Compliance, For Real
My friend, Alan Prochoroff, wrote in his April 28, 2014 edition of Insurance Compliance Insight, about the recent FinCEN fine of $5 million that may be imposed on the chief compliance officer of MoneyGram. Mr. Prochoroff quotes several banking industry professionals making the point that penalties such as this one, and other recent smaller ones directed at compliance officers personally, may make it difficult to hire and/or retain compliance officers. I think that may be true. But I think there are other ways to look at it, too.
We often talk about how compliance should come from the top of an organization in order to create and support a culture of compliance. Paying lip service to compliance by simply hiring a chief compliance officer will not help to avoid disciplinary actions, especially if the company keeps doing the same old thing. These personal fines make it clear that no one wants to be that compliance officer.
On the other hand, being a compliance officer where there is a strong culture of compliance is not a job where there is significant personal exposure. In that setting a chief compliance officer is the expert in what it means to comply, but he or she is not the only one in the organization who cares about compliance. One compliance officer quoted in Mr. Prochoroff’s article says: “The larger the institution, the less control you have of the situation and the facts.” Well, yes, that is true if compliance is one individual lacking the support necessary to do the job.
In an organization that is committed to doing the right things, a large institution doesn’t try to have a single person know every situation and all the facts. There is strong leadership and many who are following the leaders and paying attention to the situations that arise. In that scenario, with a truly strong compliance program, a single error is unlikely to draw that type of regulatory action. We all make mistakes so some errors will happen even in strong compliance departments, but they are the exception not the rule when there is a clear culture of compliance and a strong chief compliance officer.
The Reuters article that was the foundation for the Insurance Compliance Insight piece, written by Brett Wolf and published April 17, 2014, details a significant number of AML violations. The article states: “FinCEN’s push to hold Haider personally liable comes as the Justice and Treasury departments, as well as regulators, face pressure from Congress to hold accountable individuals at financial services firms where systemic anti-laundering failures have occurred and opened the U.S. financial system to criminal abuse.” That is not a single error slipping through an otherwise tight compliance program. It is a systemic issue.
Compliance officers and professionals should carefully examine the firm where they are considering employment. How strong is the commitment to compliance from the top? Chief compliance officers do not want to be working at a firm where there is no support for compliance and no commitment to do what it takes to stay on the right side of the laws and regulations. And no firm should think that merely hiring a CCO and then continue along in the same old way will be enough to hold off a fine. The lesson here is compliance has to be real.