Governance, Risk & Compliance
Gone are the kinder, gentler days when it comes to onsite examinations by the Securities Exchange Commission, say senior compliance officers, who portray the agency’s recent behavior as much more aggressive, and at times even intrusive on a firm’s time and resources.
At a New York conference sponsored by the Regulatory Compliance Association this week, industry participants heard of recent examples of SEC exams where compliance officers described strained and tense interactions with the agency’s staff. (more…)
A looming erosion of U.S. dollar dominance in international payments threatens to cripple the worldwide reach of financial sanctions and anti-money laundering controls led by the United States and its allies. This would compel Western financial institutions to improve data and analysis about their customers to guard against tainted money, officials said.
“It’s not if; it’s when,” retired Rear Adm. Chris Parry, a U.K.-based strategic forecaster, told a Thomson Reuters Financial & Risk conference in New York. “Every financial institution needs a strategy to be developed now for the days that are coming when money will be thrown across the wall to you and you have no indication whatsoever of where it’s come from and its provenance.” (more…)
Independent monitors have become a common feature of settlement agreements when government enforcement authorities agree to defer or forgo the prosecution of a financial firm. The monitor provision brings government oversight into a company’s hallways and raises the stakes for any new lapses. The growing record of experience with independent monitors has given rise to a useful body of knowledge on the dos and don’ts for companies in managing of the relationships.
This final installment of a three-part series on deferred prosecution agreements and non-prosecution agreements (DPAs and NPAs) focuses on the monitor’s role and tips for compliance professionals in working with them. Part One of the series discussed how such agreements have been used and some recent examples of their imposition and extension in duration. Part Two focused on best practices for remediating compliance program gaps or other deficiences outlined in the agreement. (more…)
The Dodd-Frank $50 billion asset threshold used to categorize systemically important banks has been a strategic business factor for E*Trade, the online broker, and unless there are compelling factors to breach the mark, the firm will continue to limit expansion of its balance sheet, chief risk officer, Mike Pizzi, said in an interview this week. (more…)
Critics of the the Financial Stability Oversight Council’s designation of nonbanks as systemically important got a chance last month to point to what they viewed as shortcomings in its approach, while also offering clues for possible improvements, during a U.S. Senate hearing on the issue.
Ever since its creation under the 2010 Dodd-Frank Act, the process by which the council designates systemically important financial institutions, or SIFIs, has been criticized as being heavily politicized, and marred with opacity.
FSOC, its rationale, and designation process
Regulatory compliance has become an incredibly complex and challenging issue for many companies and will remain a challenge for senior executives for some time to come. With that in mind, we recently released the findings of a financial crime report covering the Middle East and North Africa region in 2014. The report, conducted in collaboration with Deloitte, is the first of its kind in MENA.
According to the survey, around 85% of respondents have seen anti-crime and compliance activities increase in the last two years, whilst less than 6% of respondents believe that their compliance policy will stay the same over the short term. More than 75% of participants surveyed expect that compliance related costs will continue to increase in the short term with technology (26%) and process improvement (22%) standing out as key tools organizations are investing in to manage compliance risks. Almost half of those surveyed highlighted a lack of confidence in the effectiveness of their existing financial crime programs when compared with both domestic and international regulatory requirements. Similarly, 57% of respondents questioned the ability of their compliance policy to prevent illicit activity.
After analyzing the results, we noted a number of themes had emerged: (more…)
When a government uses sanctions to keep rogue nations in check, or law enforcement agencies bust criminal cartels, they can usually thank a bank. Financial institutions may seem like an unlikely partner in crimefighting—but they actually play a crucial role in maintaining global security. But banks are growing more wary of their role in helping freeze or investigate suspicious channels in the global flow of money, and their caution could create fertile soil for even more crime—and more economic instability.
Read more about the bankers’ dilemma.
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This week’s post is by Phil Cotter, Managing Director of Thomson Reuters Risk business.
A multinational organization’s supply chain is only as strong as its weakest link. Good global supply chain management should focus on sustainability, utilizing a risk-based approach to ensure resources are deployed in the most efficient manner. It must be robust enough to expose weak links that may be hiding within complex webs of relationships and interrelationships.
Today’s multinational organizations tend to have multitiered global supply chains including vendors, partners, subcontractors and sponsors, all linked together in complex webs of interrelationships traversing multiple jurisdictions. These complex networks can mask dangerous vulnerabilities: A problem in one area can quickly ripple up and down the chain, leading to severe reputational damage. One of the most effective methods of coping with complex, often hidden risks, especially for companies active in multiple jurisdictions, is to adopt the risk-based approach (RBA) outlined in the Financial Action Task Force’s (FATF) February 2012 “Recommendations for International Standards on Combating Money Laundering and the Financing of Terrorism & Proliferation.” These should be included in the organization’s Know Your Supplier (KYS) processes. (more…)
Professionals today must manage counterparty risk, know-your-customer requirements and supply chain security. Criminals and illicit networks increasingly mask themselves as legitimate business entities, and association with them — knowingly or not — exposes organizations to the risk of regulatory sanctions or fines. This can lead to irreparable reputational damage, often more devastating than a breach of compliance. Knowing who we are really dealing with — and uncovering risks associated with sanctions, organized crime, fraud, money laundering, bribery and country — is critical. (more…)