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Regulators and institutions appear far apart when it comes to so-called "de-risking," in which banks drop businesses for fear of enhanced regulatory scrutiny, even while policymakers are stepping up their scrutiny of terrorist financing prevention in the wake of recent attacks.
December 30 -
WASHINGTON New York Governor Andrew Cuomo proposed a requirement on Tuesday that could put bank compliance officers on the hook if a bank's anti-money-laundering system fails to meet state standards.
December 1 -
Observers fear state regulator Benjamin Lawsky's proposal to model anti-laundering reviews after Sarbanes-Oxley requirements could thin ranks of compliance specialists and slow monitoring.
March 6
Regulators and prosecutors are under increasing pressure to bring charges not only against companies, but also against individual corporate officers. Compliance officers in particular are in the legal crosshairs and running scared.
No one benefits if compliance officers head for the doors. Their jobs involve a high degree of tension (and are hard to fill). Fear of criminal prosecution, financial penalties and reputational damage should not be added to the stress. The rights and responsibilities of compliance officers should be defined by clear and binding guidelines, including a safe harbor for those who play by the rules. I propose a compliance officers bill of rights.
A compliance officer's role is often advisory, not executive — corporate decisions are ultimately made by management and the board of directors. However, the compliance officer should have a seat at the table when significant decisions impacting compliance are made.
Broadly speaking, a compliance officer's responsibilities include the following: Understanding the federal and state rules governing the company; understanding the company's business environment; communicating legal requirements to company personnel; implementing a compliance monitoring program that includes account governance, policies and procedures, training, and risk assessment; and communicating with management and the board on compliance matters.
These are substantial responsibilities. Compliance officers should be held to a reasonable standard of diligence in fulfilling them, taking into account resource constraints. But a compliance officer cannot rationally be responsible for assuring that thousands of employees follow compliance requirements. Except for cases where there is egregious dereliction of duty, a compliance officer should not be branded as a criminal.
A compliance officer who fulfills the responsibilities above should have the following rights and protections:
- Support from management in ensuring company compliance, including the meaningful involvement of the compliance officer in every corporate discussion that significantly impacts compliance.
- Support from board or a board committee to which the compliance officer reports regularly on compliance issues.
- Exemption from government claims of personal liability against the compliance officer, except for willful or grossly negligent conduct.
- Exemption from personal liability for violations of law by employees which a compliance officer could not reasonably have been expected to discover.
- Indemnification by the company, including a pledge to pay the compliance officer's legal or other expenses in defending against allegations of misconduct.
- Exemption from personal liability when a government entity brings an enforcement action against a company without having previously issued a regulation prohibiting the specific practice, that is, when it engages in rule-writing by enforcement.
In the wake of the financial crisis, compliance officers have assumed enhanced responsibilities. Their jobs require talent and motivation. Wouldn't it be better to define basic rights for those willing to fill this vital role than to stand by as talented professionals spurn these jobs as thankless and dangerous assignments?
Jeremiah Buckley is a partner at BuckleySandler LLP. Before entering private practice he served as Republican staff director of the U.S. Senate Banking Committee.
