Compliance Officer Now Required in Non-financial Sectors

The Third Anti-money Laundering Directive (Directive 2005/60/EC of 26 October 2005) was implemented in Belgian law by the Act of 18 January 2010 (the "Act"), amending the Act of 11 January 1993 on the prevention of the use of the financial system for the purpose of money laundering and the financing of terrorism (the "Anti-money Laundering Act" or AML). The Act provides that even companies which are not active in the financial sector must now appoint a compliance offer.

Extension of the obligation to appoint a compliance officer

The Anti-money Laundering Act of 1993 required companies active in the financial sector to appoint a compliance officer.

The transposition of the Third Anti-money Laundering Directive, however, necessitated a few changes to the AML. According to the Directive and in accordance with the fifteenth and sixteenth recommendations of the Financial Action Task Force (FATF):

    "Financial institutions should develop programmes against money laundering and terrorist financing. These programmes should include (a) the development of internal policies, procedures and controls, including appropriate compliance management arrangements, and adequate screening procedures to ensure high standards when hiring employees; (b) an ongoing employee training programme and (c) an audit function to test the system (…) The requirements set out in Recommendations 13 to 15 apply to all designated nonfinancial businesses and professions, subject to the following qualifications: (a) lawyers, notaries, other independent legal professionals and accountants (…)."

In other words, companies active in non-financial sectors must now appoint a compliance officer, as was already the case in the financial sector.

The role of the compliance officer

The position of "compliance officer" has long been known in common law jurisdictions. The Directive does not expressly define this position, referring instead to the traditional meaning. According to the Belgian financial supervisory authority (the Banking, Finance and Insurance Commission or CBFA), in the context of insurance, the compliance officer can be defined as follows:

    "The head of the compliance department or 'compliance officer' organizes a consultation (concertation) regarding compliance within the company, possibly at the group level as well, in order to coordinate the efforts of all parties concerned, optimize relationships with other departments and, in general, achieve a uniform and qualitative implementation of internal policy in this area. Compliance is an independent function within the organization, based on the need to analyze and improve policies regarding the integrity of the insurance business. These rules are determined by the company's general policy and by existing legislation and regulations, as well as by other laws and regulations applicable to the insurance sector."

Two key elements can be identified from this definition. First, the compliance officer, who must be a specialist in compliance (for the given sector), is entrusted with a specific mission.  Second, the compliance officer must be independent of managerial pressure and control.

Sectors or professions concerned

According to Article 18 of the AML, a compliance officer must be appointed in companies active in certain professions which regularly provide accounting services or legal advice.

This obligation is unconditional for the professions listed in Article 2 §§ 1 and 4 of the Anti-money  Laundering Act (e.g., the National Bank of Belgium, the Deposit and Consignment Office, the Post - for financial services only, insurance companies, insurance intermediaries, mutual funds, mortgage companies, estate agents, company guards, diamond merchants, casinos, etc.).

With regard to notaries, bailiffs, company auditors (CPAs), external accountants, tax advisers and lawyers, the Act adds an additional requirement: the size of the structure, firm or office. However, the wording ("structure of a size that warrants [the appointment of a compliance officer]") is problematic as it does not answer the simple question of whether a particular entity is required to appoint or hire an independent specialized compliance officer.

Both the preparatory works to the Act and the Act itself call for professional associations and ethics bodies (e.g. bar associations) to define and clarify this requirement (i.e., the size of the structure). In our opinion, an international structure or an office that forms part of an international network is automatically obliged to appoint a compliance officer. This should also be the case for large(r) offices which are, by definition, market leaders.

The compliance officer shall prepare periodic written reports and can issue recommendations.

Conclusion

The appointment of a compliance officer is now mandatory in both non-financial and financial sectors. The independence of the compliance officer and the scope of his or her mission will be further clarified by professional associations and ethics bodies. Additional rules will probably be required. It does without saying, however, that the compliance officer will be very important, even at the HR level, in which capacity (s)he will encourage the adoption of a risk-based approach to recruiting.