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Banks Must Lead Fight Vs. Money Laundering

Governments increasingly are expecting financial institutions to defend the front lines in the war against money laundering and terrorism.

Are the world’s financial institutions and their leaders ready to begin defending the front lines in the war against international financial crime and terrorism?

They’d better be.

Opinion_Bug7Governments and their regulatory agencies increasingly expect these institutions to serve as police, to work harder to prevent themselves from being used for money laundering and to prevent breaches of sanctions against countries with poor human rights records and those that support international terrorism. And regulators are punishing institutions when they fall short.

U.S. enforcement authorities, flexing their regulatory muscles, recently imposed fines for sanctions breaches on Lloyds Banking Group ($350 million), Barclays ($298 million) and Standard Chartered ($327 million).

The Department of Justice and the Securities Exchange Commission are using the Bank Secrecy and Foreign Corrupt Practices acts to demand greater due diligence from all parties involved in transactions, holding them responsible for both sins of commission (facilitating money laundering or committing sanctions breaches) and omission (failing to implement sufficiently strong internal controls against either or both).

Peter Brooke, FTI Consulting

Peter Brooke, FTI Consulting

In December 2012, HSBC agreed to a $1.9 billion settlement to resolve charges that it had failed to monitor more than $670 billion in wire transfers, allowing for money laundering, and had also breached U.S. sanctions against Iran, Libya, Sudan, Burma and Cuba. And in December 2013, RBS was fined $100 for violating sanctions against Iran, Sudan, Burma and Cuba.  More recently, the Federal Reserve has held up M&T Bank’s merger with Hudson City Bancorp until M&T beefs up its anti-money laundering controls. In short, governments are making it clear that they will not tolerate what they deem to be reckless conduct by financial institutions or a weak commitment to abiding by international rules.

Governments want senior management – CFOs, chief executive officers, chief compliance officers and chief risk officers, among others – deeply engaged (with compliance experts sitting on boards) and leading the work to build financial crime defenses.

One thought on “Banks Must Lead Fight Vs. Money Laundering

  1. I find it refreshing that per your article you are stating that “compliance officers” are now being appointed to the Board of Directors. During my accounting career I spent time as a chief auditor for the Pacific Stock Exchange, Arcata Corporation and Audit Manager of the Wells Fargo Trust Operations and Wells Fargo Investment Advisers. I assumed you are stating the chief auditor is now a member of the board of directors. If that is true it is the correct course of action to make the “compliance function” (internal audit?) not have to report on and report criticisms of operators (officers) who have a say over their compensation, work location(s), offices, etc. To me it was inherently obvious after several occurrences of having my salary and career development blocked due to being critical of persons higher in the corporate hierarchy. My solution to this situation when it occurred with me — was I departed the corporate world — explained to the people that I felt were responsible why I was leaving and started and developed my own local CPA firm that for a number of years provided a full array of accounting and tax services. I am now “semi-retired” and focus my work activities on individual, small business and non-profit tax services. As the result of my position I suffered significant decreases in my income stream for more than 10 years, but feel that that course was necessary in order to express my concerns about the inconsistencies in the field of auditing (both internal and external).

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