Governance, Risk & Compliance

Safeguard customers’ personal information; regulators are watching

REUTERS/Phil Noble

In a sanction that can serve as a wake-up to the financial industry, Verizon Communications last week agreed to pay $7.4 million to end an investigation that found it failed to tell two million new customers about their privacy rights before using their information for marketing purposes, the Federal Communications Commission said.

The privacy probe highlights the vigilance that must be paid to consumer privacy rights to meet regulators’ requirements. Although the financial industry mostly answers to different regulators, it too is subject to laws and regulations protecting the privacy of its customers. (more…)

Authorities seek more AML scrutiny of L.A. fashion district as raid nets cartel-linked targets

REUTERS/Stephane Mahe

Roughly 1,000 law enforcement agents poured into the Fashion District in downtown Los Angeles Wednesday morning to raid shops and arrest nine people suspected of using businesses to launder large sums of cash generated by drug trafficking and other illicit activity, the U.S. Justice Department said. The money laundering problem in the area has prompted authorities to request a formal designation subjecting it to greater enforcement scrutiny. (more…)

Conduct risk – Graphic of the day

Among the many forms creative compliance may take, several consistent patterns of behavior have been explored in recent research studies. We surveyed over 200 compliance and risk practitioners on the concept of conduct risk and has identified distinct industry-wide trends. Read The Global Conduct Risk Report 2013 and benchmark your firm’s preparations.

conduct risk

Standard Chartered’s AML lapses provide crucial lessons on internal controls

 REUTERS/Bobby Yip

Standard Chartered Bank’s $300 million penalty from the New York Department of Financial Services (NYDFS) for compliance failings last month highlights the importance of having effective transaction monitoring procedures to meet regulatory requirements, particularly those pertaining to high-risk clients. But what are these transaction monitoring requirements, and who is a high-risk client?

Under the terms of the order with NYDFS, London-based Standard Chartered has to suspend the processing of U.S.-dollar transactions for certain high-risk retail business clients in Hong Kong and the United Arab Emirates until its transaction monitoring program is enhanced. The settlement comes two years after the bank agreed to pay $667 million to a variety of U.S. regulators to resolve allegations of sanctions violations concerning transactions linked to Iran. (more…)

DO’s and DON’T’s For a Successful GRC Implementation


Usage of governance, risk, and compliance (GRC) software continues to expand, not only within financial institutions but also within energy, healthcare, and other non-financial sectors. As such, many organizations are in the midst of planning or executing GRC implementation projects. If your company is one of them, here are some do’s and don’ts for you to consider as you navigate through the implementation process:

DO Set Clear Objectives Up Front

There are many possible reasons for wanting to implement a GRC system, so it is important to identify and document the specific objectives you are trying to achieve with the technology. Internal audit functions have traditionally been equated with manual, labour-intensive processes, and companies often base their investment in GRC on the mere assumption that any form of automation will constitute an improvement. However, GRC has the potential to achieve much more than mere automation of existing processes, so it important to really think through the expected outcomes of the initiative and clearly articulate these to all stakeholders. Clearly defined objectives also guide decision-making throughout the implementation process and assist in dealing with resistance to change.


Bank of America’s mortgage-fraud deal yields quick impact; message may not be what enforcers wanted

Bank of America's mortgage-fraud deal yields quick impact; message may not be what enforcers wanted

It took just one day for U.S. Attorney General Eric Holder’s announcement Thursday that Bank of America would pay $16.65 billion over charges of fraudulent mortgage origination, securitization and servicing to have an impact.

But the impact was probably one of the last things Holder wanted to see as a result of the deal. (more…)

“Right to Try” Investigational Drugs


The outbreak of Ebola in West Africa and the widely-publicized plight of two Americans spotlights access to investigational drugs. Investigational drugs are those drugs that have not completed the mandatory Food and Drug Administration (“FDA”) approval process.

The two Americans, who were infected with Ebola while working as missionaries in Liberia, were given an investigational drug called ZMapp. ZMapp, made by U.S. biotech company Mapp Biopharmaceutical, has shown positive results in animal testing but its safety and effectiveness in humans has not been determined because Mapp Biopharmaceutical has not begun the FDA clinical trial process.


Circuit Split Leaves Future Efficacy of the Affordable Care Act Uncertain

Authority of Law statue

The acrimonious political and legal battles surrounding the Affordable Care Act (ACA) continue. Two opposite federal decisions were issued a few weeks ago on whether the ACA allows federal tax credit subsidies to be issued to individuals purchasing insurance in states that exclusively utilize the federal exchange. The ACA was dealt a blow in one case and a victory in another.

On July 22, 2014, the DC Circuit US Court of Appeals determined in Halbig v. Burwell that the Internal Revenue Service’s (IRS’s) interpretation of Section 36B of the Internal Revenue Code, which said that individuals may receive tax credit subsidies from the federal government for insurance purchased in states with their own exchange or those that opted to utilize the federal exchange, was inconsistent with the ACA. It held that 36B, in light of the statutory text (“established by the State”) and legislative history of the ACA, only allows subsidies for insurance purchased through state exchanges.


U.S. regulators ease credit risk rules on guarantees for banks using advanced approach

 REUTERS/Stefan Wermuth
Three major U.S. regulatory agencies have eased requirements under the advanced approach risk-based capital rules by removing a key requirement concerning guarantees provided by counterparties eligible for recognition as credit risk mitigants.The final rule , agreed by the Office of the Comptroller of the Currency, the Federal Reserve and the Federal Deposit Insurance Corporation, modified the definition of “eligible guarantee” for purposes of the advanced approach risk-based capital rules by removing the requirement that an eligible guarantee be provided by an “eligible guarantor” for all exposures other than securitization exposures. (more…)

Effective training a weak link in many compliance programs – survey

REUTERS/Andrea Comas

By Emmanuel Olaoye and Stuart Gittleman of Compliance Complete

Firms, especially those in the financial services sector, have improved their compliance and ethics training programs but are still being challenged in measuring their programs’ effectiveness, two researchers told Thomson Reuters Compliance Complete on Wednesday.

And the people driving the programs, often in chief compliance officer or roles of similar function, are still being challenged by limited resources and difficulties in making a business case for the firm’s investment, said the researchers, Mary Bennett and Ingrid Freeden of Navex Global. (more…)