Regulators Target Individuals, Not Always Compliance


Regulators Target Individuals, Not Always Compliance

A U.S. anti-money laundering official on Tuesday added his voice to the chorus of regulators who have voiced their desire to see individuals pursued for wrongdoing, not just the companies at which the wrongdoing occurred.

Kendall Day, head of asset forfeiture and money laundering in the U.S. Department of Justice's criminal division, said at a conference hosted by Wall Street Journal Pro Financial Regulation that the agency wants to bring civil cases against individuals, not just going after companies with the deepest pockets offering the best chance of asset recovery. Regulators' focus on individuals has caused some alarm among executives and especially among compliance officers who are sometimes held accountable for compliance failures at their companies. Indeed, also speaking at the WSJ conference, Robert Werner, global head of financial crime compliance at HSBC Holdings PLC, said compliance officers are usually the "easiest person you can make a case against."

Two recent cases show, however that compliance officer liability is nuanced. In September the SEC accused public roofing materials company RPM International Inc. and its general counsel and chief compliance officer of failing to disclose material information related to a Justice Department investigation of the company's pricing. RPM contests the allegations and says the information in question didn't lead to any change in its audited results. In another case, the SEC last week penalized the management of a hedge fund--and notably not its chief compliance officer--for alleged failures in supervising its analysts. The takeaway from the latter case, according to Todd Cipperman of Cipperman Compliance Services, which provides compliance outsourcing, is that "compliance just isn't for the compliance department; it's something management has to implement across the firm." Managers thought the advent of the compliance function meant regulatory issues would become a compliance responsibility. "But the SEC never said that, they said it's the  manager's responsibility," said Mr. Cipperman. "What the Commission is trying to say is that the chief compliance officer isn't necessarily a hall monitor and everyone else are the kids in the cafeteria at lunch getting away with stuff. They have as much responsibility as anyone to make stuff right."

Source: The Wall Street Journal

By Pathay Singh on 10/25/16