With U.S. President-elect Donald Trump expected to step onto the world stage in January, many in the compliance profession may be wondering what the results of the election mean for them personally.
In fact, according to an early poll conducted by The Risk Advisory Group one week prior to the presidential election, 27 percent of 157 compliance professionals globally cited the U.S. election as one of the biggest risks to their business in the year ahead.
Furthermore, the majority of compliance professionals (80.5 percent) said they saw Trump as posing a “greater threat” to the compliance profession than Hillary Clinton. Twenty-two percent of the respondents who viewed Trump as a threat expressed concern about his avowed policy positions.
During a town hall event in the State of New Hampshire in October, Trump commented that as much as 70 percent of federal regulations “can go,” if he were elected in November. “It’s just stopping businesses from growing,” he said.
In publicly stated remarks, Trump mentioned that he’d like to gut certain sections of the Dodd-Frank Act and the Volcker Rule, for example. Other things he has discussed that could be on the chopping block are free trade agreements and the Foreign Corrupt Practices Act.
If significant regulatory cuts really were to happen, “that would not be a terribly good sign for the compliance profession,” says Jack Kelly, managing director and co-founder of Compliance Search Group, an executive search firm.
“It’s almost giving Wall Street a wink and a nod saying, ‘Hey guys, don’t worry. I’ve got you. Do what you have to do to make money,’ ” Kelly adds. “If Wall Street can cut down on salaries and headcount, they’d be happy to oblige,” he says.
The counterpoint to that, however, is that the integral need for compliance officers far outweighs any deregulation that might occur. “Compliance has always been lean; it’s all muscle,” Kelly adds. “There is not a lot to cut. There is not a lot of room to let people go.”
That being said, Kelly says many companies appear to be in a wait-and-see mode as it pertains to the hiring of any new compliance personnel. “There’s been a lot of inertia,” he says.
Even if the Trump Administration hypothetically did gut certain regulations—like Dodd-Frank, Sarbanes-Oxley, the FCPA, and more—the reality is that companies still have numerous other compliance obligations for which they need to comply. “Compliance has mandates from more than one constituency: Consumers could still demand ethical business practices, regardless of regulation. Shareholders, insurance companies, banks, and business partners currently rely on the safeguards provided by these regulations and their enforcement and consider them in their risk analysis,” says Jill Williamson, counsel with law firm Rimon Law.
“Compliance has always been lean; it’s all muscle. There is not a lot to cut. There is not a lot of room to let people go.”
Jack Kelly, Managing Director, Co-Founder, Compliance Search Group
Take the financial services industry as just one example: Financial services firms will always have to worry about anti-money laundering, economic sanctions, politically exposed persons, consumer protection-related obligations, and more.
Keep in mind, too, that even if the United States made amendments to certain regulations, that has nothing to do with the regulations that multinationals have to comply with in jurisdictions around the entire world. “One has to view the U.S. election results in that context,” says Bill Waite, group chief executive officer of the Risk Advisory Group, a business risk consultancy firm.
Another aspect that cannot be ignored is the significant amount of time, money, and resources that companies have put toward their compliance programs. “Many corporations have invested many millions of dollars in putting in place structures and processes that are absolutely essential to how they run their business,” says Waite says. “The thought that they’d be discontinued overnight is not credible.”
Furthermore, the difference between the regulatory environment and the U.S. law enforcement environment cannot be overstated. “The future U.S. attorney general could be an aggressive attorney general,” says Tom Delaney, a partner at law firm Mayer Brown. “There could still be a lot of activity in which institutions find themselves subject to enforcement both from regulators, as well as law enforcement.”
CUTTING DOWN ON REGULATION
Below is an excerpt from an article in Rawstory.com that contains details on Donald Trump's October Town Hall Speech in New Hampshire.
U.S. Republican presidential nominee Donald Trump said as many as 70 percent of federal agency regulations could be eliminated if he is elected in November, just hours after an adviser said the candidate would seek to cut 10 percent.
Trump, who blamed regulations for stifling business, told a crowd at a town hall event in New Hampshire on Thursday night that regulations for the environment and safety would remain.
“We are cutting the regulation at a tremendous clip. I would say 70 percent of regulations can go,” Trump said. “It’s just stopping businesses from growing.”
Earlier in the day during an online discussion with Reuters, Trump campaign adviser Anthony Scaramucci, a Wall Street financier who has raised campaign money for Trump, said Trump would eliminate 10 percent of regulations.
“We need regulation but immediately every agency will be asked to rate the importance of their regulations and we will push to remove 10 percent of the least important,” he said.
Another Trump campaign adviser reached by Reuters confirmed the 10 percent regulatory cut was part of their economic plan.
Jeff Holmstead, a former assistant administrator for the Environmental Protection Agency under George W. Bush’s presidency, said the goal was hard to comprehend.
“You could reduce the number of regulations by 10 percent without accomplishing very much,” he said.
He added it would make more sense for Trump to try to reduce the cost of regulatory compliance by 10 percent.
“I think it probably would be possible for a new administration to make changes that would reduce the cost of these programs by at least 10 percent while still maintaining essentially the same level of environmental protection,” he said.
Officials at the EPA and the U.S. Department of the Interior declined to comment, citing internal policies.
All things considered, the outcome of the U.S. election doesn’t seem to portend any significant changes for the compliance profession. “Any suggestions that there will be no need for compliance officers, or that the value of compliance officers will suddenly decrease as a result of the election are not true,” says Steven Kaplan, also a partner at Mayer Brown.
A time for reflection
To the extent that the outcome of the U.S. election does create any concerns for compliance professionals, take this as an opportunity to reflect personally on what added value, skills, expertise, and traits you can bring to the table. With or without a presidential election, “the challenge for compliance officers is always to demonstrate value,” Waite says.
Kelly recommends speaking with managers and peers: “Find out: ‘how can I use my skills, my background, and my experience to add value?’ ” he says. “How can I make myself more important and valuable and needed within the organization so that I can get through a time that’s probably going to be a little rocky for a while?”
The immediate compliance concern raised by the U.S. election is, “What’s next?” That question, however, also applies to Brexit, as well as numerous other elections coming up in 2017, including in France, Germany, and the Netherlands.
Compliance has always been clearly predicated on understanding rules and regulations, which is all the more difficult and troubling in uncertain and turbulent times. Although significant regulatory changes won’t occur overnight, the biggest task faced by the business and compliance community right now is looking to the future and proactively mapping out the potential risks and repercussions of all the electoral outcomes in the various parts of the world in the year to come.
“New and uncertain regulatory environments are par for the course in compliance; it is a core function of compliance to manage a changing risk environment,” Williamson says. “And there is a limit to how quickly regulation can change, so I am confident that compliance professionals can keep up.”