THE LIABILITY OF COMPLIANCE OFFICERS WHEN YOUR BANK FAILS TO DE-RISK

The ongoing dialogue over De-Risking continues unabated; American financial institutions who maintain correspondent accounts for Caribbean banks, many of whom are located in dodgy jurisdictions where AML/CFT compliance is simply not up to Banking Best Practices, where corruption is systemic, and where potentially increased risk, due to the very public exposure of fraud, money laundering and rampant corruption in the five Citizenship by Investment (CBI/CIP) East Caribbean states has become a direct threat which they are becoming extremely uncomfortable with, is a very real risk management problem.

You will not read about it in the financial press, as US banks try to keep news of their De-Risking actions quiet, but there have been a number of terminations of correspondent relationships,such as that very public action by a bank to block any CBI deposits for Dominica's passport sales program ( Dominica's economic passport program lost its visa-free access to the UK). It happens; accept it as being done more often than you think.

So what if a compliance head at an American bank recommends closing a correspondent account due to continuing and uncontrolled CBI risk, and the bank, to continue a lucrative financial relationship, fails to do so? In the past, most compliance officers were untouchable; the bank simply drew a large civil fine. Now, however, the reality is that Willful Blindness charges, for failure to act over an extended period of time, is a very real possibility.

What is a compliance officer caught in such a situation to do? I strongly suggest, unless you wish to spend two or more years in a minimum security prison, being totally bored, as well as blacklisted in our industry, that you (1) thoroughly document your recommendations for termination of any correspondent relationship, sharing those documents widely within your internal system, to the extent that it is permitted, (2) That you keep copies of that recommendation outside the bank, in a secure place, like sharing them with your personal lawyer, and (3) That you maintain a log of all conversations you have with senior bank officials about the termination of a correspondent account, especially those whom you report to, so that you have documented your efforts.

These are difficult times to be a director of compliance I know, but your job at gatekeeper, especially where there are emerging threats coming at you from the Caribbean, is essential. Keep at it, but by all means protect thyself from untoward events that some prosecutor could later decide constitute money laundering, and act accordingly.