SIFMA General Counsel Criticizes Regulators' "Gotcha" Approach to AML Compliance
Commentary by Steven Lofchie
SIFMA Executive Vice President and General Counsel Ira D. Hammerman argued that regulators second-guess compliance decisions, and threaten implicitly that they will bring enforcement actions against compliance officers who make decisions with which the regulators disagree. The result, Mr. Hammerman emphasized, is that professionals avoid working in AML compliance, and in compliance in the securities industry generally, because the risk of personal liability seems too great. This, he stated, makes it difficult for firms to obtain AML compliance given the shortage of individuals willing to take the risk of being tarred by regulatory enforcement actions.
Mr. Hammerman singled out a proposal by the New York State Department of Finance ("NYSDF") to make compliance officers criminally liable for AML violations. The proposal would have the unintended consequence of worsening the shortage of individuals willing to take the personal risk of being in senior compliance positions, he concluded.
Mr. Hammerman delivered his remarks at SIFMA's 16th Annual Anti-Money Laundering and Financial Crimes Conference.
Commentary
The NYSDF proposal that was mentioned by Mr. Hammerman is problematic. The proposal would establish a regulatory standard that could not possibly be met by anyone regardless of their level of diligence or knowledge. The proposal opens the door for the NYSDF to bring enforcement actions against any bank and any AML compliance officer at any time. Mr. Hammerman may be understating the consequences of this type of regulation for filling senior compliance positions. Put differently, the only individuals who would accept positions as AML compliance officers under the NYSDF proposal are so desperate for jobs that no risk of career-ending personal liability could dissuade them.