we’re now seeing increasing interest in Initial Public Offerings (IPOs) which could signify the start of significant change in the market and will have a huge impact on law firm employees.

A slow start

The opening up of ownership to outsiders didn’t open up the floodgates as some anticipated. While significant in the history of law, at the end of last year only three firms had opted to float. Many concluded that an IPO would only serve to encourage partners to pocket the money and leave or be relevant for firms with plans for growth so big they demanded funds beyond their existing reach.

Law firms felt there was enough work and money for attractive salaries and investment to not have to seek change – change that brought shareholders who would take a share of the profits and indeed decision making power. Meanwhile, investors were wary of the risks of investing in companies whose key assets are people and relied heavily on the retention of key individuals.

We could be about to see more and more firms become public

In the seven years that ABS have been available we’re seeing a gain in momentum. From just one firm in 2015 with Gately, to two in 2017 with Gordon Dadds and Keystone to two already in 2018 with Knights and Rosenblatt Solicitors. There is widespread speculation that this number will rise with DWF and Fieldfisher already known to be openly meeting investors in the City.

This coincides with a recent survey that found that 20 percent of the top 100 law firms would consider an IPO, up from a meagre four percent four years ago.

Firms who have been cautiously watching how the early adopters have performed before making the leap themselves will have seen Gateley’s share price rise from 95p to a high of 195p in June last year. They may also be tempted by the £800m that Fieldfisher is said to have been valued at. This would indeed allow them to realise their ‘strategic objectives and stay ahead of the competition in (their) dynamic and ever-changing market’ as quoted by their spokesperson.

There are over 10,000 law firms and 134,000 lawyers in the UK and only the top 200 earn over £5m. With strain on chargeable fees and arguably volumes of work at a time costs are rising, the temptation to raise capital for growth and new technology from new sources is very real. Couple this with the draw of investors to a sector that generates £30bn in revenue a year and the potential for more firms to take the route of an IPO becomes very plausible. As more and more firms take the plunge, investors get more choice and their interest will only grow.

Short-term impact on employees

Moving onto the stock market can be very positive for the business but it would be naive to think this automatically translates through to the employees.

Firms looking to attract investors will be working hard on their P&L and in a business model based on services provided by people, the slimming down of staff is an obvious casualty of driving down costs.

Long-term impact on employees

The capital injection will largely be invested in the growth of the firm. Many employees who are currently motivated by becoming partner will find themselves further removed from ever being able to reach that goal.

In-house has always offered many appealing benefits; feeling part of the bigger picture and working with a wider range of people, escaping the pressure of billable hours and business development, job stability, having a wider scope for career progression, a better work-life balance and a greater variety of work. For those hanging on out of loyalty to the partners or in the hope of becoming partner themselves will see this slip away if their firm moves onto the stock market.

The good news is that with ABS allowing non-lawyers to invest, the options for client-side moves are only going to rise. The Co-op is making substantial moves into legal services and companies such as Saga, Halifax and even the AA are evidently testing the market. These are exciting times for lawyers seeking variety.

If you feel that it’s the right time to make the move in-house we would love to help you make this step with our elite client base.

You can reach me on +44 (0) 20 3889 5755 or rdavy@danosassociates.com

08 Jun

The reported case of Roman Abramovich and his UK visa has brought the topic of source of wealth (“SOW”) in to focus.  In this particular case the delays in granting the new UK visa have been attributed to tighter regulations introduced in April 2015.  It has been reported that Mr Abramovich was asked to explain the SOW and the UK government has commented that some wealthy individuals who had successfully applied under the investment visa route before the 2015 changes would no longer be eligible.

Putting the political landscape aside, it is not clear in this case whether the delays were due to the UK government not being satisfied with the answer, or the subject’s decision not to provide sufficient explanation.  It is understood that the application has since been withdrawn having been neither refused nor denied.  Nevertheless the case raises some pertinent questions for financial services firms who are providing banking services to individuals in these cases.

Where there are circumstances leading to a high risk of financial crime (politically exposed persons, high risk jurisdictions etc.) firms are required to establish SOW.  Firms should follow a risk-based approach i.e. apply reasonable measures dependant on the client’s money laundering and terrorist finance risks.   Once the client’s net worth is established, information should be obtained on where it came from and for corporate/legal entities, the firm should ensure SOW is generated from legitimate business and commercial activities.  Depending on the level of risk posed by the client, firms should seek to find some evidence from a reliable, independent source that corroborates the essence of how the wealth was generated.

The immediate question for financial services firms in a case like this is, if, as it would appear, the subject has not been able to satisfy the government in order to successfully apply for a visa, have the firms themselves been able to adequately satisfy the SOW requirements?  It would be prudent, given this type of change in circumstances for firms to revisit and reassess the financial crime risks in accordance with their due diligence policy and procedures.

Establishing and verifying the legitimacy of the source of wealth can be a challenge for firms and one which may rely as much on a firm’s moral compass as its appetite for risk.

The challenge for firms is determining what standards they should apply.  Standards will be driven by a firm’s appetite for risk and whilst this may be a little easier to define for reputational risk, it is less so for financial crime risks.  Firms are under an obligation to reduce the risk that they might be used to further financial crime.  The standards expected are that of prevention rather than the lesser requirement of detection and reporting, and therefore there should be lower tolerance.  As a result of this, a firm’s systems and controls should be appropriately robust.

When assessing the source of wealth information a firm must consider amongst other things how much credence should be given to unsubstantiated rumours and the views of critics or political opponents, such as is the case referred to above where it has been suggested that wealth was generated through the acquisition of state companies below market value as a result of close ties to the Kremlin. Clearly this information needs to be thoroughly investigated as part of the due diligence process, but in the absence of anything more substantive is it enough to refuse services, particularly where it may be enough for government agencies to delay consideration of a visa application?

Of course as the generations pass and wealth is inherited, the source of the wealth is diluted and in certain cases may be considered to have been legitimised through time.  Some commentators will argue that those in the present cannot be responsible for the actions of ancestors and the mechanisms of wealth making in the past.  We do not need to look overseas to identify old money created through activities which would be unlawful today.  Establishing and verifying the legitimacy of the source of wealth can be a challenge for firms and one which may rely as much on a firm’s moral compass as its appetite for risk.

K&E is a boutique regulatory, compliance, governance and risk consultancy with extensive experience of compliance and regulatory issues for banks and investment firms. We can assist clients in their preparation and implementation of regulatory change projects or with remediation exercises or day-to-day compliance solutions.

K&E together with their strategic partner Danos Associates can assist firms with their financial crime prevention arrangements including an independent review on policies, procedures, systems and controls or resourcing AML/CDD remediation projects.

Please get in touch if you would like to discuss anything in this article or if you would like further information on our services. http://www.keconsult.co.uk/

Written by our strategic partners K&E Consultants.

07 Jun

We are seeing a substantial increase in demand for compliance recruitment in the buy-side industry here in Hong Kong. We believe this is due to three main factors:

1.    The growth of the Asset Management Industry

The combination of financial market liberalisation, new fund passports, strong economic growth, fast developing capital markets and ageing populations creating pension opportunities have led to exceptional growth.

The Securities and Futures Commission’s quarterly report at the end of last year showed that the total assets under management of funds registered for sale in Hong Kong grew by 29.4% to $1.66 trn across equity, bond and mixed-asset funds.

2.    Changes in the regulatory environment

While we are still seeing an impact from last year’s introduction of the Manager in Charge regime we must also prepare for the new Fund Manager Code of Conduct coming in November.

This updated regulation addresses disclosure to investors (including investors in offshore funds that are managed by Securities and Futures Commission’s licensees) and will provide greater transparency and global alignment.

3.    Hong Kong is supporting firms’ expansion into China

The Mutual Recognition of Funds between Hong Kong and China established in 2015 and Hong Kong’s strong rule of law make it a very attractive asset management centre for mutual funds sold in China. It gives international companies a secure base to increase their coverage into China and access their assest management industry, valued at more than 100 trillion yuan.

Despite regulation creating a drop in growth last year, China is still the second largest economy in the world and as the bridge that links it with the rest of the world, over 60 of the top 100 global money managers now have a presence in Hong Kong.

China’s ‘opening up’ is only set to increase and although this will mean that it will be easier to go direct, early indicators show that companies will still favour a route through Hong Kong to obtain a wider spectrum of finance at different stages of the overseas investments. It will also give them access to a larger pool of bilingual talent and exemplary legal, accounting and professional support services firms. This will continue to drive growth in the country.

The impact on recruitment

In all areas, the increase in workload addressing new regulation and the greater amount of assets under management calls for a larger, more robust support infrastructure. For big, established Asset Managers, the continuing growth and tightening of different rules has driven the need to look at different areas of compliance. This has resulted in requirements for more specialist roles, often strengthening provisions in financial crime and improving controls and monitoring.

Alternative funds have found that growth and regulatory changes have put more pressure on their compliance requirements. Roles that have previously been satisfied by more junior staff now need more senior and credible Compliance Officers. Both the regulators and investors look to the ‘manager in charge’ wanting reassurance investments are in safe hands and this requires experience.

This level of recruitment needs local market specialists with a network of the best talent in the area with a true understanding of their skills, experience and motivating factors. This is what we have here at Danos Associates and if you are looking to develop your compliance and risk teams we are very well placed to help.

Tel: +(852) 2870 3007

Email: markmoorby@danosassociates.com

31 May

Over the last 14 years of trading we have seen our EMEA and APAC Compliance Practices continually expand geographically to cover more and more of their respective regions. But up until recently, our New York headquartered Americas practice, has been largely focussed on New York based recruitment.

Over the last 12 months, however, we have seen a dramatic surge in demand for compliance talent in other hubs across the US, and the broader Americas region. We must stay on top of hiring trends globally, and as such, it is important to discuss this one in the Americas.

Let’s be honest, the development of hubs outside of New York is not something that has just been happening over the last 12 months, but there are certain big trends in the industry – the ballooning of FinTech on the West Coast, shifts towards consumer banking by historically investment banking focussed firms, and ‘near-shoring’, for example – that draw our attention to this geographical shift away from the New York Financial Services ‘super power’.

Let’s not get carried away though…the New York compliance hiring market remains buoyant, currently very active, and undoubtedly the ‘Centre of the Universe’…well, at least for the US. But there is definitely a theme of ‘decentralisation’ in the air at many firms with focus shifting away from the Big Apple, and resulting in fresh or increased hiring need in other locations.

As New York is undoubtedly the biggest market with the deepest talent pool in compliance, it is an obvious target for hiring managers building out teams in other locations. For the New York compliance community, this means that whilst the local market is booming, there is a call for their skills all over the country.

Where and why is this happening?

Ok, so we are seeing increased demand for talent outside of New York, but where and why is this happening? We think there are three distinct factors at play:

·     First, is the very straightforward factor of the other well-established Financial Services hubs, such as Boston, Chicago, Houston, San Francisco, etc. which quite simply need to be serviced. They all have established compliance communities, but often need to draw from other talent pools. We frequently help clients find talent locally, which is possible in these well-established markets, but there is often a need to ‘refresh’ local talent pools from elsewhere…usually New York.

·     Second, there is the phenomenon of ‘near-shoring’, the bigger brother of ‘off-shoring’ which essentially sees teams and / or functions relocated to lower cost centres outside of expensive metropolitan hubs. Most firms are doing this, and whether it be in Buffalo, Jacksonville, Raleigh, Salt Lake City, Whippany, etc., the theme repeats time and again. The issue with near-shoring locations is that they have either limited or non-existent talent pools to draw from for future hiring. The need for our help with this scenario speaks for itself.

·     The third, and arguably most exciting factor here are the big industry development trends mentioned above. Clearly everyone has been talking about FinTech for a while now, but we are seeing huge demand for compliance talent in this space; largely in the San Francisco Bay Area – for obvious reasons. In addition to the boom in FinTech, we are seeing ‘FinTech adjacent’ trends like traditional bulge bracket firms pushing into the digital arena – particularly within consumer banking. Similarly, some traditional parts of consumer banking are seeing huge growth with bulge brackets pushing into the mortgage space, amongst others. Interestingly with consumer banking, geographically, this sector of the industry knows no bounds, and the talent is scattered across the whole of the US. We have been recruiting in Dallas / Fort Worth, Charlotte, Philadelphia, Wilmington, the Bay Area, and beyond.

So what does this mean for the compliance population?

We all know that the Financial Services Industry is forever morphing and developing, and after just examining the trends discussed above, it seems that the geographical trends in compliance hiring are quite simply a reflection of a phase of development within the industry, layered on top of the BAU hiring in the established hubs.

The crux of this, of course, is how does this phase of development change the landscape of the compliance profession? Will there be an increase in compliance opportunities? How will hiring managers build strong teams in the face of talent being spread across a country or region? And ultimately, what is the outlook for the compliance community moving forward.

Opportunities

We genuinely believe that this is an exciting time to be working within the regulatory arena. After the recent scaremongering around deregulation and retraction of compliance, there are many ways in which the industry is developing that will continue to require strong compliance professionals, and arguably grow the profession. We are seeing new and exciting opportunities out there, but often in different fields to the traditional investment banking heavy industry.

The long and short of it is this: in a changing industry, compliance folk must be open to new locations, new sectors, and changes in direction – albeit within the broader compliance world – in order to grow their compliance careers to full capacity.

Finding the right talent

For hiring managers, the current challenge is finding the best talent in each location. This is a perennial problem wherever you are, of course, but with the added trend of ‘decentralising’ compliance functions away from New York, and the uprising and expansion of non-traditional FS activity, the talent isn’t necessarily where the business need is.

This is where our business model of networking, and genuinely getting to know the market in all locations always brings results. Plus we are specialists in the compliance field.

We don’t just regurgitate the same old resumes of the ‘active market’ but go to great lengths to find the best talent. We travel regularly to other hubs – most recently, Chicago in May – and are frequently meeting new talent in all locations. We use our global perspective to forecast trends and strategize on how to work with them.

The outlook for compliance

We are not financial analysts, regulators, or politicians, and certainly do not have a crystal ball to tell the future, but what we can do is pull together our collective global experience to navigate and advise on hiring in the face of industry changes.

We feel the compliance arena is in an interesting spot, globally, and specifically in the Americas region we see opportunity for exciting growth.

We are always more than happy to have discussions about opportunities, your career, or hiring, depending on what perspective you are coming from. Please feel free to reach out at any time.

+(1) 212 600 4827 gpotter@danosassociates.com