Compliance Ninja

Every strong Compliance program relies on clear, effective procedures. While policies set out general principles and guidelines, it’s the Standard Operating Procedures (so called SOPs) that provide step-by-step instructions on how tasks should be performed. A clear SOP cuts down the confusion, keeps everyone on the same page, and helps avoid issues. This article explains how to create or enhance your Compliance SOP clearly and effectively.

Understanding the Purpose

Before you start writing, you must clearly understand the purpose of your procedure. A good Compliance SOP or AML SOP should detail exactly how to perform specific tasks, such as onboarding high-risk customers or conducting Enhanced Due Diligence. It must align with internal policies and external regulatory requirements. Every team member, regardless of their experience, should be able to easily follow the steps of the procedure. Clear SOPs significantly reduce uncertainty and the risk of operational errors that often arise from unclear instructions.

Remember, SOPs are practical manuals – step-by-step guidelines – not theoretical documents or policy statements. While policies establish the framework an organization follows, procedures provide the instructions on how to carry out those policies effectively..

Learn more about Compliance and AML Policies and Procedures in the Introduction to Anti-Money Laundering Course!

Knowing Your Audience

A successful Compliance Procedure considers its audience carefully. Typically, SOPs are used by different groups within an organization, each requiring a tailored approach:

For Compliance Analysts and Operational Staff, the language should be simple, clear, and practical, with every step explained in detail. Preferably there should be enough screenshots from the system for the company’s new joiners to be operational as soon as possible. 

For Managers and MLROs (Money Laundering Reporting Officers), the SOP should clearly outline decision-making responsibilities and escalation procedures. Remember that here you are targeting experienced compliance staff, no need to explain obvious things. Focus on decision-making content rather than teaching. 

For Non-Compliance Teams such as customer support or sales staff, minimize compliance jargon or define critical compliance terms clearly to prevent confusion. An example would be instead of writing a statement like “Perform EDD as per AML Framework,” clearly say – “Request and verify the customer’s source of funds, such as bank statements, if they are classified as high-risk.”

Creating a Clear Structure

A consistent and clear structure makes SOPs easy to follow and use on a regular basis. An good structure typically includes:

1. A Title that’s clear and specific, such as “KYC Periodic Review Procedure for High-Risk Clients.”
2. An Objective clearly stating the SOP’s purpose.
3. A detailed Scope specifying if the Compliance SOP applies globally or to a specific local team or region. You might include which clients are exempted, when it’s, for example, a procedure only for Corporate clients. 
4. Clearly defined Roles and Responsibilities, explicitly outlining who performs each action or decision.
5. Detailed Version Control information that includes version numbers, issuance dates, policy owner details, and a comprehensive historical record of previous versions.
6. Clear, concise, and actionable Step-by-Step Instructions, ideally numbered for simplicity and clarity.
7. Make References linking all the other related policies, matrixes, forms.
8. And lastely, keep a clear division into sections. Stick larger topics separately grouped and don’t be afraid to put things in Appendixes or Addendums when they feel like an addition to the main topic of the procedure. 

Writing Clear Step-by-Step Instructions

Every step within an SOP should be detailed but straightforward, leaving no room for ambiguity.

Instead of vague instructions like “Check customer risk profile,” provide clear guidance: “Log into the Admin System, navigate to Customer Profile, and review the customer’s risk level under the ‘Risk Rating’ tab.”

Where helpful, consider including screenshots or additional system guidance to enhance clarity.

Managing Escalations and Exceptions

Good SOPs clearly outline what steps to take when issues or exceptions occur. Clearly define how and when escalation should happen.

For example: “If a customer cannot provide proof of address, escalate to the Compliance Officer via email with the subject: Client XX-XX – KYC Exception – Proof of Address.’”

Keeping Compliance SOPs Updated

Ensure that your Standard Operating Compliance Procedure remains relevant and useful by regularly reviewing and updating it. An SOP should be written in clear language, with short, direct paragraphs that make instructions easy to follow.

Including a Change Log might be a good idea. You can make it either as an appendix or link to a separate document. However, in all the financial institutions I worked in, it was always helpful to keep each update well-recorded with detailed descriptions of what changed and when..

Conclusion

Effective Compliance or AML SOPs are critical for turning compliance principles into practical, everyday actions. They empower your teams to execute tasks confidently and consistently, significantly reducing risks. Well-maintained procedures support both internal and external audits and can clearly demonstrate to regulators that your organization is committed to the compliance efforts.