Regulatory risk at BNP

We all talk about regulatory risk often and regard it as something important. And it is. However, the following excerpt from an article from the Bloomberg Review on July 1, 2014 illustrates what happens if you limit your focus to regulatory risk. 

“But obviously BNP Paribas did not care about obeying U.S. sanctions against Sudan. It cared about not getting caught violating those sanctions, of course, and it is sad -- or whatever the bank equivalent of "sad" is, "less well capitalized" I guess -- that it did get caught. But the sanctions just had no moral bite with BNP Paribas. It did not occur to anyone there -- even in the compliance department -- that Cuban companies shouldn't be allowed to transfer money from one French bank to another French bank, because of U.S. law. That struck BNP's bankers as a dumb rule, to be avoided with dumb methods.”

Not getting caught is clearly aimed at reducing the regulatory risk, but the real issues are in an organisations' reputational risk and the core AML/CFT risks. In the case of BNP a violation of US law.

It is about – what Bloomberg calls – “moral bite”. Staff throughout the organisation need to understand why sanctions exist and why AML/CFT regulations are in place. All staff need to have an innate drive to strive for integrity and doing the right thing. 

Only then will a company be truly compliant. 

ROlf

e: rolf@i-kyc.com
w: www.i-kyc.com