The advent of the Financial Services Reform Act and the increasing number of Australian corporates pursuing Sarbanes-Oxley Act compliance, together with buoyant market conditions in the banking and financial services sector, has led to huge demand for risk and compliance professionals.

Additionally, the study from recruiter Taylor Root found, corporates are being forced to source candidates both from overseas markets and from other areas of financial services.

The compliance recruitment market is tight because, like risk management, there has not been a traditional route to take or training to complete for people to move into the compliance field, Taylor Root said. While traditionally, compliance professionals have been sourced from the internal audit or accountancy fields, lawyers and professionals with legal experience are leading the charge into the compliance field.

“As the compliance environment has cranked up over the past couple of years, we have increasingly been getting instructions from our clients for compliance staff,” said David Buckley, partner at Taylor Root. “As the demand for a different type of skillset grows, we’ve seen lawyers, or people with a legal background as opposed to the accounting and internal audit fields, being targeted.”

The increased demand has placed a premium on compliance professionals, and there has scarcely been a better time to be a compliance professional on the market. As a result, Taylor Root said, competition has been fierce, salaries are rising and premiums are increasingly being paid to attract staff.

Moreover, and in a worrying development for corporate and prudential regulators, regulatory bodies remain a key hunting ground for organisations seeking candidates, particularly for junior roles in financial institutions.

Australian Prudential Regulatory Authority Chairman Dr John Laker recently told Lawyers Weekly’s sister publication Risk Management of the problems the regulator has in attracting appropriately qualified risk management staff. “We seek to be competitive on salary, which is not always easy,” he said. “We are keen to attract experienced people from industry to see life from out side of the fence. What doesn’t make it easier…is that our people are themselves being headhunted for roles in industry.”

According to Taylor Root, demand goes across the board, and there is comparatively equal demand for junior, mid-level and senior positions. Due to a shortage of compliance specialists, particularly in the areas of insurance, funds management and research, demand will continue to outstrip supply.

The study also reflected on changing attitudes towards the compliance function. Like risk management, compliance is increasingly being seen as a business enabler and valued advisory tool, as opposed to a department dealing with “business prevention”.

Looking ahead, the key issues in 2005 driving continued demand for compliance staff will be the introduction of PS181 — the Australian Securities and Investments Commission’s conflicts of interest management policy — and the Government’s reform of the anti-money laundering (AML) legal framework.

Developments in AML could see a surge in demand for compliance professionals in this area, and the ‘know your customer’ elements of the new framework could see an increase in contract roles. According to the Taylor Root report, evidence of this trend was seen in the UK following AML reforms there in 2001.

“That was certainly something that happened with FSRA, and we think it will with AML,” said Buckley. “You will reach a point towards the end of this year where sectors such as the funds management area will have a bit of a shock. Basically the money launderers moved from the banks because there was a bit of a lockdown and moved towards the fund managers. In the UK it was a rude awakening and we will probably see people working project to project and charging massive premiums to do the work.”

This increasing demand and relative scarcity of supply is continuing to push salary rates higher and the rising salary trend is set to continue. Bonuses are increasingly being used to “reward and retain” compliance staff, with the most senior tier sometimes commanding bonuses of up 70 per cent of base salary.

Stuart Fagg is the Editor of Risk Management magazine, Lawyers Weekly’s sister publication.