Bates Research  |  11-30-16

Personal Liability for Compliance Professionals


By Geoff Winkler, Fraud and Forensics Practice Leader


This is the first installment in a three-part series discussing personal liability for compliance professionals. This week we will look at the growing trend of regulatory enforcement activity against compliance professionals and the perception within the compliance industry of increased personal risk. Next week we will take a look at regulators’ perceptions of their enforcement activity and what this trend might mean for compliance professionals moving forward. In week three we will take a look at the impact this is having on the industry and the steps some CCOs are taking to minimize their personal liability.



After the financial crisis, regulators were severely criticized for not holding key executives responsible for their alleged roles in creating the crisis. In 2013, after overseeing a number of fraud trials in the wake of the financial crisis, U.S. District Court Judge Jed Rakoff criticized the government for failing to hold these key executives “responsible for their actions” and declared his belief that the lack of individual accountability “speaks greatly to weaknesses in our prosecutorial system.”   

However, recent trends show that regulators have expanded their investigations and prosecutions to include individuals when corporate wrongdoing is discovered. In addition to top executives, a number of compliance professionals have also been found personally liable for corporate wrongdoing, resulting in monetary fines and criminal prosecutions.

Moreover, the language being used by regulators in bringing these claims has also caught the attention of everyone within the financial industry.  Sally Quillian Yates, Deputy Attorney General at the U.S. Department of Justice, issued what has become known as the “Yates Memo” on September 9, 2015.  In it she said,

“One of the most effective ways to combat corporate misconduct is by seeking accountability from the individuals who perpetrated the wrongdoing. Such accountability is important for several reasons: it deters future illegal activity, it incentivizes changes in corporate behavior, it ensures that proper parties are held responsible for their actions, and it promotes the public’s confidence in our justice system.”

This memo has created significant concern for those working within financial services companies, as it reinforced the perception that individuals, including compliance professionals, would be subject to greater personal liability for corporate wrongdoing.

According to the Thomson Reuters 2016 Annual Cost of Compliance Survey, 60 percent of compliance officers expected personal liability to increase, with 16 percent expecting a significant increase. This is further backed up by DLA Piper’s 2016 Compliance & Risk Report: CCOs Under Scrutiny, which found that more than eight out of 10 respondents were “at least somewhat concerned about the change in tone and tactics from Washington.”

All of this increased focus has caused compliance professionals to be concerned about the actions that they take (or the lack of action they take) and to consider their own personal risk in the event that wrongdoing is discovered within their organization.


Recent Enforcement Actions

A number of recent regulatory and enforcement actions have caused concern for compliance professionals as it becomes clear that they are subject to personal liability for corporate wrongdoing. These actions include:

  • In November 2012, MoneyGram International Inc. agreed to a fine of $100 million and entered into a deferred prosecution agreement with the U.S. Department of Justice for failing to maintain an effective BSA/AML compliance program. [source]
  • In November 2014, FINRA fined Brown Brothers Harriman & Co. $8 million for its inadequate BSA/AML compliance programs. BBH’s former Global AML Compliance Officer was also fined $25,000 along with a one-month suspension. [source]
  • In December 2014, FinCEN fined the former CCO of MoneyGram International Inc. $1 million related to the U.S. Department of Justice action in November 2012 and sought to have him permanently banned from the financial industry. The former CCO fought to have the fine dismissed, but a federal court found that FinCEN had the power to impose personal liability on compliance professionals and denied his request. [source]
  • April 2015, the SEC fined the CCO of BlackRock $60,000 for failure to have written compliance policies and procedures. [source]
  • In June 2015, the SEC fined the CCO of SFX Financial Advisory Management Enterprises $25,000 after a company executive was found guilty of misappropriating $670,000 of client funds. [source]
  • In August 2015, FINRA fined and suspended two chief compliance/AML officers of Aegis Capital for supervisory and AML violations at the time they served in those roles. The fines totaled $15,000 and suspensions totaled 90 days for both. [source]

Given the potential for fines, loss of employment or even prison, it is understandable why those in the compliance profession have taken note of these recent enforcement actions. Next week, we will look at this issue from the regulators’ perspective and explore what this changing dynamic might mean for the compliance profession moving forward.


What do you think? Follow us on LinkedIn or Twitter to join the conversation!

This blog is provided for informational purposes only and not for the purpose of providing legal advice. You should contact an attorney to obtain advice with respect to any particular issue or problem.


Get Bates Group News and Alerts in your Inbox

Sign Up Now

Contact Bates Group

Bates Group is with you every step of the way. Contact us today for more information on how our End-to-End Solutions can help your firm.

Contact Bates Group