The Fraud Examiner

The $18 Million Mistake: What You Can Do to Save Your Firm From Ineffective Risk and Compliance Documentation
 

John Thackeray, CFE     
Founder and CEO of Risk Smart Inc.



I am no longer amazed by the missteps of any financial organization. The incentive policies and amalgam of personnel with widely differing views (borne out of previous financial organizations) can lead to a cocktail of disasters. Today, policies and standards seem to be written in a vacuum, only to see the light of day when regulators call. However, it appears we do have a benchmark: a well-understood policy is worth $18 million, plus costs, time and energy.

Recently, John Banerjee, a former senior currency trader at the Royal Bank of Canada (RBC), sued his ex-employer for “unfair dismissal.” In his lawsuit, Banerjee claimed, among other things, that RBC had an “incoherent and inconsistent” global foreign exchange (FX) policy that no one bothered to read. More specifically, the lawsuit alleges the following(1) the fine print of RBC’s FX policy was “inconsistent, unclear” and “problematic,” making compliance nearly impossible; (2) RBC’s FX policy went unread among employees working on the FX desk at the bank’s London and Hong Kong offices; and (3) RBC’s head of FX spent less than three minutes on her own annual attestation.

In response to these allegations, an RBC spokesperson said in a statement that the bank has controls in place to uphold its principles, policies and procedures. “We conduct ongoing thorough reviews of these processes to protect the integrity of our business and retain the trust of our clients,” the spokesperson elaborated.

It is clear that employees need to comprehend and fully understand the policies under which they are expected to perform their duties. However, policymakers are still responsible for ensuring that the standards they create are extremely clear and thorough.


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