The Rise of Compliance
Financial Services workers the world over know one thing for sure: we are living in the age of Compliance.
In the aftermath of the 2008 financial crisis, banks especially have faced ever increasing levels of scrutiny from regulatory bodies. Post-Lehman Brothers collapse, the Obama administration introduced the Dodd-Frank Act, designed to clamp down on those banks viewed as ‘too big to fail’. In Europe, failure to meet GDPR requirements, the deadline for which was May 2018, can land you with a fine of up to €20m or 4% of annual revenue.
With new legal requirements being introduced every year, and lawmakers pursuing them more aggressively, financial institutions need to invest in strong Compliance teams lest they fall prey to heavy fines and, perhaps even worse, a heavy hit to their reputation. We’ve compiled some of 2019’s biggest Compliance stories below.
Talent Ticker’s Hottest Compliance Leads
Perhaps the unfortunate poster child for the importance of compliance right now, let’s start with Danske. Their Estonia branch was closed down following the revelation that the small location had been laundering money to the tune of $234bn. The aftermath has led their CEO to resign, leaving the embattled bank facing-down a $1bn damages lawsuit, as well as the potential loss of their government contract. In response, they’ve promised to devote $300m to their AML and Compliance teams, created a Fraud and Cyber Crime division, and appointed a new Head of Financial Crime.
If Danske Bank are the headline act then Swedbank are the jealous understudy waiting in the wings. Sweden’s oldest bank are currently accused of handling around $20bn in dodgy money and are facing investigation in their home country, the US, and the Baltics. Acting CEO, Anders Carlsson, has admitted to failures in their governance processes. The bank are now investing $68m into combating the issue and have established a dedicated anti-financial crime unit led by Anders Ekedahl.
Now for a bit of vintage fraud. Morgan Stanley were recently forced to pay a $150m fine to the state of California to settle charges that they misled investors about the risks involved in mortgage-backed securities the bank sold prior to the 2008 financial crisis. Proof that the past really does have a way of catching up to you. The bank have just strengthened their governance team with the addition of Carol Ann Sterling as the Director of their Legal and Compliance Department, so maybe they’ve learnt their lesson?
Sumitomo, on the other hand, have yet to be fined. Instead, the Japanese bank’s New York branch have been politely ordered by the Federal Reserve to guard against future failures and bolster their compliance, anti-money laundering, and sanctions capabilities. We have yet to see any senior Governance appointments but let’s hope they learn from their competitors mistakes and take some pre-emptive action. Who was it that first said it was better to ask for forgiveness than permission?
Last but not least, Metro Bank. An embarrassing accounting blunder has left the bank facing investigation from both the FCA and PRA, as well as potential legal action. They’ve been forced to raise £350m through a share sale to plug the shortfall on their balance sheet, which must have been especially difficult considering their share price has plummeted 75% since January. Ouch. No concrete news on the Compliance hiring front here yet, but we expect to hear some soon if they stand a chance of restoring customers’ and investors’ good faith.