Investing in Your Compliance Culture

For nearly four years between April 2017 and October 2021, Wells Fargo Advisors went unnoticed in a financially threatening scandal involving its failure to file 34 suspicious activity reports. Risky wire transfers facilitating "money laundering, terrorist financing, and other illegal money transactions to and from foreign countries"1 were swept under the rug due to the faulty implementation of Wells Fargo's 2019 update to its internal anti-money laundering, or AML, monitoring and alert system.

The August 19, 2022 compliance date of rule 18f-4 of the Investment Company Act of 1940 is approaching. The new rule is described by the Securities and Exchange Commission as an effort “to provide an updated, comprehensive approach to the regulation of funds’ “use of derivatives and certain other transactions”.  It imposes derivatives management duties on mutual funds (other than money market funds), exchange traded funds, registered closed-end funds, and business development companies. An example of a necessary step in adhering to the new policy is a written derivatives risk management program, relying upon stress testing, led by a Derivatives Risk Manager. In addition, there are Value at Risk (VaR) measurements of leverage risk and Board derivatives oversight and reporting.

In March of this year, the SEC released its annual announcement of the year’s exam priorities. This year’s priorities include many of the usual standbys: marketing and disclosures, valuation, custody of assets, conflicts of interest, etc. The specifically highlighted priorities also include some trending areas in financial services, like ESG (Environmental, Social, and Governance), crypto assets, and information security/cybersecurity.

Release Notes for CLEAR Compliance™ (Q2 - 2022)

Investment Giant Pays the Price for Misrepresented ESG Funds

Can a Hybrid Work Schedule Really Work?

In previous posts, we discussed the importance of correctly capturing Requirements (capitalized to indicate compliance requirements).   In conversations with large investment/asset managers (>$100bAUM) they have invested significant budgets in the on-boarding process. That process generally includes everything from KYC and AML to IMA/source documentation reviews.

In 2014, the United States’ regulatory hammer came down on BNP Paribas SA, sending a shock to compliance systems across the globe. Pleading guilty to violating the International Emergency Economic Powers Act and the Trading with the Enemy Act, the French bank would rack up a $9 billion price tag.[1] The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) would go on to make an example of those who violate sanction laws and risk national security interests, reaching the largest sanctions-related settlement of $963 million.[2]