Financial Regulatory Forum

Wall Street’s hot hire: anti-money laundering compliance officers

By Aruna Viswanatha and Brett Wolf, Thomson Reuters Reporting Team

NEW YORK, Oct. 14 (Thomson Reuters Accelus) - The kings of Wall Street used to be the traders and investment bankers who said yes to big deals and big trades, but today’s power brokers increasingly are the compliance officers who quite often say no to risky proposals.

As the U.S. government steps up enforcement of anti-money laundering laws, it has created a red-hot market for compliance officers, who oversee a bank’s systems that prevent it from violating regulatory requirements and monitor transactions for any suspicious activity. (more…)

Governance reforms gain momentum with SEC pay-ratio disclosure proposal

By Bora Yagiz, Compliance Complete

NEW YORK, Oct. 9 (Thomson Reuters Accelus) - The U.S. Securities and Exchange Commission has proposed a rule that would make public companies disclose the pay gap between their top executive and the rest of the staff. But the divided 3-2 vote by which the proposal was advanced reflects the fierce debate between opponents to call it difficult and unnecessary, and advocates who say it provides a useful measurement for shareholders who want to rein in excessive compensation.

The proposed rule represents an attempt to alleviate the classical principal-agency problem, where the interest of the senior management may front-run that of the shareholders’ through overcompensation. It may also help regulators in furthering a growing effort to improve corporate risk-management practices. But the challenges of compiling useful figures may be daunting. (more…)

U.S. Treasury’s know-your-customer proposal delayed by struggle for regulatory consensus

By Brett Wolf, Compliance Complete

NEW YORK, Sept. 30 (Thomson Reuters Accelus) – A months-long delay in the release of a know-your-customer rule proposal that would have an impact across the financial industry is the result of the U.S. Treasury Department’s inability to reach a consensus with regulators on key details of the measure, sources familiar with the matter say.
Rob Rowe, a lawyer with the American Bankers Association’s Center for Legal and Regulatory Compliance, said “a number of bankers have asked about the status of the proposal.” (more…)

JPMorgan’s massive spending on controls underlines “aggressive” relations with regulators

By Henry Engler, Compliance Complete

NEW YORK, Sept. 24 (Thomson Reuters Accelus) - What was once a more consultative relationship between JPMorgan and its regulators has turned into an environment of aggressive demands to reshape the banking giant, say bankers.

With news the largest U.S. bank has settled one set of charges for $920 million and is bracing for more legal and regulatory scrutiny in the coming weeks and months, insiders say the most noticeable change has been the regulators’ use of “consent orders” to enforce wholesale changes across the institution’s risk management controls and systems. (more…)

Reforming banking’s risk culture requires breaking “accountability firewall”

By Henry Engler, Compliance Complete

NEW YORK, Sept. 11 (Thomson Reuters Accelus) - If there is one part of the cultural makeup of Wall Street that remains firmly in place despite the financial crisis and subsequent avalanche of regulations, it is the reticence among those who lose money to come clean early.

Many of the most spectacular losses in recent years — whether the JPMorgan “London Whale” episode, the UBS “rogue trader” incident, or Jerome Kerviel’s manipulation of internal systems at Société Générale — have all had one thing in common: concealment of trades gone badly wrong, or at a minimum, a lack of transparency and early acknowledgement of losses. And if one can point to a single reason for such behavior, it is the well-known fact that raising the red flag would mean the individual responsible would be shown the door. (more…)

New U.S. prosecution easing on marijuana does not cut laundering risk for banks, sources say

By Brett Wolf, Compliance Complete

NEW YORK, Sept. 6 (Thomson Reuters Accelus) - A Justice Department memorandum circulated last week that gave U.S. states leeway to experiment with pot legalization failed to address the provision of financial services to marijuana dispensaries, which suggests the Obama administration still is not prepared to allow money from state-recognized pot sales to flow into banks and other financial institutions, money-laundering policy experts said.

“The Justice Department could have gone the next step and at least applied its new standards to financial transactions that derive from medical marijuana proceeds. That at least would have been an attempt to take the burden away from the financial services community to make some very difficult determinations,” said Peter Djinis, a former regulatory policy official with the U.S. Treasury Department’s anti-money laundering unit, the Financial Crimes Enforcement Network (FinCEN).  (more…)

U.S. financial regulation has gaps in risk oversight, insurance, infrastructure, global stability board finds

By Nick Paraskeva, Compliance Complete contributing author

NEW YORK, Sept 3. (Thomson Reuters Accelus) – A Financial Stability Board (FSB) peer review of U.S. regulation found gaps in oversight of systemic risk, insurance firms and financial infrastructure.

The report called on the United States to develop the Treasury-led oversight council into a “systematic, analytical and transparent macroprudential framework” that better coordinates the work of its member regulators. The 10 agency heads in Financial Stability Oversight Council have not always seen eye to eye. (more…)

Cybersecurity should be a compliance issue, says expert

By Emmanuel Olaoye, Compliance Complete

WASHINGTON, Aug. 27 (Thomson Reuters Accelus) – In March this year, a group of Islamic hackers announced that they were launching the latest phase of their denial of service attacks against the largest U.S. banks. The group, which called itself the Izz ad-Din al-Qassam Cyber Fighters, targeted the websites of banks including Bank of America, Wells Fargo, and PNC Bank.

Within days, customers of those banks were complaining of difficulties in accessing the institution’s websites. (more…)

U.S. regulators urge firms to improve business continuity and disaster recovery plans

By Stuart Gittleman, Compliance Complete

NEW YORK, Aug.21 (Thomson Reuters Accelus) – Futures and securities firms should review their industry-wide and internal business continuity and disaster recovery plans to improve responsiveness to significant disruptions and reduce recovery time, their regulators said Friday in a staff advisory.

U.S. regulators have been particularly concerned over how financial firms plan for disasters since the attacks of September 11, 2001, and through the President’s Working Group on Financial Markets during the administration of George W. Bush urged the industry to strengthen its defenses. The concerns have included flooding following Hurricane Katrina and the threat of an influenza pandemic, and are growing. (more…)

Brokers face a fight asking the SEC to end exchanges’ SRO structure

By Nick Paraskeva, Compliance Complete contributing author

NEW YORK, Aug. 14 (Thomson Reuters Accelus) - Wall Street has asked regulators to consider ending the special supervisory status given to exchanges, saying that new technology such as dark pools and algorithmic trading has led to broker-dealers directly competing with exchanges for market share.

The exchanges have countered that market dispersion hurts investors, and are seeking regulatory protection from high frequency trading, and the Securities and Exchange Commission, which oversees both brokers and exchanges, is in the middle. (more…)

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