Contents

Chapter 1: Introduction

Growing pains of the 1st line
The front office control function may be moving past its awkward teenage years. But it still faces many challenges before it reaches full maturity.

Quick-fire round: Views from a business head
1LoD quizzed Percy Rueber, global head of financial markets at ING, on how the front office control function is perceived by the business and what it takes to sit alongside his sales and trading teams.

In the hot seat: A regulator’s point of view
1LoD posed questions to Michael Held, executive vice president of the Legal Group of the Federal Reserve Bank of New York, on the evolution of the three lines model and whether we could see a real cultural shift in financial services in our generation.

A wealth of experience
After four decades in the industry, Sanlam UK’s Ian Plenderleith knows markets and he knows banking risk in a way few people do.

The art of banking, the art of war
British Army chief-turned-banking consultant Sir Peter Wall outlines to 1LoD the surprising message he gives the banks he advises – equip and empower your staff to fight their own battles.

Chapter II: The evolution of the front office control function

Will the mandate keep growing?
The front office control function is a growth industry right now. Look out for further migration of jobs and an even greater remit in the future.

Reassuringly expensive: Where is the cash spent?
Banks are spending money – and lots of it – to build out a strong front office controls function. 1LoD asked industry insiders where exactly this investment is going.

Chapter III: The structure of the front office control function

Who is cut out for front office controls?
Skilling the front office controls function means casting a wide net over compliance, regulation, advanced tech and more. But, as a number of recruiters told 1LoD, to control the front line, what you need most is front line DNA.

An impenetrable 1st line
Building a strong control framework is now a sector-wide necessity. Associate director Rebecca Deane outlines how Grant Thornton helps firms get it right.

The life of a CCO
It’s hard to imagine a role with as wide and varied a remit as chief control officer for global banking behemoth HSBC. As Rupert Jolley tells 1LoD, it’s not just about finding problems, but their solutions.

Controls over controls
Every good controls function should have it, but what does controls assurance really involve? We asked 1st line of defence expert Peter Stockwell of Parker Fitzgerald for the lowdown.

How robust is your risk culture?
Control needs a strong framework, but without a strong culture of ownership and conduct, that framework will crumble. So how do you instill the right values and measure progress?

Building a resilient risk controls framework
The way each major bank chooses to interpret the ubiquitous three lines of defence model varies greatly. 1LoD spoke to the major banking players, and found that while the signposts may look different, they all point in the same direction.

Chapter IV: Supervision

Attestation platforms: Our great expectations
A standard tool for the control officer, supervisory attestation platforms also have great limitations. Are we asking too much, or can they be built to be better?

Supervision: How much is enough?
Control functions in the front office have necessarily grown in recent times. But how much is too much?

Chapter V: Surveillance

Looking to the age of smarter surveillance
Surveillance may be an essential tool, but current systems have their flaws. Could AI and machine learning help create the holistic solution control professionals dream of?

View trader life through a Lens
Nasdaq’s approach to trade surveillance trains its sights on traders in addition to events. Because if individual performance seems too good to be true, maybe it is.

The tipping point for the three lines?
At 1LoD’s Conduct Surveillance Briefing, leaders from compliance and the front office took a deep dive into the impacts of current technology and culture on trade and e-comms surveillance.

Catching a rogue trader
The following is a frank discussion between Tom Hardin, aka insider trading informant Tipper X, and Tim Estes, founder of software company Digital Reasoning.

Chapter VI: Beyond markets & banking

One size control won’t fit all
Better controls are part of the financial zeitgeist, now reaching beyond banking and markets to every corner of financial services. How will the front office control model evolve to meet such changing needs?

Full accountability: Asset managers and the SM&CR
As the Senior Managers and Certification Regime extends to the UK’s 47,000 non-banks and insurers, FCA head of asset management Nick Miller outlines the tough questions asset management firms must ask themselves.

A guiding hand through SM&CR
Navigating the Senior Managers and Certification Regime is not for the faint-hearted. Grant Thornton is helping firms stay on track, says Paul Young, a director who has been leading on the Regime since its inception.

Your ultimate compliance companion
To ask questions of the front office, compliance officers need to back up their honed human intuition for wrongdoing with strong evidence from rich, whole-picture data. That’s where Nasdaq Buy-side Compliance comes in.

Chapter VII: Technology

1st line tech: The good, the bad and the ugly
Front office systems are an essential tool in detecting suspicious activity and churn out huge amounts of data. But it’s quality not quantity that risk and control teams really need.

A brave new world
The technological tools at the front office control function’s disposal are improving rapidly. 1LoD asked Claire Lincoln-White of New Link Consulting: Are we doomed to a tech takeover or can we embrace such changes?

The 1LoD product and service provider directory
The 1LoD directory provides practitioners working in control functions in the 1st line of defence a comprehensive guide to more than 40 of the leading technology and service providers to the sector.

Chapter VIII: DATA INDEX

Infographics
1LoD’s 2018 report takes insights from our 86-part survey answered by 21 of the world’s largest financial institutions. The survey results are displayed as interactive infographics through-out the report alongside accompanying editorial.

John Baskott

Welcome to 1LoD's 2018 Annual Report and benchmark study, the largest and most comprehensive survey ever conducted on the front office control sector. This year's report takes insights from the results of our 86-part survey answered by 21 of the world’s largest financial institutions. We hope you enjoy reading the findings and thank you to everyone who contributed to making it a success. To find out more about upcoming events, training courses and other content from 1LoD visit www.1lod.com

John Baskott, co-founder, 1LoD

Researched and published by

1loD

Lead sponsors

Grant Thornton

Nasdaq

Partner sponsors

Digital Reasoning

NewLink

Parker Fitzgerald