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#Anti Money Laundering

Getting tougher at the top?

International Compliance Association

banking , regulators

2013 comes to a close in the UK with two significant developments which demonstrate that regulators and lawmakers have their sights set firmly on senior bankers. First came the news that Standard Chartered had stripped its Finance Director of responsibility for risk, reportedly under instructions from the Prudential Regulation Authority (PRA). Next, the Banking Reform Act received Royal Assent on 18 December.

PRA in proactive mood

At the start of December, Standard Chartered announced that it was transferring responsibility for risk from its Finance Director, Richard Meddings, to its Chief Executive, Peter Sands. Reports suggested that the move was brought about after the PRA had expressed concerns to the bank over its internal structure, and that potential conflicts might exist between Mr Meddings' various roles (his responsibilities covered finance, corporate treasury, risk and corporate development).

The PRA has pledged to be a more proactive regulator - to make "forward looking judgements" - and the story does much to support that pledge. It also highlights the growing emphasis being placed upon senior individuals and the drive towards improved bank governance; clearer lines of accountability; and greater protection for the independence of risk, compliance and internal audit functions within banks.

The Standard Chartered story represents a statement of intent on the part of the PRA, and has been welcomed by Andrew Tyrie MP, Chair of the Parliamentary Commission on Banking Standards (PCBS). While plenty of noise has been made around the more interventionist regulatory approach of the Financial Conduct Authority, the Standard Chartered story demonstrates that its prudential counterpart is also willing to take a proactive approach.

How many other big banks have had, or can expect, a similar conversation with the regulator?

Banking Reform Act

With the Banking Reform Act coming into law, the focus is now more than ever on the roles and responsibilities of senior individuals. Leaving to one side the ring-fencing measures which have gained significant attention, the Act includes some key recommendations from the report of the PCBS: senior bankers will be covered by a new criminal offence of “reckless misconduct that leads to bank failure”, while a new licensing process, replacing the approved persons regime, should place tougher requirements on the ongoing approval of top bankers.

Doubtless some will view this as an unwelcome compliance burden, but for many of those concerned with the need to improve the culture of the banking system it is an early Christmas present.

2014 promises to be an interesting year.


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