Wednesday, September 7, 2016


If you are compliance officer, charged with protecting your financial institution, or MSB, from money launderers, financial criminals, and terrorist financiers, the personal and professional risks associated with failure to identify and suppress problems, what we now call compliance malpractice,  or professional negligence, have grown exponentially in recent years.

No longer are you only concerned with termination of your position, compliance failures now carry additional, and much more serious, risks, such as:

(1) Being unofficially blacklisted in the financial community, through word of mouth, poor employer references, and even telephone calls warning potential new employers off. You end up working outside the financial industry altogether, at a greatly reduced salary.

(2) Civil fines and penalties, imposed by a regulatory agency. You are also publicly named and shamed, in agency and law enforcement press releases, which remain online indefinitely, and stigmatize you professionally. You story will end up in the media, to your extreme embarrassment and chagrin.

(3) Being suspended from your position and duties for a period of time by regulators, during which time you must be working somewhere else. The chances of returning to your original position generally become extremely slim, under those circumstances. More public shame accompanies this action, and your invitations to lecture at future compliance conferences and seminars, as a speaker, disappear.

(4) Being indicted, in a Federal criminal case, which generally means conviction and felony record, which, besides probation, or imprisonment, also brings with it a loss of Civil Rights. You spend time in a Federal Prison Camp, with low-level drug offenders, and after release, are further supervised for years, by the US Probation Office. It's like having a high school principal giving your orders, about where and when you can live, work, and whom you may associate with. Does that sound like fun ? It's not; You will become a pariah in your own community, and it will take years, if not decades, to repair your reputation and life.

In 2016, to avoid such untoward consequences, many compliance officers are doing what physicians, an often-sued profession, practice: we call it prevention. Go above and beyond the bare minimums, what we know as banking best practices, leaving ordinary, garden-variety due diligence behind, for total reliance upon enhanced due diligence, as a way of minimizing the risks of the compliance profession.

What are the most effective and efficient methods of performing enhanced due diligence ? I will discuss that in Part Two of this article; stay tuned.

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