When we do trainings on compliance issues, we consistently focus on the importance of having policies and procedures in place and then operating consistently with them. Our guidance is that it is often worse to have policies in place and not follow them than to not have policies in the first place. We have increasingly been emphasizing the compliance officer’s role – and exposure – on a variety of compliance issues. In the record fine, $8 million, announced yesterday by FINRA against Brown Brothers Harriman (BBH) for AML Compliance Failures, BBH’s former AML Compliance Officer was specifically fined $25,000 and suspended for one month. FINRA found that BBH lacked an adequate supervisory system.
The specific failures relative to AML at BBH do not translate directly to insurance, but the systemic issues, including failure to investigate potentially suspicious transactions and failing to file Suspicious Activity Reports, could. Similarly the apparent basis for the sanctions against the compliance officer, failing to have an adequate AML program and failing to monitor and detect suspicious transactions, could be a problem for insurance industry compliance officers, too.
This is a clear reminder that real compliance is more than a compliance officer being in place. It is also a warning to those compliance officers who may have the title of compliance officer, but lack the resources or authority to do the job the title suggests. That doesn’t help the organization and it exposes the named compliance officer to sanctions. A compliance officer must take his/her job seriously and must have the resources to do it properly. Without that, both the firm and the compliance officer are at risk.