My wife always talks of a game she and her family played as a child in Ontario - flashlight tag. It was a game where everyone went down to the basement and the person who was it was given a flashlight. All the lights were turned out in a room (or rooms if they were really going for it) with no windows and then the person who was "it" was allowed to turn on the flashlight for a count of ten and then they had to turn it out for sixty seconds. If they could catch someone in the beam and positively identify them - seeing them in the corner of the eye or from dispersed light didn't count - then that person was tagged. Oh, and once the light went out if someone else touched them, they were unfrozen. And, as you imagine, the person who was it could here lots of scurrying, giggling, and the occasional curse while the light was out. Everyone was guessing when the light would come back on.
As you might imagine, people running around in the dark tended to run into things they didn't see - rarely were there any major injuries but bumps and bruises galore. And the infrequent opened forehead or even a broken leg. This was not only the people hiding but the person who was it was also moving during the sixty second and could run into something. Just because the company is getting in position to conduct oversight doesn't mean they can't run into a problem (or regulator) they didn't see coming.
I am taken by how that is so similar to an underfunded and under-resourced compliance department for a firm trading in financial products for commodities or even physical commodities in some jurisdictions. The compliance officer has a small little flashlight and a lot of places to sweep with that little beam.
But this actually points out a number of ways to look at compliance that can reduce the danger of running into bad things. Central to this, do a risk analysis - how many rooms are there? Can I close and lock some doors so no one can go into those rooms (maybe a list of authorized products and exchanges reduces the area to surveil)? Do I know where the corners are where I can't shine the light easily?
And then comes the next thought process - how do I get more flashlights and more constant light? If I have a flashlight in every corner and they all go on at the same time, there are no shadows. What are the axes of risk and how do I align oversight to them? Are there corners that I just don't have to worry about that much and I can save time and expense rigging lights?
Finally, what do I need? Do I really need flashlights that shine 24/7 or can I have them on once a day to look at all the track for the prior day and is that enough? Do I have to sit there and shine them and watch them 24/7 to keep someone from running into something (and can I actually do it in a way that isn't just making everyone move at a crawl - i.e. without having compliance be an absolute drag on success)?
Just a little light fun and thought exercise to maybe joggle your thinking about how trade compliance can be viewed and enabled.
DCM provides practical risk and compliance advisory and review services for clients in the tradeable commodity space (energy, agriculture, and metals) who transact inn these markets -whether as producer, marketer, trader, or procurement and end user. Happy to chat if you are looking for a different perspective on these problems.