Don’t be fooled by student debt article


This is not about financial regulatory compliance from the perspectives of regulators or financial institutions. This is about compliance from a personal finance perspective. The short and skinny of it all is, you should not borrow money for education if at all possible.  The reason is because it is one of the worst to get toward financial independence.

I will explain why by first explaining how income taxes and their associated fines work when you don’t pay your income taxes. If you earned $100,000 in 2015, your effective earn income tax rate is 28%, or $28,000, unmarried non-head of household taxpayer. If you didn’t pay any of that, you would pay a fine of up to 25%. This in on top of the unpaid taxes you must pay. Basically, the IRS is punishing you for borrowing money you owe them. That makes sense. So, 125% of $28,000 is $35,000, or an effective tax rate becomes 35%. This is only applied to the years you did not pay your income taxes, of course.

Let’s see what that looks like when it is converted to student loans. If you borrowed $100,000 for your higher education, and if your interest rate is 5%, and you are in repayment, then this year you would pay $12,727.92, of which about 95% of it in your first year of repayment will be interest, or $12,091.53. Essentially, you are paying this interest to the government, which, if you think about, is a tax because this is not the amount you borrowed; it is on top of it. And, also, you must pay all of the borrowed money back. It is kind of like having a very low interest rate for this portion of borrowed “income.”

Since you are in repayment for our example. You would get a deducation of up to $2,500 from your pre-tax income, the deduction cannot exceed the amount of interest paid. So, now you will pay 27.3% or $27,300 on your earned income, a savings of $700. Plus you will have been paying the government an additional $12,091.53, so, you will have paid the government a total of $39,391.53. And this will continue for ten years, albeit the “tax” portion of it will decrease. Another way to look at it, regardless of whether you pay all of the interest, you will still have to pay more interest for at least ten years, unlike not paying taxes, which you will only have to pay interest as long as you don’t pay.

In order to pay an effective tax rate of 39.3% on your earned income, you would have to make $14.3 Million. Another way to think about it this: in order for student loans to really make sense is if you either make enough money to live on comfortably even after you pay your student loans and you are guaranteed to have your job(s) for the duration of the repayment period, or make a break even amount the first year and then an increase in your income to the amount of the interest rate each year (which becomes easier to do each successive year because the even monthly payments effectively reduce the interest payments over time).

That magical break even income for the example’s first year is… about $66,700. How do I figure? Well, if living comfortable on average costs about $40,000 per year, and your effective tax rate will upwards of nearly 40%, then you need to make $40,000 after tax. This $66,700 only accounts for Federal Income Tax. It does not account for Social Security, Medicare, local taxes. Most of those other taxes amounts to about 10% of your income, depending on where you are. That means, you’d need about $80,ooo.

Who gets paid $80,000 on their first job after undergrad? Engineers and investment bankers. Is it no wonder that they have the bandwidth to accomplish a lot of other things in their early lives?


Marcus Maltempo is a Certified Anti-Money Laundering Specialist and a Certified Fraud Examiner with more than a decade of experience helping banks, law firms and clients manage investigations and regulatory responses. 

Bear Market Compliance

Jules, the bulldog, chase away the bears
Jules, the bulldog, chase away the bears

It’s easy to want to reduce compliance spending as the bank enters a bear market, but this is a bad idea for a whole host of reasons. The single primary reason is that revenue centers employees may take on non-compliant and high risk activities to reduce that decline in revenue to keep save their jobs. The incentive structure of your revenue center employees and the compliance culture will be tested.

Ideally, compliance spending should be relatively stable regardless of any short term market trends. In this case, short term means 18 months, because it is strategic. If your compliance department is organized to simply tackle tactical issues, you will need more compliance activity to address the possible rise of noncompliant activities.

In this sense, compliance is a lot like branding. Culture is one of the most important ingredients to Compliance Management. I know there are a lot of supposed Compliance Experts who talk about culture. If you haven’t noticed, my reader, I rarely talk about culture. It’s not that I don’t think it isn’t important, but because culture seems to be the only thing most Compliance Experts talk about; culture and tone from the top. But anyone who is actually a Compliance Expert would agree with me, culture is the one thing that doesn’t require compliance expertise.

In this entry, though, I will address culture from the perspective of a leader, not a manager. A leader who is promoting a Culture of Compliance will be cognizant of the fact that the Compliance Department’s culture and the Line of Business’s culture are often different. And the ways they are different depend on the mix of people in the Compliance Department more than the people in the Line of Business.

Compliance, by nature, requires being pedantic. Possibilities are dealt with, rather than thrown aside in favor of priorities. The few rogue employees are always looking out for possibilities, not necessarily what is right. The current bank structures are organized to reward those who bring in the most money, making the activity that brought in the money the de facto “right thing.”

We live in a society that rewards based on money, not productivity. Luckily, most of the time, productivity is the right thing. We don’t live in a society, however, that rewards those who are more productive; we live in one that rewards those who own the productivity. This means that a few superstar employees who know how to vastly upend the current level of productivity often are rewarded when the great many who help those superstars are not. (I know, I know, I’m starting to sound like a bleeding liberal; just hang in with me.) These superstars do not want to share their productivity gains with others who have helped them on their way. This last bit of change is what describes a transactional society, not a transformational one. Think about it. Transactions take just a minimum of two parties; one invariably makes a better decision than the other. Transactional society creates losers. A transformational one requires assessing one’s actual contributions and rewarding proportionally. A transformational society creates winners of varying degrees. When done right, much of the fear of getting laid off during a downturn will lessen because the issue isn’t due to proving one’s productive value but due to an issue of demand and the comparative productive value against other colleagues.

This doesn’t mean a transformational society is Utopia. But it means that people will understand the true competitive nature of the workplace: the larger competition between firms that an employee contributes to and the smaller competition between employees to be the most valuable on the team – again, the intrafirm competition doesn’t create losers but degrees of winning. But, as I said, we don’t have such a society.

That’s where managing the Culture of Compliance becomes important. Everyone should always feel like they are contributing to the welfare of the firm and compliance to policies and procedures should feel like a contribution to that firm welfare. And work should have a causality to it, meaning, one’s work causes something else to happen. If it merely has a correlation to it, as many corporate employees feel as they do, work feels bureaucratic. And it probably is. Then, of course, each employee’s duty to themselves comes down to the impression of productivity or cheating to be more productive. While only the latter is a compliance issue, they are two sides of the same coin.

So, to sum up the issue of tackling the Culture of Compliance as we head into a bear market, the Culture of Compliance starts from the duties of an employee having causal relationship to the firm’s well-being and understanding that noncompliance and brown-nosing are both results of caring more about results from a short period of time, not a long full history.

I know people might say that I am being idealistic with this, but if you are a compliance professional who doesn’t know how to lead your bank, you are ready to lead your compliance department. Compliance is a responsibility of every member of the firm and the Compliance department exists to take some of the responsibility away from other members of the firm so that they can focus on other activities. So, of course, I believe that leadership and Culture of Compliance as transformational issues, not a transactional one.

If you don’t believe me, then you are probably not a Compliance Expert. If you are a Compliance Expert, you would already know that regulators also agree with me on this point and often Delayed Prosecution Agreements are rewarded based on dealing with issues like I have mentioned.


Marcus Maltempo is a Certified Anti-Money Laundering Specialist and a Certified Fraud Examiner with more than a decade of experience helping banks, law firms and clients manage investigations and regulatory responses. 

Importance of formal training in Compliance

There are many jobs that one can learn from experience alone. Compliance Officer is not one of them.

ACFELOGOLike Law or Accounting, becoming an effective compliance officer requires three sets of knowledge: foundational knowledge gained in formal education, specialist knowledge gained in training, and management and leadership knowledge through experience. Foundational knowledge is important because that’s the common knowledge with which the world operates. And management and leadership knowledge can only be developed through real world experience, no amount of conceptual knowledge alone will make one a good manager or leader. The middle piece, the specialist knowledge, requires training because without it the Compliance Officer simply becomes a Compliance Manager or Analyst.

The reason Compliance is like Law or Accounting is that the logic with which Compliance works differs. The logic behind complying with Financial Regulation comes from understanding a business at the operational level as well as the contribution the firm makes to the financial markets overseen by the regulator. Understanding the operations of a business could be gained through training and experience within a business. Understanding the requirements and priorities of regulators require interfacing with the regulator. Many roles are title Compliance Officer, but the true CO roles are the ones that require both arenas.

CAMS LogoThere are several ways to gain the necessary training. Many large financial institutions have Compliance training. Usually, this is the bare minimum of Compliance training necessary. Some of them might not actually be Compliance training but simply a training about suspicious activities awareness. To be qualified as Compliance training, it should include information about regulatory functions and the responsibilities of various regulators and their interactions with Self Regulatory Organizations (SROs) and private firms. In the US, this means a need to cover some combination of the following entities:

And, at a minimum, there is a need to cover the following topics:

These are a lot of topics and no one can be an expert in all of them. But without exposure to this full spectrum of knowledge, a Compliance Officer is not equipped to dealing with the complex nature of the competing interests without an overview of these subjects. There are several ways to get formal training on these entities and matters.

The most common, direct, and practical way to get the formal training needed to be equipped to be a Compliance Officer are through associations that have developed the certifications.

There are programs at a few institutes of higher education that offer coursework specifically addressing these entities and topics:

  • University of South Florida has undergraduate, graduate and PhD programs in Criminology
  • Pace University has Certified Compliance and Regulatory Professional (CCRP)
  • Utica College has MS in Financial Crime and Compliance Management
  • Charles Sturt University has Diplomas, BA and MA degrees in Anti-Money Laundering and Counter Terrorist Financing, Intelligence Analysis, and Investigations

I have provided a concise, compelling reason why you should be staffing your firm with trained Compliance Officer or training the untrained employees who are moving into Compliance. Hopefully, this will be a good starting point for you to think about what kinds of issues your firm will have to face and the value a trained Compliance Officer will bring in handling them.


Marcus Maltempo is a Certified Anti-Money Laundering Specialist and a Certified Fraud Examiner with more than a decade of experience. 

Week In Compliance: Retirees, be ware

Don’t trust her with your money. Kristina Svechinskaya, 26, is a Russian hacker who stole $3 Million

FINRA has proposed new rules that will allow a firm to put a temporary hold on financial transactions when abuse is suspected, and will allow the firm to contact a trusted other during this hold period. Where’s the flaw? No rule yet mandates that every financial firm and every individual advisor obtain information for a trusted contact person for every client. – Mikol S. Davis for Aging Capital 

Retirement accounts to be regulated by SEC and FINRA in 2016 – on ERISA, Andrew Welsch for On Wall Street

38% of the survey’s respondents said that compliance with TRID was their chief concern with the implementation of the new mortgage disclosure process – Ben Lane for Housing Wire

SEC observed that certain outsourced CCOs could not articulate the business or compliance risks of the registrant or, to the extent the risks were identified, whether the registrant had adopted written policies and procedures to mitigate or address those risks. In some instances, the risks described to the staff by the registrant’s principals were different than the risks described by the outsourced CCO. – on SEC’s warning about outsourced Compliance, Ethan Mark for JPSupra

Regardless of what or how many functions one chooses to outsource, it is the hiring firm that is ultimately responsible for its compliance program (not the fired firm) – Julie DiMauro from Regulatory Intelligence for Reuters 

Jobs in 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: IRS is after rich people

News In Brief

non-complianceIt’s Time to Focus IRS Audits on the Superrich, Inspector General Says by Richard Rubin for Wall Street Journal

“HR departments get a bad rap. That’s because, for better or worse, they tend to excel at enforcing compliance.” by Lisa Nirell for Fast Company 

Common Interview Questions for Compliance Officers by Stella Osoba for Investopedia 

The top 6 Governance, Risk and Compliance certifications by Kim Lindros and Ed Tittel for CIO 

Advisors Take Note: Compliance Officers Are Watching by Bernice Napach for ThinkAdvisor 

3 Tips for Smarter Use of Compliance Technology by Rebekah Mintzer for Corporate Counsel

Banks need to invest more on tech for Basel III compliance: Report from India Times

“Regulatory Compliance LLC, based in Londonderry, is merging with National Compliance Services” by Eli Okun for Union Leader 

Is Compliance Keeping Up With Your Automated Advisory Tools? by Carlos Guillen for Financial Planning

“A new survey from Compliance Solutions at Charles Schwab finds the role of the compliance officer is evolving and growing in scope across corporate America.” by TMC News 

Jobs


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: Senator Warren is portrayed as a communist dictator

Hello on this brilliant Friday here in New York.

from Examiner

Sen. Elizabeth Warren is portrayed as a communist dictator along with CFPB director, Richard Cordray. Se. Warren lashes back via Twitter. – from Sophia Tesfaye for Salon

Speaking of CFPB, Dir. Cordray warned the Mortgage Bankers Association that there is a disturbing lack of effort to implement TRID rules by its vendors. – from Eric W. Mills of McGuireWoods LLP for Lexology

While we are on TRID, OCC warns lenders that TRID exams are coming, attached with some helpful guidance. – from Ben Lane for Housing Wire

“The overwhelming majority of the cases we bring involve CCOs who crossed a clear line by engaging in affirmative misconduct or obstructing regulators,” Andrew Ceresney, director of SEC Enforcement Division. – from Sue Reisinger for Corporate Counsel

“One of the areas we’re spending a lot of time thinking about is the sale of complex financial instruments, particularly as they’re sold to retail investors,” said Stephanie Avakian, deputy director of SEC Enforcement Division. – from Financial Planning at NASDAQ 

East West Bank’s stock took a plunge on Thursday because it failed the Federal Reserve’s AML test. It will be required to collect much more information about customers. – from James Rufus Koren for Los Angeles Times

Los Urabenos crime group of Colombia has been placed on the OFAC Sanctions list. – from Samuel Rubenfeld for Wall Street Journal

Most Compliance Analysts Expect Increased Personal Liability. – from Mani for ValueWalk

Jobs In Compliance

Opinion: Equity-Assets Ratio

It is strange that there are Conservatives who want to raise capital requirements for banks. I thought that was only something Democrats wanted. The annual stress testing of banks by the Federal Reserve is a joke, though. All that work could be avoided with some easier measures without losing any financial engenuity. Actually, there are two main ways to make stress testing pretty much obsolete. One is raising the capital requirements. But that would reduce the money supply in the market, which, if you haven’t noticed, is pretty weak right now. It is so weak that we keep missing the inflation target of 2%. Anyway, raising capital requirements would be the monetary method of solving that problem. The other method is by requiring an equity-to-assets ratio. Currently, there is no such ratio. But what if there was a requirement to have a EA ratio of 10%? This shouldn’t be that difficult. Apple, the largest company by valuation, has a 41%. JPMorgan, the largest US bank by assets, has an EA ratio of 9%. This means that JPMorgan is four times more likely to go bankrupt that Apple. Why would we let our financial institutions be so risky? The economists who proposed this several years ago proposed a 20% EA ratio. This would allow the market to monitor a bank’s health, not the just the Federal Reserve.


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. 

Week In Compliance: Do you have a penthouse in Shenzhen?

Hello on this hazy Friday here in New York.

Compliance officers are executives and subject matter experts – Mike Scher from FCPA Blog

“General Information Services and its affiliate failed to take basic steps to provide accurate background screening reports to employers about job applicants,” Richard Cordray, Director of CFPB from Law 360

JPMorgan pays $166 Million to CFPB and $50 Million to settle claims to California for cheating thousands of credit-card customers while collecting debts – Peter Blumberg from Bloomberg New

Six Steps to Outsourcing Compliance Technology – from Compliance Digest

Shenzhen Penthouse and conflict-of-interests brings ex-CEO to court for possible seven-year sentence and Hong Kong’s anti-bribery law is questioned. – Wendy Wysong, Partner at Clifford Chance for Corporate Compliance Insight

Compliance Consultants No More!… Maybe… “What’s intriguing about this case – and what makes it all the more important – is the way that it has morphed from a “simple” alleged undisclosed conflicts of interest case into a case that calls into the question reliance on compliance consultants.” – Chris Stanley, CCO of Loring Ward Group for Think Advisor

Whistleblowers are still very likely – from Dodd-Frank Update

Standard Chartered plans to cut 15,000 jobs, increase digital banking and compliance automation – Renee Caruthers at Fierce Finance IT

Jobs In Compliance

Opinion: Is there a big opportunity in Compliance Media? 

I have been listening to a podcast called StartUp. It is produced by Gimlet Media. It is in its second season and each season they intend to follow a startup company. They introduced me to something called a lifestyle company. A lifestyle company is a company that supports the lifestyle of its owners and employees. Successful, yes. Global? No. In the show, they were following a company called DatingRing, an online dating site trying to disrupt the online dating world. While the founders were really smart and enthusiastic about it. But I had my doubts. What about all of the other dating sites? They would probably argue that since Match.com launched, there have been several successful online dating sites: OkCupid, Tinder, Coffee Meets Bagel, to name a three. The reason I was doubtful was because they weren’t offering something that was possible to scale. Match brought personal classifieds online in a palatable user interface. OKCupid brought social networking to dating. Tinder brought gaming to dating. Coffee Meets Bagel made everyone on Facebook a matchmaker. All of these things used technology to facilitate the matching and let the humans do the dating. DatingRing brought group dating on demand? The idea was that you could have a date that night if you wanted to? But it was a blind date, with no other connection except this dating service? Not that it couldn’t happen. It did happen. The problem was that it didn’t actually solve the matching problem, which is qualitative. They just thought if they had users, the matching would happen. But group dating, when scaled, is just a large party. When not scaled, it is a blind date setup by people who don’t really know you and have no connection to you, which leads to low probability of success. I mention this because I feel like I am at the point of trying to decide if my business is going to be a global media business or a lifestyle business. Right now, I can only hope to make it a lifestyle business, but I can’t really ask for money from investors for a lifestyle business. But I do have a big dream for this enterprise. I wish this would be the Law.com, Law360.com, JDSupra, Lawyers.com of the Compliance world. There are some big players in Compliance Media, not no company has as much traction as the above mentioned for law. I could have chosen other industries to do the same analogy, but you get the idea. How do I make such a narrow and new function in the financial services industry something worth monopolizing?


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. 

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.


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. 

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.


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. 

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.


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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.