In the words of the song “… are the last words of a fool”
i
When the legislation states ‘must’ it is clear that we need to just ‘do it’. But what happens when it states ‘should’ or ‘it’s best practice’? When a director decides that if it doesn’t say ‘must’ then don’t waste company time or money on it, it’s an unpleasant road for a Compliance Officer to go down, and whilst most board members these days are aware of the perils of wilful blindness, there are still a few mavericks willing to pick a fight.
Given all the issues which businesses, small and large, have had to face to keep afloat during the pandemic, it was hardly surprising that a “pragmatic approach” was heard echoing through the emptying offices and the computers of staff working from home. Unfortunately, pragmatism can also lead to a looser interpretation of the usual ethic and principal frameworks in place, while looking for a chink in the legislation to justify not doing something lest you lose a valuable client.
With the current situation regarding Sanctions following so closely on the back of the pandemic, will Boards be looking for the Compliance and Legal teams to find those chinks? It was interesting to hear a question at a recent conference from an attendee wanting to know which legislation took precedence – Data Protection versus Anti-Money Laundering/Countering Financial Terrorism. The answer was the latter, and I can’t imagine any number of semantics and navel-gazing debate would make the Regulator take kindly to a company using ‘privacy’ or ‘minimum necessary’ to explain why the usual ‘best practice’ policy was ignored regarding the identification of the beneficial owner of a structure or the client’s source of wealth.
In 2020 you may recall the Bank of China paid a sobering €3.9m fine for turning a blind eye to customers not paying European taxes when moving their millions to Asian-based accounts, and the Bernie Madoff 2008 Ponzi scheme, and how in 2017 one of its trustees claimed that greed was the reason that the BNP Bank turned a blind eye to fraud. According to Kyle Kroll
ii , a US attorney, this type of ‘blind eye’ fraud claim is on the rise and advises that to avoid litigation, firms should be proactive, investigate and “make a reasoned decision disconnected from profit”.
Although not all Board members and decision-makers are going to be versed in Kant or Nietzsche, they should be aware of the need to abide by the rules and standards written into the legislation relevant to their industry and be able to demonstrate they are acting with integrity and competence whilst ensuring the financial soundness of their business. To quote Margaret Heffernan in her 2011 book ‘Wilful Blindness’
iii, “the biggest threats we face are the ones we don’t see, not because they are invisible but we choose not to see them”. So hopefully, when the Regulator comes knocking, you don’t have to, in the words of the song, “wish I’d done a little bit more”!
i Should Woulda Coulda – Written by Beverly Knight and Craig Wiseman 2002
ii 'Blind Eye' litigation and what it means for banks - BankBeat
iii Wilful Blindness: Why we ignore the obvious - Margaret Heffernan, Simon & Schuster UK