Trending: The risk of being a compliance officer & The Weekly Roundup

 In Anti-Money Laundering, Compliance, Trending

America’s Riskiest Job: Compliance Officer?

Ever had a minor slip-up on the job and laughed it off with coworkers a couple of days later? Probably. Now think about the possibility of being held criminally responsible for such an error, being forced to pay large monetary fines or even facing jail time as a result of that action. It’s a scary thought indeed. Luckily for most people who hold a part-time or full-time job in the United States, they are unlikely to face any serious backlash for the minor faults they may make on the job, but this also leaves them likely to possibly commit the same or similar mistakes again in the future as a result. However, the reality for those choosing to take on the role of compliance officer in financial institutions across the United States is as drastic as in the first scenario. The stakes are significantly higher for those in the financial services sector, specifically for those working within compliance departments of financial institutions, which are now faced with an unprecedented amount of responsibility in their everyday procedures. For years we have been hearing about compliance casualties – businesses being forced to shut their doors due to severe compliance failures that have left their customers at risk, or have allowed for illicit activity to occur right beneath their noses. It is easy to punish an entire organization or specific department for AML-related offenses, but for months now, many in the political realm have pushed for the power to criminally charge individual compliance officers for their personal on-the-job failures. This trend has already begun to completely transform the occupation of “Compliance Officer” into one of the highest-risk jobs on the market today, leading one notable regulatory practice expert to say that “say the heightened accountability is driving experienced people to be more cautious about the profession and making it difficult for banks to find replacements” (Glazer, 2017).

With potentially drastic repercussions on their horizon, compliance officials from multiple banks whose responsibilities included overseeing anti-money laundering activities have begun to abandon their posts and seek new areas of “safe” employment, something not seen before the threat of personal penalties emerged within the last three years. Some however were not as fortunate to avoid such consequences and are now set to face prosecution for their “wrongdoings.” The Lexology article “A Cautionary Tale of Two Compliance Officers” cited in BSA News now on Thursday, June 1st, 2017, discusses two separate cases involving compliance officers facing civil penalties and jail time, respectively, for compliance failures that occurred under their watch. The cases also signify just how highly stressful compliance responsibilities have become for those operating in this sector.

The first case involves claims made under the Bank Secrecy Act (BSA) against the former chief compliance officer of the money transfer services company MoneyGram International Inc., one Thomas E. Haider. As part of the settlement with the U.S. Treasury Department, Mr. Haider reportedly accepted responsibility for several actions while holding his previous position, including:

(1) failing to terminate specific MoneyGram outlets after being presented with information that strongly indicated the outlets were complicit in consumer fraud schemes, (2) failing to implement a policy for terminating outlets that presented a high risk of fraud, and (3) structuring MoneyGram’s AML [anti-money laundering] program such that information that MoneyGram’s Fraud Department had aggregated about outlets was not generally provided to the MoneyGram analysts who were responsible for filing SARs [suspicious activity reports]” (Phelps & Phillips LLP, 2017).

As part of the settlement, Haider will pay $250,000 USD as a civil penalty and will be prohibited from acting in any role related to compliance for any money transmitting companies for the next three years.

The next case involves another settlement, this time between the Securities and Exchange Commission (SEC) and the former chief compliance officer of the rapidly growing investment firm Trident Partners Ltd., William Quigley. Quigley, who had a history of unethical incidents, is said to have served for Trident at two different times between 2004 and 2014. During his time with the company, it was found that Quigley and multiple associates of his, which turned out to be his brothers, “opened three brokerage accounts that he and his brothers used to misappropriate investor funds, including one account at Trident” (Phelps & Phillips LLP, 2017). Keep in mind that this occurred while Quigley was serving as the organization’s chief compliance officer. Yet as if this were not bad enough, Quigley actively tried to keep Trident from learning the whereabouts of the account, and also transferred funds from said accounts into the bank accounts of his brothers. In a statement on the case, the SEC noted “it was William Quigley’s obligation to report violations and suspected violations of the securities laws, rules and regulation”, yet he failed to file such a report, nor did he keep proper beneficial ownership information on accounts he handled, let alone come forward and admit his direct involvement in the fraudulent activity taking place.

Quigley pleaded guilty to his role in the fraudulent investment scheme and was sentenced to six months in jail, one year of home confinement, and was forced to pay back approximately $357,000 USD. Both of these cases represent a blatant misuse of power by individuals who held positions meant to help increase financial security. As we now know, the opposite occurred, and the tables were turned to benefit the compliance officers themselves and pad their own pockets. The role of compliance officer, albeit prone to garnering much more negative publicity than positive, is still held in high esteem by governing bodies within the U.S. and abroad, as well as by the general staff of financial institutions across the globe. Because of this, and the primary defense role that compliance officers serve in the ongoing battle against money laundering and terrorism financing, the need for proper, ethical practices to be maintained is evident – thus the aforementioned call for stricter penalties is warranted to keep the balance of power within a compliance department in check.

Weekly Roundup

Brazilian Meat Company Cooked by Fine

Brazilian meat company JBS was charged a record $3.2 billion fine on June 1st stemming from the findings in multiple corruption investigations into the company between 2016 and early-2017. The fine will reportedly be paid over a 25 year period, but the total monetary amount that will be paid instantly became the largest fine ever given to a Brazil-based company, topping the $2.6 billion corruption fine issued against Brazilian conglomerate Odebrecht in April of 2017. While the bribes paid by JBS did not have as substantial a geographical reach as those paid by Odebrecht (which paid bribes in 12 countries), it has been found that JBS owners Joesley and Wesley Batista “spent 600 million Brazilian real to bribe almost 1,900 politicians in recent years” (BBC News, 2017).

The case gets even more interesting when you consider that Joesley Batista granted prosecutors an audio tape containing a recorded conversation between Batista and Brazilian President Michel Temer that appears to implicate Temer in condoning the bribery of a witness; that witness – Brazilian politician Eduardo Cunha, who is currently serving a jail sentence. Temer has come forward and acknowledged the tape as genuine, but denies authorizing any bribery payments. Brazil’s Supreme Court has given the green light to investigators to look into the allegations against President Temer, and Global RADAR will provide an update on the results of these investigations in the coming weeks.

Deutsche Bank Fined for AML Faults…Again

On Tuesday, May 30th, the U.S. Federal Reserve fined Frankfurt-based Deutsche Bank a reported $41 million as a result of what the Reserve deemed as “unsafe and unsound practices with the bank’s US operations” (DW, 2017). The organization was found to be performing improper screening procedures in regards to transactions that were deemed as potentially suspicious, leaving them susceptible to money laundering activity. This fine is the second issued by the Federal Reserve against Deutsche Bank so far this year, as they were charged $425 million in January for numerous compliance failures discovered between 2011 and 2015.

Deutsche Bank is said to be in agreement with the Federal Reserve on an order to implement a series of future compliance related actions, including improvements in “oversight from senior management to better comply with anti-money laundering laws in the US” (DW, 2017).

AML Control Issues in Ireland

Over the course of the past eight months, three of Ireland’s main retail banks have been issued fines for their failures in maintaining proper anti-money laundering systems – a trend that has caused great concern in the state’s financial services sector. This week, the Bank of Ireland was fined “a total of €3.15 million after admitting to ‘significant failures’ in their anti-money laundering and counter terrorist financing controls” (Aodha, 2017). Practices such as delayed reporting of suspicious activity, as well as what has been regarded as simply a “chronic lack of regulatory compliance”, signify the severity of the money laundering and terror financing issues seen in Ireland of late. One would imagine that if this trend was to continue, it would likely lead to greater public mistrust and perhaps more severe outcomes for the banks involved. Thus finding a solution to these issues is imperative sooner rather than later.

Top Anti-Corruption Prosecutor Bids Farewell

Earlier this week, Spain’s top anti-corruption prosecutor chose to step away from his position following recent criticism from opposing parties of his past case-handling methods. Although he is said to have at no time engaged in any illegal or unethical activity, Manuel Moix resigned as a result of public pressure following allegations that he and Spain’s minister of justice hindered several anti-corruption investigations involving Spain’s “People’s Party”. This came in addition to claims that Moix also held a stake in an offshore company in Panama, which some say made him an individual unfit to pursue corruption.

 

 

Works Cited

Aodha, Gráinne Ní. “The Central Bank Has Fined Bank of Ireland €3 Million for ‘significant Failures’.” TheJournal.ie. 30 May 2017. Web. 

Associated Press. “Spain’s Top Anti-Corruption Prosecutor Resigns.” U.S. News. 1 June 2017. Web. 

“Brazil Meat-packing Giant JBS to Pay Record $3.2bn Corruption Fine.” BBC News. BBC, 31 May 2017. Web. 

Glazer, Emily. “The Most Thankless Job on Wall Street Gets a New Worry.” The Wall Street Journal. Dow Jones & Company, 11 Feb. 2016. Web. 

Manatt Phelps & Phillips LLP. “A Cautionary Tale of Two Compliance Officers.” Lexology – Newsfeed. 30 May 2017. Web. 

 Deutsche Welle. “US Fines Deutsche Bank $41 Million for Money Laundering Control Lapses | News | DW | 31.05.2017.” DW.COM. 31 May 2017. Web.

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