Personal Liability of Compliance Officers Now a Permanent Occupational Risk, Cases Show

A quickening trend has emerged that puts compliance officers at financial institutions and other businesses at a greater personal risk than ever before. This new occupational hazard has resulted in adverse actions against individual compliance officers by government regulatory and enforcement agencies, including monetary penalties, dismissals or downgrading of positions, and criminal prosecutions.

Individual compliance officers are increasingly exposed to personal liability for institutional lapses and failings. This brings a new dynamic to one of the fastest-growing occupations in the United States and other countries.

In recent years, financial crime compliance officers have been elevated to a position of greater distinction – and visibility – at financial institutions and other businesses vulnerable to financial criminals. At the same time, the compensation paid to compliance officers also grew. It is not uncommon today that a senior compliance officer at a major institution in an urban area earns more than $1 million per year.

The perceived and actual value of compliance officers at medium-sized and large institutions has risen substantially. Much of this has been driven by far-reaching government efforts against tax evasion, money laundering, sanctions violations and public corruption, primarily in the US and UK – and the reputational harm that befalls institutions and other businesses caught up in these high visibility crimes.

While the stature of compliance officers has increased, so has their exposure to personal liability for programmatic failings. Increasingly, compliance is a “high-risk, high-reward” profession.

These increased risks are largely a result of “Congressional and regulatory demand for individual liability when systemic issues are identified [at financial institutions],” says Nick Hartofilis, a director of risk advisory services at the accounting and consulting firm, Kaufman, Rossin & Co, in Miami. He says there are pragmatic reasons for regulators to target compliance officers rather than just bringing enforcement actions against an institution.

“Individual liability raises the bar across the entire compliance landscape,” Hartofilis says.

Continue reading this compliance liability article at ACFCS.org.

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Nick Hartofilis, CPA, CRCP, CAMS, is a director in Kaufman Rossin’s Boca Raton, Florida, office. Kaufman Rossin is one of the top CPA firms in the U.S. and offers anti-money laundering compliance consulting services to the financial services industry. Nick can be reached at nhartofilis@kaufmanrossin.com.