Compliance Professionals are Still Second-Class

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Banks are hiring compliance staff. Compliance professionals are hot. They are paid more, respected more, talked about more. But they still don't have a clue what's going on.

Fabrice Tourre worked for Goldman Sachs in London. In September 2009, the SEC told Goldman Sachs that it was planning enforcement action against Tourre. This was a huge issue: when it became public Goldman's share price tanked.

Evidently aware of the implications of the SEC case, Goldman senior staff in the U.S. told "a number of senior managers and other personnel" in the UK what was going on. But they didn't tell compliance, who (we assume) only found out seven months later when the affair became public. Throughout that time, Tourre remained working in the UK.

Clearly, compliance should have known, and the FSA should have known - hence Goldman's fine. Equally clearly, it looks very much as if Goldman thought its compliance staff couldn't be trusted with such sensitive information. Given Goldman's stock lost $12 billion on the day the news became public and the FSA has just fined the bank more than $20 million for not telling its compliance professionals sooner, withholding that information still looks entirely rational. When big money is at stake, compliance simply doesn't count.

By the way, that takes the fines levied by the City regulator to almost 84 million, up from 35 million in 2009 and a pitiful 22 million in 2008, according to Alphaville.

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