The Birth of an Industry 

In the aftermath of the 2008 financial crisis, Wall Street was forever changed. No longer could businesses operate with the same cavalier attitude towards risk. The collapse of institutions like Lehman Brothers, as Neil Irwin, Chief Economic Correspondent at Axios and author of The Alchemist, puts it, was due to “small losses on your mortgage book… that’s rippled through the financial system because it’s highly leveraged and the funding sources that you rely on every night aren’t there.” 

This monumental event forced a reckoning, and from the ashes emerged a new paradigm: the birth of the compliance industry as we know it today. 

Episode Three of “Gone Rogue” delves into this transformative period, exploring how a crisis-driven response blossomed into a fundamental pillar of financial services. 

From ‘Good Old Days’ to Regulatory Overhaul 

Before 2008, the financial world often operated with a “check the box” mentality when it came to compliance. Jason Maan, a Director at PwC‘s Capital Markets Risk and Regulatory Compliance group, recalls stories of “the good old days when it seemed like just a big party and people were taking tremendous amounts of risk, and being rewarded tremendously.”  

However, the crisis laid bare the catastrophic consequences of this approach. As George Stein, Director of Global Compliance and Operational Risk at Bank of America, states, “Compliance never had the power, which it did after Dodd-Frank. Before Dodd-Frank, compliance was in many firms considered a check the box performative exercise.”  

“Compliance never had the power, which it did after Dodd-Frank. Before Dodd-Frank, compliance was in many firms considered a check the box performative exercise.”

George Stein, Director of Global Compliance and Operational Risk at Bank of America

The government’s intervention and the subsequent bailout came with stringent conditions, ushering in an era of extensive regulatory frameworks designed to curb excessive risk-taking. Regulations like Dodd-Frank and MiFID II were enacted to prevent a repeat of the 2008 catastrophe. This meant that compliance, once a peripheral function, was thrust into the spotlight. 

A New Seat at the Table 

Jason Maan highlights a significant shift: “Compliance has a much larger voice and a seat at the table, and is definitely seen as a strategic partner.” This newfound influence, though sometimes “forced from regulations,” is now recognized by leadership as crucial to avoid fines and unnecessary risks.  

Yet, the human element remains a challenge. Maan admits, “it’s difficult to get a healthy compliance culture across the firm when it’s not seen as necessarily a revenue generating exercise.” The temptation to “just click through” compliance training, even for those in the industry, underscores the ongoing battle against a superficial approach. 

The Front Lines of Change 

The immediacy of the crisis also created a new front line for compliance. Alex DeLucena, Director of Product Strategy and Business Development at Shield, vividly recounts his first job in 2008. Which involved manually listening to recorded trader calls to ensure no illegal short-selling of Lehman Brothers stock occurred. He describes this as a “front row audio experience to the collapse of not just this company, but just this moment.”   

This labor-intensive, reactive approach to monitoring, as he notes, “took hours and hours. Some calls were two minutes long, some were 15 minutes long, and you had to log everything.” Illustrating the monumental task faced by institutions and the nascent need for more advanced solutions. 

Emily Wright, who was in the HR department at Lehman Brothers’ London office during the collapse, recalls the surreal atmosphere. “It really felt like everyone was waiting to hear what their fate would be,” she explains, describing the quiet trading floor and the eventual news of delayed salaries, underscoring the very real human impact of regulatory failures. 

These firsthand accounts reveal the depth of the crisis’s impact, not just on the global financial system, but on the individuals working within it. The chaos and uncertainty in London offices reflected a worldwide struggle to comprehend and respond to an unprecedented meltdown, pushing compliance from a back-office function to a critical strategic imperative. 

Mark Taylor, formerly a compliance officer at Goldman Sachs, reflects on the slow-motion realization of the crisis from a UK perspective. While his seniority meant he wasn’t directly in the eye of the storm, he acknowledges the profound market ramifications. He emphasizes that “the more compliance departments are put onto the trading floor… that connection starts to be better established.”  

Shielding the Future of Finance 

The challenges faced in 2008 and the reactive measures taken ultimately paved the way for innovative solutions in financial compliance. Shield, a leader in digital communications governance and archiving (DCGA), was built on the understanding that “communication compliance needed to change.” Our cloud-native, end-to-end platform streamlines digital communications across over 100 data sources, ingesting 23.2 million communications daily and covering more than 175,000 monitored employees. 

Modules like Shield Data Hub, Shield Discover, Shield Surveillance, and the Voice module leverage multi-layered AI to deliver actionable risk insights with over 90% accuracy, making compliance more efficient and effective than the manual efforts of the past. As Alex DeLucena, now with Shield, states, his role is to “future cast and understand where it is we see our industry going, where we see compliance going, where we see regulations going, and ensure that we have a product that’s fit for purpose.” 

The crisis of 2008 may have been a stark reminder of systemic failures, but it also catalyzed the evolution of financial compliance into a vital, strategic function. Shield is committed to empowering compliance teams to “see more, know more, and solve more,” ensuring trust and transparency in an ever-evolving financial landscape. 

Reach out to explore how Shield helps compliance teams stay ahead of the next big risk.