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Compliance Under Fire: Two More Tales

Oh dear: we have two fresh tales of compliance officers suffering dire professional consequences for doing their jobs. Not the best way to welcome the Thanksgiving holiday, but the compliance community needs to stick together and study troubling corporate behavior when we see it.

First is news from Australia. Westpac, the second-largest bank in the country, was charged by regulators there last week with failing to report international wire transfers for much of the 2010s. That led to 29 million violations of Australia’s anti-money laundering law, and a potential fine of $40 trillion. (Yes, trillion with a ‘t’— $17 million to $21 million per violation.) 

According to the Australian Financial Review (which has done excellent reporting on this story), the failures started with a software upgrade in 2011, when a feature for automatic reporting of international wire transfers was left inactive. So Westpac failed to report those transfers for years, even as it sent $7.5 billion out of the country. At least some of that money ended up funding known human-traffickers and terrorists.

A junior staffer finally discovered the error in 2017, but “did not appear to appreciate what he had identified,” as one Westpac internal report phrased it. Junior staffers then failed to tell senior staffers in the bank’s global transactions unit, so Westpac’s compliance team didn’t realize the full extent of the mess until July 2018.

wood

Wood

At that point, Amanda Wood, Westpac’s anti-money laundering officer, was working with Westpac’s board to determine the depth of the problem and how to inform AUSTRAC, Australia’s AML agency. Westpac reported the failures to AUSTRAC on Aug. 15, 2018. 

Investigations ensued, until a key meeting between Westpac and AUSTRAC in May of this year. As the AFR reports it, Wood was excluded from that meeting, and immediately after, was given a choice: demotion to a junior role with limited staff and duties, but the same salary; or a severance package. Wood took the package, and left last May.

A bit more about Wood: according to her LinkedIn profile, she worked at Westpac from May 2017 to May 2019, and prior to that had been head of financial crime compliance at Commonwealth Bank (which has also had its share of AML trouble). She had also worked as a compliance manager at AUSTRAC, the very agency now investigating Westpac, from 2007 to 2015. 

At this point it’s hard to tell how much Wood was scapegoated. Clearly the problems started long before she arrived, but by late 2017 at least some red flags were appearing in Westpac’s internal compliance system — small flags, perhaps, but they were there. Yet nobody grasped the severity of the failures until summer 2018. How much is a mid-level compliance officer responsible for buggy systems and a semi-clueless culture? My instinct would be to point the finger of blame higher up.

Speaking of higher-ups: once charges were filed against Westpac earlier this month, CEO Brian Hartzner and board chairman Lindsay Maxsted have both agreed to leave. Wood has been hanging out her own shingle as a solo compliance consultant since she left Westpac six months ago.

Compliance Officer Under Fire in New Jersey

We have a much more clear-cut case of retaliation against a compliance officer in New Jersey, where the former CCO of a broker-dealer firm says she’s being harassed because she raised concerns about private equity firm GPB Capital Holdings.

If GPB Capital sounds familiar, that’s because the feds indicted its chief compliance officer, Michael Cohn, last month on charges that he stole information about an SEC probe into GPB Capital while he was working as a compliance examiner the SEC and trying to land the CCO job at GPB Capital. According to the indictment, Cohn shared at least some of the stolen intel during his job interview, and then kept senior executives apprised as the investigation continued. I mean — wow. Just, wow. 

Now we have more news about how GPB Capital came to be under SEC investigation in the first place. 

Caiazzo Neff

According to press reports, Toni Caiazzo Neff was a compliance officer for Purshe Kaplan Sterling, a broker-dealer firm that sold private placements with GPB Capital. Neff says she was fired in 2018 for alerting the SEC and the Financial Industry Regulatory Authority that GPB executives might have been using investor funds to support personal business interests. 

Neff filed a wrongful termination lawsuit against her old firm, Purshe Kaplan, but that case was dismissed. She also applied for whistleblower status with the SEC, but was denied because she reported to FINRA first rather than the SEC. 

Now the disturbing stuff. Since Cohn’s indictment in October, Neff claims she has suffered personal intimidation: unknown men following her home, and someone loosening the lug nuts of her car. She’s filed police reports, and claims that the incidents are related to her involvement in a lawsuit against GPB. (GPB denies any involvement in, or knowledge of, retaliation against Neff.)

Here’s the bottom line: Neff was tasked to perform due diligence on GPB, suspected a stinker, reported it, and now she’s out of a job. Meanwhile, said suspected stinker is the target of a federal probe, its CCO is under indictment, and just today the company said its audit firm has walked off the job

Neither of these stories is good. They, along with other tales of retaliation against CCOs I’ve collected over the years, are a reminder that corporate compliance must be important after all — because when you do the job well, you can piss people off. Let’s stand by those compliance folks who do the right thing. Attention must be paid.

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