Increasing focus on personal liability

In 2012, HSBC was found to have been involved in a series of illicit transactions, including transfers amounting to more than $20bn (Forbes/BBC). No executives faced charges.

If you are an executive or Board Member at a financial institution, this outcome should no longer be expected. When it comes to liability, the spotlight has decidedly shifted to individuals.

Recent cases evidence this shift clearly. In May of this year, both Danske Bank’s former CEO, and former finance director were charged over their failure to prevent the flow of billions in illicit transactions through their Estonian affiliate, with further indictments reportedly still pending (Financial Times). Recently, news broke that 17 Goldman Sachs Directors were facing criminal charges relating to illicit funds raised through the Malaysian sovereign wealth fund, 1MDB (Financial Times). Those involved could face up to ten years in prison if convicted.

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Across global financial markets, regulators are focusing increasingly on banking executives’ liability in financial crime events. Over the past four years, the UK’s Financial Conduct Authority (“FCA”) has opened more cases year-on-year (Financial Conduct Authority). Last year, the FCA issued final notices against 22 individuals, imposing fines on eight. The cost of these fines on individuals totaled £80.2m, a stark contrast to the two previous years, with neither year exceeding £1m (Financial Conduct Authority).

Potential consequences

The consequences may extend beyond criminal charges and fines. When an executive or Board Member, knowingly or unknowingly, is involved in a financial crime event and/or criminal violation, they may lose their job, and may no longer be considered fit for a new one, regardless of the legal outcome (European Central Bank). Globally, fit and proper standards lay out soft prohibitions on those who have previously run afoul of, or have even been investigated for violations of financial regulations (Financial Conduct Authority). To put it simply, not only are personal assets at stake, but careers as well.

Bank executives must now ask themselves this question: Are they comfortable betting their careers and assets on the effectiveness of their institution’s financial crime programme? Regardless of how one may feel about this shift, the reality is that a good risk management strategy acts as an institution’s liability insurance.

Personal liability in large organisations

When a regulator identifies financial misdeeds, one of their primary focuses is assigning responsibility for the transgression. When an executive finds themselves under scrutiny, they will have to demonstrate that a financial crime was committed in spite of their best efforts to prevent it. The adequacy of their work will be judged against their bank’s unique risk profile, and in these cases, ignorance is no defence. Executives must be aware of their exposure if they are to effectively and adequately manage it. In large financial institutions this task is made more difficult by the complexity of such organisations. Monitoring becomes exponentially more difficult with size, intricate organisational structures, complex payments and products, and increased cross-border scope. Yet, the burden remains the same: executives must ensure adequate controls are in place, notwithstanding how Sisyphean this task may seem.

The Elucidate Financial Crime Index (“EFI”) as a solution

The EFI allows decision makers to holistically and continuously assess an institution’s risk profile, ensuring awareness of risk exposure, and enabling quick and effective response to any outstanding risks in a demonstrable way.

Why take the risk? The EFI takes the guesswork out of managing FinCrime exposure so that executives, Board Members can easily and swiftly understand their institution’s vulnerabilities, take action and see the results of their actions on their institution.

To learn more about Elucidate, visit or contact our team.

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