The New York State Department of Financial Services has proposed new tough anti-money laundering and financial crime prevention regulations for NYS-regulated banking entities, as well as certain non-bank entities including check cashers and money transmitters licensed under NY’s banking law. Under proposed new rules, affected entities must have enhanced transaction monitoring and filtering programs that “reflect all current [AML laws], regulations and alerts” and that are designed to stop transactions that are prohibited by US government sanctions programs. They must also have processes to help ensure their transaction monitoring and filtering programs utilize accurate data from all relevant sources. Moreover, on an annual basis, the chief compliance officer or functional equivalent of an affected entity must certify under oath that the firm’s transaction monitoring and filtering program “complies” with all provisions of the new regulation. The new proposed rules will be subject to a 45-day comment period after their publication in the NYS Register. Separately, Barclays Bank plc agreed to pay a financial penalty of over GBP 72 million (approximately US $108 million) to the Financial Conduct Authority in the UK related to a single transaction arranged during 2011 and 2012 “for a number of ultra-high net worth politically exposed persons.” FCA claimed that, in arranging the transaction – which was valued at GBP 1.88 billion (approximately, over US $2.8 billion) – Barclays did not engage in enhanced due diligence despite red flags that should have prompted greater inquiry. It was also unclear, at the relevant time, said the FCA, “who, if anyone, within Barclay’s front office senior management ... was responsible overall for overseeing [the firm’s] handling of the financial crime risks associated with [the relevant transaction].” Importantly, FCA brought its action although it made no finding that “financial crime was facilitated by Barclays.”
My View: Compliance officers will be placed in an impossible circumstance if they must certify that their firms comply with all laws, even if just to the best of their knowledge. It is one thing to require a chief compliance officer to prepare a firm’s annual compliance report, relying on sub-certifications from various corporate officers; however, the obligation to certify its accuracy should more appropriately lie with the chief executive officer. This is because, ultimately, all corporate officers report to the CEO, not the CCO. The CCO is not a supervisor. Moreover, CCOs are employees of a firm, not of the State of NY, and should not be viewed as adjuncts to government enforcement staff.