High Net Worth
EDITORIAL COMMENT: Compliance Dominates Agenda As Punishments Continue

As the list of wealth management miscreants lengthens daily, the need to focus on compliance has never been more vital.
Almost exactly a year ago, the firm that owns this publication decided that there were so many stories about compliance and regulatory issues that it launched a bespoke news service, Compliance Matters. It is aimed at wealth management professionals who need to handle the ever-expanding volume of rules touching everything from hedge fund rules to money laundering. It is a must-read. (Register here.)
And events in the past few weeks alone have only underscored how necessary it is for the wealth management business to have expert analysis and focused news on compliance. So much for the late summer period being a quiet one for current affairs. Banks such as BNP Paribas, Bank of America, Standard Chartered and PricewaterhouseCoopers have been punished, with varying levels of severity, for sins of omission or commission, such as over money laundering. And there appears to be no end in sight. The list of wealth management miscreants that sister publication WealthBriefing publishes gets longer and longer. It is almost reaching the stage where the question is not “who has been naughty?” but “Who is left who hasn’t been bad or caught?”
It is arguable, of course, that some of this misbehavior dates back quite some time, but that is not entirely reassuring, since concerns about money laundering, for example, are hardly new. Even before the 9/11 terrorist attacks on the US, money laundering, in areas such as drugs, was a known problem. Part of the issue may be that, while technology becomes (supposedly) ever more advanced in flagging potentially crooked transactions, the sheer size and complexity of modern banking means that unearthing dubious money transfers is difficult. Tech is great but the human element, and that all-too-rare thing, common sense, is still vital.
Inevitably, there will always be crooks, and people adept at, or certainly bold enough, to try to misuse the banking system. This means that authorities in different governments must think harder about trying to reach agreements about common standards of punishment. There must be deterrents; one cannot have a situation where fines are treated as an inescapable business cost, like paying for heating and lighting.
Things have taken a more severe turn, arguably. A case in point is the $8.97 billion settlement of BNP Paribas with the US over the firm’s violations of sanctions against nations such as Sudan and Iran. The fine shocked even world-weary observers, as did the temporary ban on the bank’s ability to handle certain dollar-denominated transactions. The punishment has prompted squeals from Paris, with the implication that the US is using its powers on an extra-territorial basis and acting like a bully. Up to a point, this might be a justified complaint. The US must avoid the charge that it is using AML violations in some sort of shakedown operation. But the US has reason to be angry, and the need to be tough on wrongdoers is ever more relevant given the current geopolitical situation regarding the Middle East and Ukraine. The US, and other countries, ought to be able to make the case that money laundering and breaches of sanctions are exceptionally serious.
One problem is that so far as one is able to tell, not a single senior bank executive at any institution has been jailed for allowing money laundering to happen, or been suspended for a long period of time from bank operations. There are, of course, resignations and “departures” from banks where there have been problems. Now, while the parallels are not exact, it is worth considering that in English Common Law, handling stolen goods carries a custodial sentence for those convicted of it. Knowingly laundering money ought to be seen in the same light and laxness on such matters should carry grave civil, if not criminal, consequences.
In the meantime, it is almost “happy first birthday” time for Compliance Matters. Make sure you get a copy.