Attestation Update – A&A for CPAs

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Bank fiascos – slow progress on changing cultures to prevent the next fiasco

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Change in massive organizations is slow. Here are a few articles on the speed of compliance to prevent future fiascos.

4/1 – Wall Street Journal – HSBC Monitor Says Bank’s Compliance Progress Too Slow and 4/1 – Deal Book at NY Times HSBC Is Deemed Slow to Carry Out Changes – Quarterly report from the monitor on the 2012 DPA says he thinks the bank is not making enough progress on improving the anti-money laundering program. HSBC is now in year three of a five-year DPA.

On the other hand, progress takes time…

4/2 – This is Money at Daily Mail – Senior HSBC executive privately admits another major regulatory breach is ‘cast-iron certainty’, according to reports – This report got lots of coverage. I think it was reported elsewhere earlier than this article.

A senior compliance officer reportedly said that there is a high probability of another major regulatory violation at some point in the future. Several commenters and one headline I saw spun this as meaning the bank intends to break the law again.

I don’t think that is anywhere close to what he said, what he meant, or what he thinks. Keep in mind he was talking to regulators at the moment. If the full context of the conversations had been described in media reports, I’ll guess we would have learned he was saying that given the size of the bank and the range of compliance rules they face, they will eventually fail on compliance on some issue somewhere sometime.

Look at the size of the bank:

HSBC has 266,000 employees working in 6,100 offices located in 73 countries and territories speaking 145 languages. That info is from an infographic at the top right side of this page at the HSBC website.

How do you change the attitude and behavior of every one of those 266,000 people? How do you make a major change in a year or three? How can you make sure every person everywhere complies with every applicable law & reg?

If I had a clue on the answer to those questions, I would be a smashing success at running their compliance department.

On the other, other hand, it isn’t like the banks only got notice last week to change their culture…

8/8/12Francine McKenna at American BankerBanks Are Being Punished, Again and Again, to No Avail – This article is close to three years old. It could have been written this morning.

Ms. McKenna points out that repeated DPAs and fines for the preceding decade doesn’t seem to have forced a change.

Previously mentioned this article here.

My favorite line from her post is still:

We’ll see no justice as long those charged with protecting the public, the taxpayers and the investor are more worried about quick court wins and maintaining bank profits than punishing illegal activities once and for all.

In addition, many of the current fiascos are not old news. Some issues popped up during or before the great recession, but other issues have been created in last couple of years. Some of the behavior in fiasco headlines is only two or three years old.

…or only need to deal with ticky-tacky fine print requirements…

We aren’t discussing little bitty issues like how to get every loan officer in compliance with some new subtleties in calculating annual percentage rate.

Or training staff how to watch for customers making currency deposits just under the $10,000 limit to avoid triggering a mandatory report.

Or coaching every CSR to always get customer initials on that three-page disclosure for opening new accounts for existing customers.

No, there are massive attitudinal issues involved.

Like helping your customers carry bales of currency to their car as they get ready to cross the U.S. border.

Or having carpenters widen the windows at the teller stations so it is easier to slide bundles of currency across the counter.

Or having subsidiaries in place since 1910 to fabricate all the documents needed for customers to launder money.

Written by Jim Ulvog

April 7, 2015, 8:33 am at 8:33 am

Posted in Other stuff

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