Goldman Sachs executive Court Golumbic is raising the red flag.
Golumbic says a string of recent enforcement actions targeting financial sector compliance officers is “fueling concerns that they are being unfairly targeted.”
Golumbic is head of finance crime compliance at Goldman Sachs. He’s also an adjunct professor at NYU Law School.
Golumbic is the author of The Big Chill: Personal Liability and the Targeting of Financial Sector Compliance Officers — posted yesterday at the NYU Law Compliance and Enforcement Blog.
Golumbic says that law enforcement officials have responded to these concerns of unfair targeting by stressing that “in the rare instances in which financial sector compliance officers have been held personally accountable, the majority had engaged in affirmative misconduct.”
“Rarer still, they contend, are cases where compliance officers were found to have exhibited ‘wholesale’ or ‘broad-based’ failures in carrying out responsibilities assigned to them,” Golumbic writes. “In these particular cases, officials have stressed that the enforcement actions proceed only when, after carefully weighing the evidence, the facts indicate that the compliance officers ‘crossed a clear line.’”
But Golumbic says that “efforts to allay compliance officers’ fears and justify regulators’ charging practices appear to have been ineffective — the perception of targeting endure.”
“Indeed, the perception has coincided with increased attrition within the ranks of senior compliance officers in the industry,” Golumbic says. “In February 2016, The Wall Street Journal reported that the number of senior bank compliance executives who had left their jobs in 2015 was three times greater than in 2014. Evidence also suggests that the specter of personal liability is causing potential leaders in financial sector compliance to reconsider their career paths.”
In a recent survey of chief compliance officers of public companies, sixty percent said they would think more carefully about future roles they might consider given the risk of personal liability.
What to do to?
“One proposal for countering the perception of compliance officer targeting is the adoption in U.S. of an accountability regime similar to the senior manager regime in the U.K., which compels financial institutions to allocate certain conduct rules and other responsibilities to designated ‘senior management functions,’” Golumbic says. “Because these senior management functions include not only senior compliance functions, but a range of other senior business and control-side roles, this shared responsibility would provide greater assurance to compliance officers that their conduct will be assessed not in isolation, but within the context of a broader managerial effort.”
“Whether by adopting a U.S. analogue to the SMR or through some other measure, the perception of compliance officer targeting must be reversed before the ‘big chill’ sets in, and the industry finds that this critical function has been robbed of its best and brightest.”