Compliance Officers in Financial Firms Expect Personal Liability to Rise in 2015

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By Yin Wilczek

May 15 — Compliance officers all over the world are feeling the heat as regulators continue their scrutiny of financial institutions, a new survey indicates.

According to Thomson Reuters' sixth annual “Cost of Compliance” survey, 59 percent of respondents expect the personal liability of compliance officers to increase in 2015, with 15 percent expecting a significant increase.

The statistics are even starker for firms identified as global systemically important financial institutions (G-SIFIs). Sixty-five percent of respondents from G-SIFIs expect the personal liability of compliance officers to rise this year, with 21 percent expecting a significant increase.

The survey also found that regulatory fatigue is taking a toll. Seventy percent of the respondents expect regulators to publish even more information this year, with 28 percent expecting significantly more.

Increased Accountability 

“We have seen an ongoing rise in compliance leaders expressing regulatory fatigue as they are being held to increased accountability amidst an ever-escalating volume of regulation, the expectation of being knowledgeable, and the added pressure of being exposed to record fines for non-compliance,” Phil Cotter, Thomson Reuters' managing director for risk, said in a release.

“With heightened scrutiny and accountability, it has never been more vital for boards to continue to support the compliance function and senior leadership with the budget, resources and tools to help ensure a culture of transparency, trust and adaptive-change in behaviors throughout firms,” Cotter said.

The survey, issued May 13, polled 600 compliance practitioners in financial services institutions from Africa, the Americas, Asia, Australia, Europe, the Middle East and other parts of the world between November and January. The institutions were asked to self-identify as G-SIFIs to enable comparison with smaller entities.

Areas in which compliance officers have been held personally liable for the violations of their firms include economic sanctions and anti-money laundering.

Among other examples, the head of compliance for the New York branch of Commerzbank AG resigned after New York's Department of Financial Services initiated an investigation into allegations that the bank facilitated transactions for sanctioned clients such as Iran and Sudan. In March, the bank agreed to pay $1.45 billion to settle multiple U.S. investigations over sanctions violations claims and its role in one of Japan's biggest accounting scandals.

Tracking Regulatory Changes 

Among other highlights, the survey found that 38 percent of the respondents are using at least a whole working day every week to track and analyze regulatory developments. For G-SIFI respondents, that figure rises to 59 percent.

The survey also found that 7 percent of the respondents spend more than 10 hours a week to amend their policies and procedures to comply with the latest rules. In G-SIFIs, 25 percent of the respondents spend that amount of time to amend their policies and procedures.

Meanwhile, 71 percent of respondents in G-SIFI firms expect the cost of senior compliance personnel to rise in 2015, compared to 69 percent of the total population, the survey found.

The respondents also listed, among other statutes, the Foreign Corrupt Practices Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act and the Foreign Account Tax Compliance Act as the biggest compliance challenges they anticipate for 2015.

To contact the reporter on this story: Yin Wilczek in Washington at ywilczek@bna.com

To contact the editor responsible for this story: Ryan Tuck at rtuck@bna.com

The survey is available at http://accelus.thomsonreuters.com/special-report/cost-compliance-2015.