We might then ask how these can people become living, breathing “nudges” in favor of better behavior. Third, and more generally, I wonder whether our approach to compliance is, at times, too rulesbased. This is a classic “rules versus standards” debate, that is familiar to many lawyers.3 A surfeit of rules may cause employees to believe that they are not trusted. This could create the misimpression that it is someone else’s job to consider long-term consequences or what is the right thing to do. Now, I am not suggesting that there should be a wholesale elimination of rules. But, in some areas, compliance programs may be more effective if some rules were redeployed as standards. That way, front line businesses would have to exercise good judgment in interpreting and applying those standards. Simply put, some empirical basis for evaluating the right balance of rules and standards would be helpful. So, there is room for improvement and creative thinking in compliance—even in ways that challenge basic assumptions on how compliance should work. You are familiar, no doubt, with the phrase, “Don’t let the perfect be the enemy of the good.” My first message to you is, “Don’t let the good be the enemy of the better.”  Compliance and influence Progress aside, I still see confusion about the basic roles and responsibilities of compliance functions within supervised financial institutions. Or, perhaps, there is a degree of entrenched resistance. Before I tell you what I mean by that, here is what I don’t mean.

They may develop aberrant norms that can undermine standard oversight and controls. Compliance can and should leverage its independence to spot silos—or any form of “groupthink”—before undue risks mature. Third, compliance can increase its influence through careful stewardship of its people. This means attracting and retaining talented compliance professionals, and, whenever possible, insisting on getting to know the business area. The role of a compliance officer should include building relationships and becoming a trusted resource. Such relationships can yield a deeper understanding of, among other things, the motivations and pressures that are affecting the business. These insights can inform and help improve policies, procedures, testing and monitoring. As I mentioned earlier, compliance can become more effective if it calibrates processes to actual circumstances and behaviors. Finding and retaining talented people for compliance roles is a major challenge facing firms across the industry right now. After all, compliance can be a nearly impossible job. And welltrained, experienced compliance personnel are scarce. Those are but two of the many challenges that compliance functions in financial institutions face. I certainly do not have solutions to every compliance challenge. But, having to manage the attraction, retention, and development of the New York Fed’s compliance staff, I am sympathetic. I am optimistic, too. As I mentioned earlier, I think the broad trends in compliance are heading in the right direction. Compliance functions are gaining influence. Greater clarity about roles can help. Compliance will always be a difficult job, but does not have to be a seemingly impossible one.