Academic journal article American University Business Law Review

Panel I: Evolution of the Cco Role & Expectations of Ccos in Today's Regulatory Environment

Academic journal article American University Business Law Review

Panel I: Evolution of the Cco Role & Expectations of Ccos in Today's Regulatory Environment

Article excerpt

M = Moderator

P = Panelist

A= Attendee·

P1: Hi, I am the global head of financial crime compliance at [Redacted]. I have been there since 2005 and, in a prior life, I was a federal prosecutor in Manhattan and before that, I was with the U.S. Treasury Department ("Treasury") as a senior policy advisor to the Undersecretary for Enforcement.

I got into compliance by accident. I became an expert on money laundering policy while I was at Treasury. I took that expertise to my role as a federal prosecutor and pursued cases against the heads of Mexican and Columbian narcotics cartels from a financial perspective. Great line of work-you meet a lot of nice people. I eventually graduated to whitecollar crime and securities fraud.

Then when it came time to leave the U.S. Attorney's Office-that roughly coincided with September 11, 2001 and the PATRIOT Act passed the year after September 11th-broker-dealers needed anti-money laundering officers and Ray Kelly, who was a mentor of mine at the time, former Commissioner of the New York City police department, recommended that I consider doing a job like that. I really liked being a prosecutor. I did not really think I was cut out to be a defense attorney so I liked the idea of sort of being a policeman on the inside. And so, for the last twelve years that is what I have been doing. I loved wearing the white hat. Now I sort of wear the beige hat and I enjoy it greatly as well.

When Ml asked me to talk about the evolving role of the compliance officer, the thing that stuck out to me more than anything else is the fact that compliance officers generally, and specifically in my industry, are facing the specter of personal liability in ways that they never have before, which is a daunting notion. I cannot go to jail; there are far too many people in there that know me there.

And this specter of personal liability trails a number of significant cases against compliance officers that have occurred within the last couple of years and a lot of policy announcements of the sort that Ml and M2 were referring to and a lot of rhetoric among members of Congress, the press, and the like. I have worked with people like Mary Joe White, Preet Bharara, Andrew Ceresney, George Canellos and I completely accept the representations they have made when they say they carefully weigh recommending cases against compliance officers and only do so when the evidence clearly supports such action. That typically occurs in one of two ways: (1) when compliance officers cross the line by engaging in affirmative misconduct or obstruction, or (2) when regulators have concluded that a compliance officer exhibited some "wholesale failure" to do their job. No one disputes the propriety of pursuing an enforcement action against a compliance officer who engaged in affirmative misconduct. The controversy therefore centers around the enforcement actions that allege in a wholesale failure to do their jobs. Within this category there have been a number of highly publicized cases. Some of them occurring in the Investment Advisers Act and some in the Bank Secrecy Act/anti-money laundering context. The facts of these cases are obviously different, but presumably they all gave rise to this conclusion that there was a wholesale failure to execute for which compliance officers were allegedly responsible.

What I have been struggling with is that if the evidence so clearly supported the conclusion that there was a "wholesale failure," why then is there this perception-and it absolutely exists-among compliance officers that they are being targeted or unduly singled out? There is also empirical evidence to support this perception. For example, a DLA Piper survey performed earlier this year indicated that eighty-one percent of respondents surveyed said they were at least "somewhat concerned" about their personal liability.1 Sixty-five percent said that the recent statements by people in the Securities and Exchange Commission ("SEC") and the Department of Justice ("DOJ") had caused them to pause when considering their future roles as CCOs. …

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