After the financial crisis began in 2008, compliance departments at global firms mushroomed in size; now they are contracting, although Brexit is interfering with this trend. In this article we interview Harry Chetwynd-Talbot of the compliance recruitment firm of Hedley May in London.

Q: What kind of compliance executive do you tend to help with recruitment?

A: A typical compliance appointment would be a global head of compliance at a global financial services organisation. We're talking about the C-suite, or perhaps the C-suite minus 1.

Q: What trends are evident at that level?

A: The key thing is that since the financial crisis began, these functions have exploded in budget and headcount. Jamie Dimon of JP Morgan famously took on 3,000 compliance people in one go in 2013. HSBC underwent a similar big expansion in response to its money laundering fine of $1.9 billion in 2012. These very senior compliance roles - group head or just one rung below - are difficult to fill because the requirements for them have changed quickly. The chief compliance officer now has to operate on an executive committee at board level, and be a change leader. He or she is now expected to be plugged into the internal and external stakeholder environment. He or she needs to have excellent communication skills and the ability to influence people at the most senior levels.

Q: So in the old days such a person had to be a compliance expert, but now he or she has to be a top-level corporate politician, for want of a better term, and the shock of this change in culture is enormous and the job market still hasn't caught up?

A: Yes. Such a person is expected to contribute to commercial decisions. By and large, with the exception of two, the major banks have chosen group chief compliance officers who are not skilled in compliance and not qualified by years of compliance experience. Instead, they have chosen people who are good at being executives, who know the business. The choice usually falls on a senior functional leader who understands risk management and has prior credibility with the board/exco.

Q: What makes a senior functional leader effective?

A: Not their technical expertise. They must have judgment, senior management credibility, an ability to operate at executive committee level and – crucially – the ability to influence the chief executive officer. In the old days, perhaps, the standing of a director on a board stemmed from the size of the budget that he controlled, but this has nothing to do with budgets. Ultimately, 'conduct' has been at or near the top of the agenda at banks since the financial crisis began and getting that right has proved elusive.

Q: What do you mean by 'senior management credibility'?

A: The credibility to operate, add value and influence people at the most senior levels of an organisation. This requires a good knowledge of the business and (if the appointment is internal) a ready-made set of relationships with the key people at the firm in place already, before the appointment is made.

If people just see you as a technically proficient compliance officer, your ability to build relationships at the top can only go so far. You have to be creative and bring fresh perspectives to the board; you cannot just say no to proposals. In smaller organisations people might still see the compliance department as the "anti-business department," but most banks, if not all banks, have a different understanding of the compliance function. I think that the Senior Managers and Certification Regime will hasten the change of attitude that is happening at smaller firms. Compliance is not seen as a cost centre any more; it is now normally regarded as essential to the success of the business.

Q: What is the typical time frame for a successful recruitment process?

A: If everything goes smoothly, from the moment we kick off a search, it's usually 6 weeks before the client-firm is meeting candidates. You can expect the whole thing to take three months if all goes well. It can take 6-9 months to get one of these people in the door.

Q: That's an external search. Does your firm help with internal searches as well?

A: Yes, we still get involved if it's an internal appointment. One would expect each firm to have an internal succession plan and an external succession plan.

Q: In every sector of business, some C-suite people are hired because they are 'technology transfer' people who can help the company take on new technical developments. Are we seeing any RegTech executives being recruited for C-suite jobs at global financial firms yet?

A: Not to my knowledge.

Q: Do you expect to see it in future?

A: That's a very good question. As time goes on, the chief compliance officer will certain have to be able to embrace technology and understand what the 'art of the possible' is. Technology is disruptive and risky from a compliance point of view – it doesn't just help firms comply, it can damage their compliance as well.

Q: Have you seen compliance executives from the UK go east, towards the Mediterranean and the financial hubs of the Far East?

A: Yes, there is a bit of that. A lot of the major financial centres look to the Financial Conduct Authority and the Bank of England as thought leaders.

Q: Do you export regulatory talent westwards?

A: Not to the United States, possibly to the Caribbean. A small handful of British compliance officers operate in US institutions but they are rare. The movement of talent is very much the other way, with US compliance officers coming here to the UK.

The US talent pool is so much bigger than that of the UK. If we're doing a search for a major group head of compliance over here, our search will be as much in the US as it is here. We would expect the eventual shortlist to have some Americans on it. London has its allure as a major financial hub.

Q: Some banks are moving various parts of their businesses to Dublin or Paris because of Brexit. Is this increasing the sum total of compliance officers that firms need?

A: Headcount is falling in compliance departments on average at major global banks, having been through a decade of growth. These days it's all about how you make them more efficient. Some of that shrinkage is offset by having to hire new people in Dublin or Frankfurt, but the numbers that this phenomenon contributes are very small.

Q: Why are the big banks cutting?

A: I suppose that compliance departments are victims of own success. After the financial crisis began in 2008, compliance departments mushroomed in size – it was a panic response to the crisis and its regulatory aftermath. A decade on, the pace of regulatory change has slowed. Organisations have a much better picture of their conduct risk. With most major banks struggling with return on equity, the focus is on cost.

Q: What is the best way to cut?

A: Organisations that just look at it in a headcount-related way are not going to be doing it right. They should be increasing effectiveness as well as efficiency. They must be looking at software as they cut.

* Harry Chetwynd-Talbot can be reached on +44 (0) 20 7858 9431 or at harry@hedleymay.com