In June of 2016, Global RADAR featured a story on a trend that was beginning to have a sizable impact on the realm of regulatory compliance and financial security both in the United States and abroad; leading to a period of profound doubt and uncertainty in one of the world’s most critical employment fields. This trend was captivating in the sense that it was not centered on the growth of regulatory technology, sanctions, or even anti-money laundering (AML) programs and regulations per say – topics that seem to litter organizational briefings and the general dialogue held among those operating within the financial sphere on a daily basis. Instead, what made this trend unique in this day and age is that it brought the human element back into play, at a time where the movement towards the incorporation of more sophisticated means of promoting efficiency – generally through the use of artificial intelligence and automation – is at an all time high. These unprecedented developments ultimately saw a complete transformation of the occupation of “Compliance Officer” into one of the highest-risk positions found on the job market today. In a time where constant scrutiny and unbelievable pressures are being placed on financial institutions of all sizes to remain compliant and uphold the standards that accompany the maintenance of potent AML safeguards, for the first time in history weight of responsibility load that had for so long been carried solely by the institution itself began to transfer onto the respective individuals who fail to adequately perform their professional duties.
The importance of compliance officers cannot be overstated. This sentiment is shared throughout the financial services sector, and is made evident when considering that AML issues often come hand in hand with other serious criminal events such as terrorist financing, the global drug trade, and countless others, each of which pose a viable threat to the greater well-being of the general public and the health of the international monetary system alike. Regulatory authorities have done their part in issuing million and billion dollar fines to companies deemed guilty of breaching current AML and Bank Secrecy Act (BSA) guidelines, moves made to both punish entities that have wittingly or unwittingly facilitated serious crimes, and to deter other banks from making the same mistakes as their counterparts. While the rates of major AML breaches seen on an annual basis have noticeably declined over the past decade, to many it appears that more can and must be done to truly eradicate any lingering issues in this regard. That next step towards shoring up regulatory compliance ultimately proved to be a greater emphasis placed on the personal liability of AML compliance officers for their on-the-job failures. This move was inevitable in a way, as many in the political realm have pushed for these happenings over the course of the past several years, aiming to establish the power to criminally charge individual compliance officers for any and all failures that may cost their company.
Thus a new trend has emerged out of this rapid yet steep progression, one that has seen compliance officers from financial institutions globally ditching their duties and seeking employment opportunities in other fields in wake of recent cases of personal liability that have left this sector in a state of shock. Industry experts have taken notice of the recent staggering unemployment statistics found in a field that had boomed since the turn of the century, finding a direct correlation between this data and the heightened accountability now placed on individuals with compliance responsibilities. Analysts believe that the fear of facing civil penalties and potential jail time for failures occurring under their watch has led to both first-time candidates and seasoned veterans in the profession being more cautious about taking and keeping these roles, making it difficult for companies to fill open positions or find capable replacements for those abandoning their posts. With the potential to jeopardize their own financial and career stability, as well as their reputations, compliance officers have been faced with a very difficult decision: Should I stay or should I go?
Instances of enforcement actions against individual compliance officers have been widespread in recent years, and often occur in conjunction with enforcement action taken against the company at large. In 2011, for example, “Japanese courts leveled harsh punishments against three former executives of camera and medical equipment maker Olympus, with fines of up to 10 million yen (over $128,000 in 2011) and prison sentences of up to 10 years” for compliance-related issues (Reuters, 2017). The Global RADAR 2017 article, America’s Riskiest Job: Compliance Officer?, also discussed multiple cases witnessed in the last year against the chief compliance officers (CCO) from MoneyGram International Inc. and the investment firm Trident Partners Ltd., respectively. The Securities and Exchange Commission (SEC) levied a six-month jail sentence against Trident CCO William Quigley for his role in a fraudulent investment scheme, and also forced him to pay back approximately $357,000 USD. Thomas Haider, previously of MoneyGram, was forced to pay a civil penalty in excess of $250,000 USD and was banished from the compliance realm for three years as part of his settlement with the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN) over his role in a consumer fraud scheme. While both of these cases represent a blatant misuse of power by individuals who held positions meant to help increase financial security, the reality is that these cases have begun to set the precedent for future legal proceedings against compliance officials failing to maintain compliance with current legislation.
The Bloomberg BNA article “Personal Liability Exposure for AML Compliance Officers: Lessons From Haider” examines several concepts that can be learned from the Haider case, one’s which may ultimately prove valuable for those currently acting in a compliance position. Esteemed writer Robert Axelrod notes that out of these instances, “the big issue that has roiled AML compliance officers for the past five to ten years has been whether and when they will be deemed personally responsible for AML compliance mishaps in organizations they simply do not substantially control, and what in the world they can and should do as things spin out of whatever modest control they do possess, and it is apparent that there are ongoing, sustained violations of AML laws and regulations” (Axelrod, 2017). From this we can deduct that uncertainty in several regards is at the root of the “jumping ship” trend seen in compliance departments of late. While the Haider case does not provide a comprehensive solution to each of Axelrod’s respective points, it does provide a means by which institutions, their compliance departments and their employees can potentially learn to channel their issues to the proper personnel and mitigate personal exposure at a far greater rate.
Between 2009 and 2014, the SEC brought forth more than 70 liability claims against CCO’s operating in financial institutions across the United States, a number that has continued to rise in the years since. In examining liability cases involving compliance officers seen in the recent past, several areas stick out that can be addressed by both the individual and the organization collectively to limit exposure to risks and breaches. Several key causes of CCO liability include supervising failures, failure to follow through on standard procedures such as conducting annual reviews and implementing written policies and procedures for AML initiatives, and the inability to escalate material issues to senior management. Each of these can occur when compliance officers are burdened by multiple strenuous responsibilities within an organization, usually when their activities and responsibilities go outside of the traditional duties of a CCO – something that has become far more common in this demanding position.
While the complexity of the compliance officer role continues to grow as regulations and legislation continue to expand exponentially, the fact remains that as long as compliance officials are attentive and aware of areas that could lead to potential slip-ups, their profession can be quite rewarding in both a spiritual and financial sense. The annual salaries of chief compliance officers in the U.S. range from as low as $127,500 at a small company, to as much as $261,000 at larger companies, numbers that continue to increase on a yearly basis (perhaps in an effort by financial institutions to entice more qualified personnel to this position). Also, while the SEC is viewed as a body that only inflicts pain upon institutions and their employees via large penalties, in 2015 the Commission implemented an award of greater than a million dollars ($1.4 to $1.6 million) to compliance professionals who provided information that assists the SEC in pursuing enforcement action against their own company. According to a press release published by the Securities and Exchange Commission, “the award involves a compliance officer who has a reasonable basis to believe that disclosure to the SEC was necessary to prevent imminent misconduct from causing substantial financial harm to the company or investors” (SEC, 2015). Due to a variety of factors, compliance roles remain some of the most stressful, risky jobs in the world today, but as seen above, they can also have their perks. Thus it is up to those holding these positions to determine if the risks of personal liability are worth the potential rewards, a process that ultimately involves these individuals betting on themselves and their abilities to live up to their professional expectations.
