It really comes as little surprise to learn the bearer of bad news at Westpac was removed from her role having investigated their massive AML compliance breach. Over my years as a regulator the rancid culture in many financial services businesses was apparent from the blend of arrogance and fear that I saw when talking to their staff and Directors. On more than one occasion I witnessed a fellow regulator cowed by a perception that somehow big banks were above the law. So it’s nice to see that AUSTRAC haven’t forgotten that their over-riding responsibility is to the citizens they protect. I hate it when the Australians do things better than us.
Most regulators expect a change of compliance officer to be notified to them, but it amazes me that it doesn’t get more attention – most agencies pay scant attention to the people, and focus instead on the paperwork (the “are you a nazi war criminal” approach…). With the use of the correct type of legal mechanism it is possible to absolve an ex-employee of any non-disclosure obligations. Imagine what a tool that is? Our culture of somehow thinking our duty to a (former!) employer is greater than that to our nation and fellow citizens needs to be tackled. We as a society need to make sure we understand that only ‘we the people’ can keep ourselves safe: businesses aren’t going to do it for us.
A while back I heard of a reporting entity that took legal advice about the level of personal liability that would fall on a compliance officer if they followed orders from the board to ignore AML obligations. Another has opinion shopped for legal advice that is clearly nonsense: they seem to think this patently incorrect guidance will somehow defend them in court. Even asking these questions indicates a cultural issue. The regulators really need to step up in this space, because they are the only counter to poor governance. For example, IRD used to consider it part of their public duty to take on incompetent accountants – other regulators could learn from that.
A key part of the answer is to improve the standard of regulatory practice – in many sectors the pendulum is well over to the “capture” side of the spectrum at the moment, with notable exceptions like the Reserve Bank & Privacy Commission. One of our most powerful, the IRD, is struggling to answer phones let alone take on tax cheats, and some other regulators seem to be unable to multi-task. It is not acceptable to stop your day job just because you are implementing new legislation or systems – that’s in addition, not instead of. Here’s a tip: invite fewer people to the project meetings.
Confidence in fair and even handed application of the law is critical to faith in our government and democracy – poor enforcement has very far reaching consequences. We are in need of a shake up to tackle the erosion of the last decade.