Conference Review: Raising the bar for compliance

The 6th Annual Anti-Money Laundering,
Compliance and Financial Crime Conference, hosted by Global Compliance
Solutions, aimed to raise the bar for compliance professionals with an event
programme that featured an interesting array of practitioners, investigators,
prosecutors, whistleblowers and reformed fraudsters.

Especially in the Cayman Islands, where
compliance professionals have to do twice as much only to be considered half as
good by the rest of the world, Karen O’Brien, managing partner at Global
Compliance Solutions, told conference attendees in her introductory words, “We
need to do more and we need to do it better”.

Echoing the conference theme, Langston
Sibblies, the deputy managing director of CIMA, acknowledged that much work
remains to be done but also outlined recent improvements to the regime in
Cayman. Sibblies specifically mentioned the strengthening of CIMA’s
independence and enhancements to insurance supervision with the new Insurance
Law. The Peer Review Group Report in connection with the Global Forum’s
assessment of the local regulatory framework supporting the exchange of tax
information also highlighted many of the recent improvements, Sibblies said.

A motivational speech by psychologist Bill
Crawford on the first day of the two-day event set the tone for one of the
underlying themes of the conference: The difficulties in implementing a
compliance programme and establishing a compliance culture. Crawford tackled
the issue from a psychological angle in terms of how to get others to “get it”,
illustrating a communications technique that could also be applied to other
aspects of life.

By identifying whether other people’s
responses are drawn from the upper part of the brain, the neocortex, or from
the limbic system or brainstem, all the pitfalls of a “trapped conversation”,
where the rejection of an idea leads to frustration and subsequently even
greater resistance, can be avoided, he said. 

Juan Llanos, director of compliance with
Unidos Financial Services, broached the topic of how to implement a compliance
culture within an organisation, demanding that a culture must first be
established by a company’s management leading through actions and not just
words. This must be followed by having the right people in place to adopt this
corporate culture “through assimilation”, systems that support this process and

Kem Warner went into greater detail by
outlining how to implement a whistleblower policy, before delegates heard from
the personal experience of an actual whistleblower. Martin Woods, a former
anti-money laundering and compliance officer with Wachovia, blew the whistle on
suspicious sequential travellers cheques from Mexican currency exchanges. He
spoke of his troubles in getting regulators to listen and the harassment he
received from his own employer, who sued him. Ultimately Wachovia was fined
$160 million for money laundering in what Jeffrey Sloman, the US Attorney for
the Southern District of Florida, called “Wachovia’s blatant disregard for our
banking laws, [which] gave international cocaine cartels a virtual carte
blanche to finance their operations.”

However, the presentation did raise serious
questions about both the viability of whistleblowing, the willingness of some
financial organisations to really enforce strict due diligence and the
effectiveness of fines as a deterrent.

Llanos, in his presentation, mentioned
statements he heard from compliance officials at large financial institutions
in the US, who spoke about their problems in convincing senior management to
appropriately fund compliance programmes. Some organisations have even
established internal funds for future potential fines to deal with any
infringements and failures, rather than improve their internal compliance
processes, he noted.

At least in the US, however, change might
be on the way with the Dodd Frank Act, which recently introduced financial
rewards for whistleblowers of between 10 per cent and 30 per cent of the
recovered value by the SEC in each case, delegates heard.

Woods’ presentation also brought home the
need for effective anti-money laundering and compliance systems, as in the case
of Mexico’s drug war not only involving money, but also the fact that human
lives are at stake.

The consequences of lax anti-money
laundering mechanisms with regard to corruption were highlighted by Robert
Palmer, a policy analyst and campaigner with Global Witness. Palmer published a
report in October 2010 on how some British banks were complicit in Nigerian
corruption. According to Palmer, British and French banks accepted millions of
pounds from Nigerian politicians.

The Global Witness report found that
Barclays, HSBC, RBS, NatWest and UBS all held accounts for two former Nigerian
state governors, Diepreye Alamieyeseigha of Bayelsa State and Joshua Dariye of
Plateau State, although public officials in Nigeria are prohibited from holding
foreign bank accounts by the Nigerian constitution. The accounts enabled the politically
exposed persons to launder corruption proceeds through the UK and spend the
funds on properties and luxury items.

If that was not enough to warn banks that
dealing with politically exposed persons exposes financial institutions to a
reputational risk, Dan Wise, a partner with the BVI firm Martin Kenney &
Co,, gave more examples of the dangers that PEPs represent in his
presentations. Rather than to focus on the client’s political profile,
compliance professionals should monitor the history, background and trading
patterns for inconsistencies, he advised.

Delegates were given other red flags from
recent fraud cases by speakers from US Homeland Security, Cayman liquidators
and Krys & Associates.

The penultimate presentation by Cayman’s
Senior Crown Counsel John Masters, who described potential consequences for
those convicted of financial crimes in line with the Proceeds of Crime Law,
were contrasted by the story of John Borbi, a US investment adviser who was
convicted of fraud. When a general stock market downturn wiped out previously
profitable investments, Borbi attempted to cover the losses of certain clients
with funds from other clients, who were less inclined to notice. Yet, Borbi’s
scheme was uncovered and he ended up in prison, divorced and without money,
albeit a reformed character.

Energetic and communicative, Borbi appeared
to confirm John Master’s statement that you will never meet a fraudster you
don’t like. “You will never find a rude conman. They are charismatic, they will
make you laugh, they will entertain you,” Masters said.