Week In Compliance: Local News uses beauty as click-bait

Hello on this crisp-cool Friday here in New York. Excuse my unexplained absence, the reason was personal.

Rochelle Yazzie

News from Albuquerque: “Southwest Capital Bank has hired Rochelle Yazzie, who will work as an Operational Compliance Specialist.” Okay, so, this isn’t exactly new to the compliance world at large, but I find it funny that this is news to Albuquerque, especially for someone who is going into a role at the bottom of the compliance organization. Just goes to show you how small that town is. Yazzie showed up on the local newspaper’s “People On the Move” column. – Albuquerque Business First 

“Dozens of Swiss banks have been spilling their secrets this year as to how they encouraged U.S. clients to hide money abroad” – WSJ

New CFPB proposal would publish arbitration awards given to consumers from banks and credit unions, making it part of public record like court cases. – Tina Orem from Credit Union Times 

God giveth in investment returns – Amvona Fund LP is a hedge fund run by a Greek Orthodox church, which exempts it from compliance from SEC. It manages $20 Million. – Claire Groden at Fortune

SCCE‘s 2015 Compliance Officer Compensation Survey is out, HERE!

2015 Compliance and Ethics Officer Salary SurveySome takeaways from the aforementioned survey: It is does not include non-managing compliance officers, it does not include CAMS or CRCM or many of the technology certificates, it does not include many people in financial services (just 8%). 50% of respondents who make more than $1M in compensation per year had JD’s. And, if presentation matters to you, it used Microsoft Excel’s default setting for tables.

KeyCorp seeking $4 billion purchase of First Niagara.” (The Buffalo News). Buffalo, NY is obviously worried that this could mean job losses for the area. For me, I’m observing KeyCorp executing on a long tradition of itself: buying smaller banks. KeyCorp’s ambition is to become another national bank, the likes of JPMorgan Chase, Citigroup, Wells Fargo, and Bank of America Merrill Lynch. There are couple other contenders for such a role: PNC, USBancorp, Capital One, Suntrust, BB&T, Fifth Third, Citizens, M&T, and Huntingdon.

Singapore‘s tax authority collects $217 Million in unpaid taxes. (The Business Times). Even on the island of prosperity, tax evasion happens.

Goldman Sachs fined $50M by NY regulator for leaking data from Federal Reserve Bank of New York. (ValueWalk).

Jobs In Compliance

Opinion: 3,415 American renounced their citizenship

American immigration policy is a problem. Not just do poor people from other nations want to come here but rich people from America want to leave. In 2014, 3,415 people gave up their American citizenship. As of September 30, 2015, 3,221 people gave up their citizenship. That’s 15 times more than in 2008. (Sophie Yan of Local Syracuse). This is a result of FATCA, the tax law that requires reporting assets held by American in foreign jurisdictions. The law’s reach is long, just $10,000 in assets. While it is illegal to renounce American citizenship because of the tax bill associated with foreign assets, the the law faces a steep cultural hill. America was founded on the fact that it did not want to pay taxes to Britain. The problem with many of the new financial regulations is that they don’t tackle the primary problems, they tackle tertiary ones. FATCA is no different. Reporting foreign assets might be a solution to getting information, but proving that a person gave up citizenship due to taxes is quite difficult. Without explicit evidence, the only evidence that would exists, at best, are circumstantial. Plus, not all jurisdictions cooperate with the US, and even when they do, they don’t cooperate with laws that would be financially beneficial to them. FATCA is one of those laws. They could be giving up valuable tax dollars in various forms if the interested person finds the jurisdiction supporting US tax policies that was being evaded. The other problem with jurisdiction is that FATCA will likely reveal tax avoiders, not tax evaders. The difference is that tax avoiders are avoid taxes using the rules while tax evaders are not paying taxes they are supposed to be paying either by misclassifying accounting rules or simply hiding the funds through some legal convolution. The solution for the immigration problem is extremely complicated. Plus, I don’t have an integrated, holistic one to share with you. I just wanted to point out that regardless of the law, the culture of not paying taxes is the primary problem. The solution really should be cultural, not legal.


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Marcus Maltempo is a compliance professional with more than a decade of experience helping banks, law firms and clients manage investigations and regulatory responses. He is a member of ACAMS and ACFE. 

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What people don’t talk about when they talk about the tone at the bottom

“Tone at the bottom” is often used to talk about how messages from leadership gets translated into action. This “action” includes attitudes.

I was talking to a friend of mine who went to a Christian-Business talk. It was given by Chick-Fil-A‘s current CFO.

I love the fact that my friend is really into finding advice from senior leaders. But she and I often get defends indefensible positions. This time was no different.

The CFO touched on a number of topics, one of which is how the corporation inspires employees in their restaurant. (Chick-Fil-A is a franchise, so, in this case, “employees” also refers to employees of franchisees.) The Corporation does this through communicating its value and hiring only those who believe in that value. Then she went on to contrast that by presenting her own company, an accounting firm, and despite its efforts to do the same thing, it fails to instill such values in its employees. She felt that it was because Chick-Fil-A puts money where their mouth is. Among the examples she provided to support this was the fact that Chick-Fil-A gives away 30% of its income to charity, it has even thwarted two efforts by Warren Buffett to buy the shareholders out in order to make it a public corporation.

As an amateur economist, I had to point out to her that her professional services company and the CFO’s food products company are materially different in economic terms in ways that would make Chick-Fil-A’s business model would not work in her organization. Chick-Fil-A’s success, in this case, is not replicable in her organization and it would also fail.

Here’s why: Chick-Fil-A is in an industry with a classic pyramid shaped power structure. The number of employees it would take to undo it would proportionally increase as the span of control of managers increases. Her accounting firm is in an industry with a matrixed power structure. While she might not be able to negotiate very well with her superiors, she has the ability to go into the labor market for better opportunities if she wishes because the organization relies on her not just to make the product but to create it from scratch. Most functions of at Chick-Fil-A does not require expert decision-making skills, while most functions in accounting firms do.

The tone at the bottom is far easier to manage in industries where employees have little bargaining power. The reason is because tone is not free either. One submits to the successful tone existing successful tones if one cannot create her own music. If she could, she would become a concert soloist, so to speak.


Marcus Maltempo is a compliance professional with more than a decade of experience helping banks, law firms and clients manage investigations and regulatory responses. He is a member of ACAMS and ACFE. 

To Shell Or Not To Shell: Moral Dilemma

One million pairs of socks: knitting for victory in the first world war

The use of shell companies has increased over the years, and as well as their traditional use of decreasing tax liability…  they are now commonly created to hold a parent entity’s assets, to facilitate mergers or to protect trade secrets. The use of shell companies is not just limited to decreasing the burden of high taxes or for other legitimate business reasons. A 2011 World Bank Report, “The Puppet Masters”, investigated over 800 cases of corruption between 1980 and 2010, almost all of which involved the use of a shell company. Indeed, shell companies are sometimes used for illicit purposes including money laundering, bribery, and tax avoidance – they are the ideal corporate vehicle through which companies and their leaders can conduct such illicit behavior because they offer a high-level of anonymity for their true or “beneficial owners”, making it difficult for authorities to trace such crimes to back to the source. – Compliance Insider

For companies in the United States seeking to do what is legal, shell corporation is almost a requirement. For companies seeking to do what is right, it is a little more difficult.

The business advantages advantages are clear: secrecy, tax avoidance… those are the two primary benefits. But those are some incredibly large benefits. If a corporation could hide profits or hide assets, it can not just benefit the shareholders but also the executives that manage the secrecy and tax avoidance.

What the right thing to do is very difficult question. If no competitor is using shell corporations, then the right thing is clearer. Despite the legal loophole having been available and known by legal professionals for decades, it was considered immoral and uncouth to use shell corporations fifty years ago. Now, even the CEO of Apple, the largest corporation by valuation, is unapologetic about being “smart” to avoid taxes. Tax accounts and lawyers are quick to point out that tax avoidance is legal but tax evasion is illegal. And all human’s in their right mind would know that not all legal activity are moral, as is not all illegal activity are immoral.

Use of shell corporations, then, comes down to choosing whether it is the right thing to lose some market advantage and profits to shareholders for contributing adequately to an economic system that benefits to held corporation that actually produces products and services. It comes down to allegiance.

Apple, I’m picking on Apple because it is the largest company in the world, but it definitely is not leading the two-faced allegiance of corporations. Apple, like many other companies, have decided that it can be a Irish corporation even though it is headquartered in California. It is basically stating that it is legally Irish but not actually. The true test of such things is this: in a war between the nations of its legal headquarters and its business headquarters, and if these nations asked Apple to contribute to the war effort the way companies did during World War II, which side will Apple choose? Or maybe it won’t choose a side at all and flee or just take advantage of the situation on both sides somehow. Ultimately, its action will either make it American or Irish or a corporation of some other nation… or… a sociopath. And that’s the disturbing thing about this moral dilemma. While the first three statements reveal Apple’s true identity as a national interest or a corporation with no backbone, but we also allow it to be a sociopath when we don’t allow people to be so. And this isn’t an argument for allowing people to be sociopathic. This is an argument to disallow corporations from being sociopathic. Don’t allow shareholders be sociopathic through a legal framework. Considering only wealthy people own shares of corporations – whose ever heard of a homeless who died of being homeless – why do we allow wealthy people to be sociopathic?


How do you like applying moral philosophy to Compliance? 


Marcus Maltempo is a compliance professional with more than a decade of experience helping banks, law firms and clients manage investigations and regulatory responses. He is a member of ACAMS and ACFE. 

Week In Compliance: Wolverine charged by SEC

credit: j4p4n

SEC charged Wolverine Trading LLC and Wolverine Asset Management LLC with failing to prevent insider trading. – SEC

Payday lender will be able to sue FDICFRBOCC – “A U.S. district court judge has ruled that a case brought by the Community Financial Services Association of America Ltd. against the Federal Deposit Insurance Corp., Federal Reserve Board and the Office of the Comptroller of the Currency can move forward. The plaintiffs are seeking injunctive relief from what they argue is agency involvement in the Department of Justice’s Operation Chokepoint initiative against payday lending.” – Dodd-Frank Update

“Costs of overhauling internal systems could deal some insurers a hard blow.” – John Everington at The National, reporting on S&P

“[Fee disclosure rule] was a good place to start. Hopefully this will create a momentum for increased transparency with other fees,” said Judith Shaw, President, North American Securities Administrators AssociationTed Knutson at Financial Advisor

Brian Grazer, renown film producer, had Tom Cruise lead the cost compliance effort on Far And Away. – Business Management Daily

IRS to scrutinize retirement accounts – “Citing what it calls a ‘historical pattern of non-compliance,’ the Internal Revenue Service has said it will intensify compliance reviews of most classifications of employer-sponsored retirement plans.” – Nick Thornton at Benefits Pro

National Association of Realtors defends money launderers by effectively stating that “mandatory anti-money laundering controls imposed on other regulated entities make up for the absence of regulations covering real estate agents.” – Tom Weldy at The FCPA Blog

Middle office jobs have become even more stressful – Paul Clarke at eFinancial Careers

Jobs In Compliance

credit GDJ

Opinion: VW emissions scandal weighs on financial services 

I have not referred to the VW emissions scandal in Money Compliance. It is not a scandal in the financial services sector. But I should address the part that does affect financial service. Whenever money is involved, financial services are involved. In this case, all of the employees involved in deciding to trick emissions testing are, essentially, laundering money. After all, money laundering is legitimizing illegal gains, and gaining from evading the emissions regulations are illegal. Of course, the legal cases have not been prosecuted yet, so, I am not opining about the guilt or liability of any party. But let’s be clear about one think: banks are in a difficult position when corporate scandals are revealed. Do they immediately freeze assets? Whose assets? Are they opening themselves up to liability if they freeze assets because they are effectively judging their client? Are they opening themselves to liability if they don’t freeze assets because they are not protecting the public interest? The operational issues are dicey. Many developed jurisdictions have policies laid out for situations like this. I’m sure German does. But what if you work for a bank who has a branch in a jurisdiction without such directives and scandal breaks out in that jurisdiction? I find that banks are always shorted on credit for the difficult job they have simply because of the poor job they do on other areas. Banking services have a value to society. We should recognize that. And banks provide a way to make legitimate transactions and accumulation of wealth take place while deterring, preventing, and aiding investigations and prosecutions of illegitimate transactions and accumulations of wealth. As for the VW case, since it took decades of potential illegal activity, including breaking international treaties, the whole global financial sector is now involved in investigating the financial aspect of VW.


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Marcus Maltempo is a compliance professional with more than a decade of experience helping banks, law firms and clients manage investigations and regulatory responses. He is a member of ACAMS and ACFE. 

Ivory Queen’s Name

credit: ITV

Tanzania has caught the Yang Feng Glan, the 66 year old mastermind behind an ivory trafficking ring.

Yang’s story is unusual. She moved to the central african nation of Tanzania in 1975, learned Swahili and became a translator. Authorities have evidence that she started trafficking in 2006. She made connections with Chinese executive, presumably through her translation work. She is currently the vice president of Tanzania China-Africa business council and the owner of a Chinese restaurant.

Tanzania’s elephant population has halved during the time Yang was involved. While she was not the only one to cause the decline, she is known to be one of the leaders of the trafficking that caused it.

He bank accounts are likely to have been seized and frozen and is probably being reviewed for any evidence of who might have purchased ivory from her.

China is known to be the leading market for elephant ivory.

In other elephant news: there is scientific evidence to show that elephant genes have developed cancer-fighting traits.


Marcus Maltempo is a compliance professional with more than a decade of experience helping banks, law firms and clients manage investigations and regulatory responses. He is a member of ACAMS and ACFE. 

Week In Compliance: Everybody’s a Terrorist!

You’re a Terrorist, and You’re a Terrorist, and You’re a Terrorist!State Department designates additional terrorist fighters. And there are many. Find it HERE.

Leniency Granted! – Consumer Financial Protection Bureau (CFPB) and Office of the Comptroller of the Currency (OCC) will be lenient in enforcement of TRID. TRID is TILA-RESPA Integrated Disclosure. TILA is Truth In Lending Act. RESPA is Real Estate Settlement Procedures Act of 1974. The examinations for compliance with TRID will primarily focus on “overall efforts” over itemized compliance. This language comes from identical letter from the CFPB and the OCC, which can be found HERE. – Nikki Smith, Federal Title & Escrow Company

Fraudster hound you for debts you never had! – These two companies and an additional person, Broadway Global Master Inc., In-Arabia Solutions Inc. and Kirit Patel, settled with the Federal Trade Commission for allegations of defrauding consumers to pay debts stemming from payday loans. This probably doesn’t affect you since you probably don’t get payday loans, but if you do, don’t work with these people. – Dodd-Frank Update

Millennials are optimistic for absolutely no reason! – “Millennials expressed the most optimism” despite living paycheck-to-paycheck. – ABA Banking Journal

“It is striking that most of the erosion in community banks’ share over the past decade has been concentrated among the very smallest loans.”  – Governor Lael Brainard at The Third Annual Community Banking Research and Policy Conference

Former CFO of Siemens Argentina pleaded guilty to conspiring to violate the anti-bribery, internal controls, and books and records provisions of the FCPA, and to commit wire fraud. – Richard Cassin, The FCPA Blog

Grant Thornton India and Grant Thornton Australia charged for breaking auditor independence. – SEC (HERE & HERE)

credit: Wikipedia

Bill Gates sues Petrobas, complaining of “pervasive bribery and money laundering scheme.” – Jonathan Stempel, Reuters

Jobs In Compliance

Opinion: Regulatory Creep, The New Kind 

No, regulatory creep isn’t someone stalking you. That’s when more and more regulations are imposed over time, usually as a result of disaster, and the regulations end up doing more harm than good. I am not anti-regulation, but there is a new type of regulatory creep going on. The new type of regulatory creep hasn’t so much to do with so many regulations but simply the complexity of them. I am a financial regulatory compliance expert and while the growth in the profession is good for me, this particular type of growth is bad for the economy and, therefore, bad for my profession on the long run. We are getting very close to making everything possibly illegal or subject to a prescriptive policy or procedure. A major part of this is the legal system we have, which I will address it by saying that we have letter-based laws rather than spirit-based laws. For example, rather than punishing a financial advisor for not seeking out for the best interest of his client before seeking out the best interest for himself (which is the standard for lawyers and accountants), we specifically allow them to be brokers AND dealers. The purpose was to reduce the cost of transactions. I won’t go into the economics of this, but economically it makes sense… for 1915, not 2015. The actual cost of financial transactions through our centralized counterparty system in our markets is less than a penny per transaction. As a matter of fact, the fraction is so small and continues to decrease that I cannot recall if it is in the 100th of a penny or 1,000th of a penny. This is the reason why online brokers can charge $4 per transaction. Add the broker’s cost, and the transaction still comes out to less than a $1, depending on the scale of the broker and the volume of business. The point is this: why do we treat financial advisors like employees first rather than professionals first. This will allow a whole sections of law to disappear. Look at the laws governing lawyers, as an example. Not much there. They are self-regulated and they can kick people out of the profession and they have a high bar of entry. It might be a little too high. We really need para-legal professionals, which, despite their claims, paralegals are not really paraprofessionals the way EMTs and Physician Assistants are in the medical profession. By shifting our laws to focus on the goals of regulated activities, we will develop a practice of prosecuting individuals and firms will reduce taking risk because they can’t shift the cost of noncompliance onto the shareholders, which is what is happening when firms pay for noncompliance rather than individuals. The shift will also make compliance much easier, as well as spotting noncompliance.


How do you like the new weekly round up?


Marcus Maltempo is a compliance professional with more than a decade of experience helping banks, law firms and clients manage investigations and regulatory responses. He is a member of ACAMS and ACFE.