On 25 February 2015, Benjamin Lawsky, the superintendent of the New York Department of Financial Services (“DFS”), delivered a speech at Columbia Law School on his view of the role in the US federal system of the financial regulators of the 50 US states. He believes that state regulators can play an important role in protecting the integrity of the US financial system by providing additional resources to supplement the limited resources of federal regulators. He also discussed his view that individuals should be held accountable for misconduct at financial firms, and he noted that DFS has focused increasingly on individual accountability. Superintendent Lawsky also stressed the importance of maintaining effective anti-money-laundering (“AML”) programmes to prevent terrorist financing. He said that DFS was considering conducting random audits of financial firms’ AML systems and imposing a requirement on senior executives to “personally attest to the adequacy and robustness of those systems”, much as they are currently required to attest to the accuracy of financial statements. He concluded his speech by discussing measures to strengthen information security in the financial sector.
Recent DFS actions have been consistent with Superintendent Lawsky’s views both on the role of state regulators and on individual accountability for compliance violations. In June 2014, as part of the settlement between BNP Paribas and state and federal regulators for violations of sanctions laws, DFS collected $2.24 billion of the overall $8.9 billion fine and required the bank to terminate the employment of 13 individuals, including the Chief Operating Officer, two senior compliance officers, and two other group heads, and take disciplinary action against 32 other employees. In the insurance sector as well, DFS has actively policed compliance with federal sanctions laws involving Iran. DFS’s focus on individual accountability also is illustrated by its December 2014 settlement with Ocwen Financial for misconduct in servicing subprime mortgages, which involved the resignation of Ocwen’s Executive Chairman.