WILL SHAREHOLDERS AT BANK OF VALLETTA SUE FORMER CHIEF RISK OFFICER FOR FAILURE TO CONDUCT DUE DILIGENCE ON €36M STEWARD HEALTHCARE LOAN?

Former BOV Chief Risk Officer & Executive Director Miguel Borg

If we take it as a given that the use of Artificial Intelligence by compliance officers conducting due diligence inquiries on new clients is now not only a breach of banking best practices, due to the increased information AI yields, but constitutes malpractice, then will bank shareholders, who are denied dividends at year end, due to regulatory fines and lost profits, sue for damages?

I bring this up after examining the case of Miguel Borg, the recently-resigned Chief Risk Officer and Executive Director at Malta's Bank of Valletta, that country's principal financial institution. Borg allegedly approved the €36m Steward Healthcare loan, based upon what has been described in media as grossly insufficient due diligence. That failed loan, which appears to be in jeopardy of being uncollectable, will reportedly result in zero dividends being paid to BOV shareholders next year. Borg, who has been the CRO for several years, reportedly earned in excess of €200,000 a year in his position, and it is rumoured that civil litigation is being contemplated by certain individual shareholders unhappy that they will not receive any return on their investments.

I will wager that a review of Borg's files will show that he failed to access any artificial intelligence platforms in his inquiries, and since AI has now become the gold standard for compliance to obtain information and data not otherwise available, but critical to any effective due diligence examination, a court of competent jurisdiction, taking judicial notice of the demonstrated primacy of AI in compliance, would rule that he is liable to his bank's shareholders.

Inasmuch as we live in very litigious times, lawyers for disappointed bank shareholders may very well choose to enforce their client's rights, upon the theory of gross negligence verging upon malpractice.Under the circumstances, failing to employ AI and ML in your risk-based compliance program no longer appears to be optional.