The ability to regulate and supervise activities of branches, subsidiaries, associates and firms on which a firm must place reliance has always been a key issue faced by firms. Most recently failure to police overseas subsidiaries has led to accounting scandals at Ahold, fraud at Parmalat. Whilst control of branches overseas is an issue supervisory failures are common even at corporate HQ – distance is not the determining factor. The whole Mutual Fund timing scandal occurred as a result of managements’ inability to determine that excessive profits are not always a good thing for shareholders.

Lack of supervision has lead to instances of;

• fraud
• money laundering,
• pension and insurance mis-selling
• officers acting ultra vires
• fictitious accounts
• operational inefficiencies

This supervisory activity can take many shapes;

• U.S.A. Patriot Act/ Basle Know Your Customer (KYC) – reliance on an introducing bank to a new account
• N.A.S.D. - Compliance must be allocated sufficient resources to "reasonably detect and prevent abuses" (NASD Rule 2010)
• Mutual Fund timing rules
• Monitoring of life insulance policy turnover & cool-off statistics

Firms now have regulatory obligations to not only designate individuals to conduct supervision, but provide realistic tools and support to the supervising principal.

The deployment of technology is a key factor in retrieving and delivering information throughout the Branch Office system and to the Branch Managers and OSJ’s

Crest Rider advises on and solutions are designed to detect breaches in compliance and best business practice through the use of integration, validation and rules engines. These tools are complemented by powerful front-end visualization tools designed to make the analysis of information accessible.

Crest Rider solutions, in keeping with the company ethos, are adaptive and can be used to comply with other regulatory mandates and aid in increasing operational efficiency as well as detecting revenue opportunity . Utilizing the same core Crest Rider infrastructure solutions can be adapted for compliance purposes. Pattern Recognition or Anti Money Laundering packages, can be incorporated into the core infrastructure to provide adaptive compliance solutions around existing infrastructure in a non-intrusive manner.

Who watches the watchmen?

If your staff are your most valuable asset how to best utilize them?

• Game theory is used so that each manager monitors the activities of the others to spot potential issues, such as mutual fund mis-selling, or highlight areas for revenue or cost improvement
• Each manager has a view on both his own branch/ area/ subsidaiary activity and those branches that are in his cluster through a B.A.M. tool

A Head Office dashboard allows managers the ability to:

• Detect suspicious activity
• Enhance revenue thru identification of lost revenue opportunities
• Allow managers to cover for each other or ease rotation