Compliance and ethics: two sides of the integrity coin
In today’s heavily regulated financial landscape, with growing public scrutiny and increasing stakeholder expectations, organisations are under pressure to meet legal requirements and demonstrate ethical integrity.
This shift calls for a more nuanced understanding of compliance - one that integrates ethical decision-making at every level. FAnews spoke to Rianné Potgieter, Chief Executive Officer at the International Federation of Compliance Associations (IFCA), to explore how ethical principles can be embedded into the regulatory reporting process and help financial firms navigate the grey areas of compliance.
“Ethics in compliance is about creating a business environment where doing the right thing is not just a legal obligation, but a fundamental part of the organisational culture and values,” Potgieter says.
Creating a culture where ethics thrive
According to Potgieter, integrity, fairness, accountability, and respect for stakeholders are the cornerstone ethical principles that should guide all compliance efforts. These go beyond ensuring regulatory requirements are met. They also ask whether decisions and actions uphold the spirit of the law and align with an organisation’s core values.
“Identifying non-compliance should be about protecting the organisation, clients, markets, and the public,” she says. “It means going beyond technical breaches to also check if it aligns with the organisation’s values.”
This mindset is essential in a regulatory environment that is increasingly shifting from rules-based legislation to outcomes- and principles-based approaches. Prescriptive rules cannot anticipate every scenario, and reputational harm can be as damaging as legal or regulatory sanctions. In this context, transparency and professional courage become critical, particularly when confronting conduct that may fall within the letter of the law but violates ethical standards.
Organisational culture is the foundation of ethical compliance. When ethical behaviour is supported at all levels, from leadership through to frontline employees, compliance becomes a way of working.
“Culture is everything! It determines whether compliance is embraced or resisted,” she says. Potgieter describes this through three layers of culture, i.e. the tone at the top, the mood in the middle, and the buzz at the bottom.
Leadership must “walk the talk.” Setting the tone for ethical behaviour includes being transparent, making tough decisions when necessary, and consistently reinforcing that how outcomes are achieved matters just as much as the outcomes themselves.
“Be the change,” Potgieter urges. “Leaders must model the behaviour they expect. Ethical decision-making is reinforced when leaders celebrate values-based decisions, not only financial wins.”
Middle managers play a critical role in translating leadership intent into everyday behaviour, while frontline employees reflect on how those values are truly experienced in daily operations.
Embedding ethics into compliance and reporting
As Potgieter highlights, many of the real ethical challenges lie in the grey areas - those moments when regulations are vague, silent, or lag innovation. In such instances, values-based thinking must guide decisions.
“Asking whether a decision could withstand scrutiny by customers, regulators, or the public is a useful lens,” she notes.
Diverse perspectives and ethical principles, such as fairness, harm avoidance, and transparency, can help bridge the gap between legal compliance and what is ethically right.
When it comes to regulatory reporting, organisations must ensure their systems and processes are technically sound and ethically grounded. Potgieter emphasises the importance of:
- A clear code of conduct
- Values-integrated training and real-world case studies
- Transparent reporting structures
- Consistent application of policies
- Regular monitoring and improvement
Transparency in handling non-compliance matters is also crucial. This must be done without compromising due process. Confidentiality must be respected, yet stakeholders must see that issues are handled fairly and consistently. Importantly, there should be consequences for bad behaviour.
“As Perry Belcher said, nothing will kill a great employee faster than watching you tolerate a bad one,” Potgieter warns.
Clear policies, well-communicated procedures, and documented decision-making are essential in creating accountability and trust.
Stakeholder accountability also requires structure. Potgieter recommends mechanisms like independent oversight committees, ethical audits, and shared responsibilities that extend beyond the compliance function to include business units, leadership, and third-party providers.
Futureproofing through ethical leadership
With regulatory landscapes evolving, Potgieter says we are already seeing a shift in how regulators assess compliance, moving beyond whether a rule was broken to whether decisions reflect ethical judgment and social responsibility.
“Regulators look at how decisions impact customers and the market, not only whether a technical breach occurred,” she explains.
In South Africa, the upcoming Conduct of Financial Institutions (COFI) Bill reinforces this shift by holding company governing bodies accountable for conduct, not just financial soundness. Ethical culture is becoming a regulatory expectation and a competitive advantage.
Whistleblower protection is another critical area. Potgieter points out that while some countries offer statutory protection, many do not, or offer only partial safeguards. In these cases, the ethical burden lies with the organisation itself.
“It’s about creating safe, accessible reporting channels, protecting identities, and ensuring that whistleblowers are not disadvantaged in their careers, and in some cases, protecting life and limb!” she says.
Equally, investigations into wrongdoing must be impartial, independent, and free from conflicts of interest. Only then can organisations maintain a culture of trust and openness.
Looking ahead, Potgieter believes that ethics will become central to how compliance frameworks are designed and implemented. As emerging technologies like AI reshape business operations, new ethical risks, such as a lack of transparency (black box problem), privacy breaches due to massive data collection, algorithmic bias, and the misuse of personal information (e.g. deepfakes), will arise. Laws will take time to catch up, so ethical reasoning will need to fill the void.
“The ability to explain not just what was done, but why it was done ethically, will become a key differentiator in trust and legitimacy,” she says.
To prepare, organisations should shift from reactive compliance to proactive ethical leadership. That means strengthening their internal cultures, realigning incentives with values, and embedding ethical thinking into day-to-day operations. “We are what we repeatedly do. Excellence (values), then, is not an act, but a habit,” Potgieter concludes, quoting Aristotle. “Let’s get into these habits.”
As regulatory and stakeholder expectations rise, the line between legal and ethical compliance is blurring. Organisations that recognise this and invest in ethics as a strategic priority, not just a compliance requirement, will be the ones that thrive in the future.
For financial services firms, the message is clear: It is time to move to values-driven compliance. Not because the law says so - but because it is the right thing to do.
Writer’s Thoughts
For financial services professionals navigating an increasingly principles-based regulatory environment, compliance can no longer be treated as a tick-box exercise. Embedding ethics into decision-making, culture and reporting is fast becoming essential to sustaining trust, protecting clients, and future-proofing businesses in a landscape where conduct matters as much as outcomes. Do you agree? Please comment below, interact with us on X at @fanews_online or email me your thoughts.
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