Nose in, fingers out

Recently a client asked me how to deal with difficult directors.  How to train them, you mean? I asked – how to encourage them to attend AML training and take note of our pearls of wisdom?  No, she said: I means directors who are bullies and tell other directors that AML is nonsense, who have zero respect for compliance and storm out of board meetings where AML policies are being discussed because it’s all a waste of time, who tell staff that AML is not worth bothering with and who generally set a Very Poor Example.  Heavens, I thought: I had no idea.  So I did some reading – looking for examples and suggestions – and although much of what I found was focused on creating an effective board of directors and choosing the right people in the first place, I did come across some compliance-specific tips that I can share with you.

First, the title of this post.  One of the common complaints about directors is that they forget what a director is for.  The clue is in the name: a director directs, while managers manage and staff do.  Many directors – particularly those who have risen through the managerial ranks – find it difficult to step back from detail.  But that’s what they need to do: the board sets the direction and the managers figure out the best way to get there.  Hence the mantra: nose in, fingers out.  So if you have a director who objects to how the MLRO is actually achieving the AML objectives of the firm – but still achieving them – remind him/her of the mantra.

Second, there is the relentlessly negative director.  This will never work, that’s not what we need to be doing, I don’t see why AML matters when it’s not generating profit.  Constant disagreement can hamper decision-making and frustrate the management who are trying to get things done.  It is the job of the chair of the board to make sure that the board is working effectively, and if s/he has not noticed (or become immune to) the detrimental effect of the negative director, you should bring this to their attention.

Third, you have the bullying director.  Boards are, by design and by intent, collegiate in nature: they are not a pyramid structure, with a leader and minions.  Agreement achieved by bullying is dangerous and destructive: the whole board can end up falling in behind a very strong and intimidating leader, which makes the board structure (and indeed philosophy) pointless.  Again, if you think this is happening, you need to alert the chair.  Quite what you do if the bully is the chair, I’m not sure – ideas please!

And if you want to see how bad it can be, take a look at this case from Dubai: in May 2016 two directors of a bank in Dubai (Raphael Lilla and Kapparath Muraleedharan) were fined for bullying a Senior Executive Officer and a Compliance Officer into opening accounts which they considered too high risk.  Thankfully the bullying was recognised as just that, and moreover the DFSA press release praised the SEO and CO for standing up to it: “The DFSA also commends the Senior Executive Officer and the Compliance and Money Laundering Reporting Officer for taking action to mitigate the risks to which the Firm was exposed, and for notifying the DFSA.”