Don't be misled by the title. This is not a love story but a horrible lesson to financial institutions operating in a developing country.
According to an article in Wall Street Journal, a promising executive at a state-owned bank in Vietnam is potentially facing a death penalty and 4 employees of ABN Amro could be jailed for up 20 years.
Ms Van, aged 35, was deputy head of trade financing at Incombank, one of Vietnam's biggest state banks. She traded foreign currencies through a number of intermediaries, including ABN Amro. Vietnamese police alleged that Ms. Van lost US$5.4m in a series of speculative but unauthorized trades from Apr 2003 to Feb 2006. Her manager approved these trades because he couldn't read English well to understand what she was doing!
Police arrested Ms Van for allegedly "mis-handling state assets", which could be subject to a capital punishment in Vietnam! In order to recover its losses, Incombank has sued ABN Amro to return the US$5.4m, even though ABN Amro only received a commission as the middleman in the currency deals. At the same time, Vietnamese police are pursuing a criminal investigation into whether ABN Amro staff knowingly helped Ms Van execute unauthorized trades.
Police have so far detained two Vietnamese ABN Amro employees without charges and denied them access to lawyers or their families. One currency trader has been in a top security prison for more than 4 months. Two other ABN Amro workers have been put under house arrest. Police have also barred the U.S. general manager of ABN Amro's Hanoi branch, from leaving the country, although she is 6-month pregnant!
ABN Amro officials say there is nothing wrong with the bank's role in Ms. Van's currency transactions. People familiar with the situation say Vietnam's central bank has also examined ABN Amro's trades with Incombank and found nothing wrong.
This case may illustrate to what extent certain jurisdictions have been civilized. We may not be alerted if one of the parties involved is not an international bank.
This is a sad story in view of the way the govt handled the case (without knowing more details and the true facts behind).
ReplyDeleteFrom this, I have some thought on the approach to create a firm-wide compliance cultural. Implementation of compliance policies and operational procedures, I believe, is most effective if a high-pressured top-down approach is adopted. Of course, I am talking about firms without compliance cultural and the compliance department is a newly established unit.
To unfreeze an established cultural, you can hardly use a coaching approach. I have seen incidents where people said “Oh, it is definitely a compliance issue and hence must be handled by the compliance people.” (Senior personnel accepted this) and “Oh, it is a complaint case and hence must be handled by the complaint officer.” (just so happens the compliance officer is the compliance officer is this case). I have also seen the Head of Operations askedd the Head of Compliance to endorse a request to refine the clearing operating systems pursuant to clearing house’s requirements, because it was a compliance issue! (this case happened in a bank). I have also seen user departments ask the Compliance Department to endorse every I.T. system modification forms because they modified the system to fulfill regulatory requirements and hence the modifications were compliance issues!!!!!!
Without high level support to us high-pressured approach, the compliance people are fighting uphill battles.
PS: My underlying presumption is that compliance personnel are “reasonable” and will not abuse their authority given by senior mgt.
What Ban mentioned is abuse of the compliance function, originating from the intention of shirking. As compliance officers we are obliged to convey the following messages to all levels of a company: (a) To ensure compliance is everybody's role; (b) compliance function is to facilitate compliance; (c) written endorsement by compliance officers on their non-expertise areas are not value-added.
ReplyDeleteThe regulators may help clarify the appropriate roles played by a compliance department. I am still waiting for HKMA's SPM IC-2 "Internal audit, legal and compliance functions".
I am sure the forcoming MA guidelines will give a de facto definition of the role of the compliance personnel, at least in the banking sector. I certainly believe that the definition will be revolutionary perhaps will give surprises.
ReplyDeleteI came across one MA circular dated 21 February 05 (available on the web) on Register of Relevant Individual under S.20(1)(ea) of the BO, some control procedures were suggested and in the second bullet point (c), it says that the periodic check is preferably to be done by compliance.....
Whether the input is correct, I think is a control that the internal auditor should perform periodic review on. Not because the operation (the input in that particular case) relates to registration of relevant individuals (i.e. has compliance consequence), then it is preferably be done by the compliance personnel. When the internal auditor reveals some operational deficiencies, than the department should enhance the control so as to make the bank comply with the regulatory requirements.
My view is, even the learned MA people have blurred ideal of what compliance, internal audit, risk mgt, operation are.
I also don't think it is necessary for compliance personnel to conduct periodic checks of the register. Imagine how tedious such job is in a retail bank with hundreds or thousands of relevant individuals. Actually such checking could be done by HR if it is responsible for the registration process. Alternatively, each relevant individual may be requested to do this checking by himself / herself.
ReplyDelete