In a year when regulations have been regularly in the news with the LIBOR scandal, UBS rogue trader Kweku Adoboli and Deutsche Bank's recent whistleblower travails, surely there could not be worse to come?
This morning it did with the news that HSBC's practices in South America and the Middle East have caused an unprecedented $1.9B fine from the US authorities in an historic money laundering settlement. So, is this another example of banker bashing by zealous US authorities, or is this 'bang to rights'?
Founder and CEO of Xactium, Dr. Andy Evans, comments on the news from a governance, risk and compliance perspective:
Why is this happening now?
There are simply too few effective Anti Money Laundering (AML) controls in place. Even where relevant policies and procedures exist there is no reliable (provable) way to communicate these to staff across the multiple business units involved internationally. Without these we can expect many more such fines, as the spotlight has now fallen on these transactions.
Can future fines be avoided?
It is not just the staff who banks need to be able to prove they have trained. If customers are not made aware of the AML practices and laws in a way that can be tracked, issues will remain in the system. Bank systems, like anti-money laundering, need to be managed globally and not in the current silos by territory or division and then monitored both at the regional and the central levels.
What should banks do?
Immediately review their current exposure to fines and act to prevent future exposure with a global 'system of record' which proves all staff and clients are aware of the laws the bank has signed up to and the policies it enforces. Until recently this would have been prohibitively expensive, however the advancements within cloud computing have made this an affordable necessity. With fines at multi-billion levels, now wiping away as much as 20% of annual profit, such systems are a much more effective investment in protecting your brand than lawyers.
Check out our whitepaper on how to build a culture of compliance, starting with the key indicators that your business may be at risk. Just click below.