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.
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.
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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…)
2014 was a year in which knowing more —who, what, why and how — was critical to informed decision making and successful outcomes. Explore our 2014 Annual Report.
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…)
Banks’ ever-increasing KYC requirements are hindering the operational efficiency of corporate treasury departments. Our own Anna Mazzone explores some innovative solutions to the problem.
03 Apr 2015Thomson Reuters
Many corporate treasurers will remember the ‘old days’ of KYC, when banks’ requests for documents were fairly simple and predictable in nature and adding additional features or services to an account didn’t normally involve additional procedures. The game-changing events of 9/11 and the financial crisis of 2008, however, have resulted in increased regulations and the metamorphosis of KYC. The threat of hefty fines and, more importantly, reputational damage have seen banks focus on KYC compliance with renewed vigour.
Banks and corporate treasurers – same problem, different perspective
Where does this leave corporate treasurers? The KYC checks performed are now extensive, with additional checks for additional services. The number of documents required is increasing exponentially and moreover, requests vary by bank and by geography. With no ‘standard’, it is difficult for treasurers to predict exactly what information will be required and many are wasting time collecting documents and carrying out repetitive activities. On top of this, client on-boarding can take up to 34 weeks, significantly disrupting the revenue generating activities of the organization.
Then there are the very real concerns over data security and privacy. Sensitive documentation requested by banks can and does get lost leading to a further waste of valuable time, with treasurers having to check that documents have arrived. Email is not secure, since sensitive information can be intercepted and there is no way to track who are viewing the documents once they have been sent to the financial institution.
But let us not forget that banks also face challenges, including fines; operational, staff and IT costs; lost revenue due to customer attrition; and the threat of reputational damage if they fail in their KYC due diligence. Mired in their own problems, many banks do not view KYC from a client perspective at all. But KYC is not just a bank problem! End-clients are being affected too.
The paper reviews trends of new entries into the banking industry since states relaxed restrictions on branch banking in the 1970s. It found that each wave of banks exiting the industry was accompanied by a rise in startups. The paper breaks down new bank entries into three categories: a) banking entities such as credit unions, or saving banks that become commercial banks by converting their charter; b) units that spin off from their holding companies; and, c) newly established banks.
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During 2014, the risks of global fraud and rising terrorism; the multi-stage recovery of world markets and the opening up of China; the significant shift in oil prices and increasingly urgent focus on climate change and energy alternatives; and the economic and social impacts of an aging world population and Alzheimer’s disease were just a few of the challenges and opportunities facing our world. It was a year in which knowing more — who, what, why and how — was critical to informed decision making and successful outcomes.
Steven L. Caponi Steven L. Caponi is a partner at Blank Rome LLP. His national litigation practice covers all facets of business litigation, including corporate and IP matters, cybersecurity, M&A litigation, and securities litigation.