Tuesday, August 19, 2014


If you read about imminent actions, by New York regulators. against bank consultants for "sanitizing" reports about bank clients, and were disturbed, you were not alone. The intentional deletion of negative information from reports of bank examinations, conducted by consultants, renders these reports, which are to be filed with regulators, misleading and even meaningless.

The two most damaging actions taken by bank consultants are, frankly, shocking:

(1) The consulting firm deleted information that explained the wire-stripping policy of Bank of Tokyo-Mitsubishi UFJ, whereby the names of all Iranian clients were removed by the bank, to avoid detection of sanctions violations.

(2) The consulting firm removed, at Standard Chartered's request, its recommendations for procedures which were designed to identify and interdict money laundering.

When banks have the ability to return draft reports to consultants, with paragraphs that they find objectionable, because they point out existing flaws, and the consultant delete them, the system is broken. This occurs because the banks pay the consultants' fees; this is a clear conflict of interest.

Perhaps it is time to tale the responsibility for examining banks, to see whether prior misconduct has been eliminated, away from the consulting industry altogether. Let government regulators alone assess whether a bank is playing by the rules.

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