No escape for NY compliance officers

Ever since it burst onto the regulatory scene in 2011, the New York Department of Financial Services has specialised in ruffling feathers.  In August 2014 they stepped out of line with all other regulators (who were considering a united approach) and issued their own penalty of US$300 million against Standard Chartered for AML failings, while in June 2015 they lost patience with international foot-dragging on the matter and announced their BitLicense, “the first comprehensive framework for regulating digital currency firms”.

And now they’re at it again.  On 1 December 2015, they issued a proposed AML regulation that, inter alia, requires chief compliance officers of banks and money transmitters to annually certify that, “to the best of their knowledge”, their monitoring and filtering programs are in compliance and that they had reviewed, or caused to be reviewed, those programs.  These poor souls will then be held personally liable for the effectiveness of the AML transaction monitoring and sanctions screening regimes of their institutions.  And criminally liable: “All regulated institutions shall be subject to all applicable penalties provided for by the Banking Law and the Financial Services Law for failure to maintain a transaction monitoring program, or a watch list filtering program complying with the requirements of this [regulation] and for failure to file the certifications required…  A certifying senior officer who files an incorrect or false annual certification also may be subject to criminal penalties for such filing.”  This is not actually a surprise development: earlier this year, DFS then-supremo Benjamin Lawsky indicated that the regulator would start holding bank executives personally accountable for their institution’s AML and sanctions shortcomings.

The Rockefeller Center skating rink, Rizzoli’s bookstore and the Metropolitan Opera House may not be enough to make up for this.

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