Is Objectivity Possible for Compliance Consultants?

MSB Talk 4

Two articles appeared in the New York Times on September 13, 2013 which caught my attention because of its relation to ‘objectivity’ in the Compliance Consultant industry.    The two articles appeared in separate sections of the New York Times and had no bearing on each other in any way.  It was my reading of the articles which raised an interesting thought.

The first article entitled ‘ 2 Consultants to Banking Industry Come Under Scrutiny’ by Ben Protess and Jessica Silver-Greenberg concerns the Promontory Financial Group and Pricewaterhouse Coopers  being subpoenaed within the past few months by the New York Department of Financial Services.  It appears that there is a questioning of the Compliance Consultants being able to have total independence when reviewing a bank.  There is a possibility that there could be a conflict of interest  for the Compliance Consultant in giving independent assessments when at the same time it is the customer who is choosing and paying for the consultant work.  This situation is also causing concern to the Regulators  because of its own use of Compliance Consultants to correct and institute AML compliance processes for the banks.

The second article appearing in the New York Times the same day was ‘When Accountants Act as Bankers.’ By Floyd Norris.    In this particular case, Deloitte L.L.P was fined 14 million English pounds and one its retired partners Maghsoud Einollahi – 250,000 English pounds  for failure in its professional responsibilities for work conducted for MG Rover.  Apparently in the U.K, there are ethics rules of the Institute of Chartered Accountants which require accountants to consider the ‘public interest.’  In this particular case, the U.K Financial Reporting Council ruled ‘ They placed their own interests ahead of that of the public and compromised their own objectivity.’

After reading these two articles, the terminology of ‘ the Public Good’ is so very appropriate when it comes to Anti-Money Laundering and the Countering of Financing of Terrorism issues in the U.S.A.   These two serious issues if not controlled and thus prohibited at the banking level can be considered as being for ‘ the Public Good.’  And we would expect the compliance staff at the banks and the supplemental professional assistance from the Compliance Consultants to set up maximum procedures to prevent the infiltration of drug money and other criminal finances from entering the U.S Banking system.

I am under the belief that Compliance personnel are indeed very serious about their responsibilities in the prevention of money laundering and terrorist financing.  But there could be the tendency of trying to be lenient with their Customers not for financial gain but perhaps not wanting the hurt the ‘bottom line’ of their customers.  The areas of Compliance and Business Development do come under different mentalities.  On the one hand, if the compliance group institutes such strong compliance rules then from the business development point of view – it means a loss of revenue from operations.

Somehow we have to come to a level whereby there is a regulation of some sort which ties into the concept of the ‘Public Good’ which will clearly spell out the objectify role of the compliance consultants.   Then once this rule is established, both the customer and the compliance consultant would clearly understand seriousness of the U.S Compliance Regulations.  The consultant would then have no choice but to demonstrate a strict compliance assessment.   In a way, the rules will then provide more comfort to the consultant when conducting compliance work on an objective basis.

– Allan Ramlall