House Issue 45 - February 2019

Welcome issue 45 of House! and Kung Hei Fat Choy to our readers in Hong Kong, Gong Xi Fa Chai to our readers in China and a very happy lunar new year to everyone else. The year of the pig has started well with some big moves been trotted out across the globe. Benjamin Bair has been announced as the new Global Head of Compliance at Cantor Fitzgerald and in the corporate sector Walmart have promoted Daniel Trujillo to be the new Global Head of Compliance, replacing Jay Jorgensen.

External MD Hiring is back!

Managing Director level compliance officers are back in vogue... In Asia Pacific, Josh Pieterse has joined UBS Asset Management as their new Head of Compliance and Operational Risk Management, Katryna Murtagh has joined Credit Suisse as an MD covering wealth management and Joseph Wong has left BNP to join CICC. Interestingly Felicity Youl has also left BNP Paribas, where she was there CCO, it is understood she is retiring, Tim Woodward meanwhile has joined BNP Paribas as an MD! Aveline San has resigned from UBS, it is not known where she is going but is understood to be a competitor. Finally, Tony Smith has joined TD securities in Singapore as their new APAC Head of Compliance from NatWest Markets.

In London this theme has continued, we have seen Citibank hire Dominic Hirons from Morgan Stanley in Europe as their new EMEA CCO, whilst Miten Trivedi joined Goldman Sachs as an MD from Bank of America Merrill Lynch in December.

At one point, 2017 seemed to have signalled the end of a 10 year run of senior MD level hiring within banks from competitors. The US banks especially looked to promote from within or quite often from other departments. JP Morgan, Citigroup, Barclays and Wells Fargo all moved auditors internally to run their global compliance functions. UBS and Credit Suisse promoted from within and the theme at the French banks like SocGen and BNP Paribas was to move individuals from COO or even business focussed roles. In the eyes of the boards at several leading investment banks it appeared that the compliance diaspora just wasn’t good enough for the new leadership roles.

Since January, this has changed and the feedback we are getting from our clients is that the business want ‘proper’ compliance officers again. Compliance officers who can partner with the business, make a call and work to find solutions. Compliance is not a subset of legal, audit or an imaginary line of defence in the business, it’s a core function that is essential to traders, bankers, asset and wealth managers. The senior compliance officers who were to an extent ostracised for the last 18 months are now back in demand, and it is the business that want them back!

Financial Crime Departments now bigger than Compliance!

AML, Anti-Financial Crime, Financial Crime Compliance, however firms wish to describe the department that aims to prevent the flow of ill-gotten gains and sanctioned nations and individuals’ wealth through a firm is arguably a bigger growth story than the compliance one. Compliance departments ballooned in size following the 2007/8 financial crisis and the rise of fin-crime professionals mirrored this to a smaller extent, but the ‘AML’ departments very much remained a far smaller subset of the compliance team.

HSBC’s well documented deferred prosecution that led to a USD 1.9 Billion fine and the very public resignation of their Global Head of Compliance in 2012 was the watershed, AML was going to outgrow it’s compliance brethren. A 6 year boom in the hiring of fin-crime professionals followed suit.

Are financial crime departments bigger than compliance now? The evidence seems to suggest so, in Asia alone, at one point Citibank had over 1000 professionals dedicated to fin-crime prevention and HSBC has a similar amount. At most international banks now the financial crime prevention team sits separate from the compliance function and reports to a Global Head sitting in the home country of the bank, they in turn now often report to the Chief Regulatory Officer sitting on the board.

Like compliance departments, the Fin-crime teams have ballooned in size largely due to litigation, remediation and preventative initiative. They will naturally reduce in size and this is already happening in many of the larger US banks, but the function that is only really 6 years old is here to stay and remains an integral part of any bank’s regulatory risk management strategy.