Compliance Officers

Return of the Bank Inspectors

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Shining a light on banks' illicit practices.
  • Why it matters

    Why it matters

    Keeping banks and their traders in line with the law could help financial firms save billions of dollars in legal penalties, but only if the newly powerful internal auditors succeed.

  • Facts


    • The average compliance department has doubled in size over the last 10 years in the wake of billion-dollar fines and new regulations since the 2008 crisis.
    • Deutsche Bank spent more than €1 billion on upgrading its controls in 2014 – about half as much as it was forced to set aside for legal fees and fines over the year.
    • About three quarters of global banks say they’ll ramp up their spending on compliance by 10 percent or more in the coming two years.
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Heike Samel remembers the days when handling “compliance” at a bank was pretty dull.

When she first entered the field back in 1998, many of her colleagues were near retirement and had taken this cushy job that wouldn’t take too much effort in the twilight of their career. If they asked a colleague in another department for a file, they would get it two weeks later – heavily redacted.

Things began to change with the September 11 terrorist attacks in 2001, she said. Suddenly, making sure banks weren’t involved in money laundering became a top priority. Ms. Samel began rising up the ranks, joining the Institute for Management before taking compliance jobs at Citi Bank and later Dresdner Bank.

Things are changing again now, she says. With banks around the world facing billions of dollars in fines from regulators and lawsuits, on everything from traders rigging interest-rate and currency benchmarks to selling bad mortgages to customers during the financial crisis, banks have spent the last few years taking another hard look at revamping their compliance departments.

Gone are the old and retiring workers, replaced with ambitious employees and high-paid “risk managers.” If they need a particular file from another department, they expect to get it immediately – no questions asked. If anything, the pendulum has swung the other way, and traders now complain they can barely press a button without a compliance person breathing down their necks.

“The fines led everyone to look more closely at their operations,” Ms. Samel, now a senior manager at the German consulting firm Sopra Steria, told Handelsblatt Global Edition. “It’s been an incredible transformation,” she said.

Welcome to the new world of compliance and the new sheriffs of the banking world.

With new power comes a new responsibility for keeping banks and their traders out of trouble. While nobody should expect banks to be scandal-free in the future, the hope is to catch traders and others bankers in the act before things get out of hand.

One auditor at Deutsche Bank said he has made sure his picture is nowhere to be seen in the organization – so other employees can’t see him coming.

“There’s certainly a huge increase in expectations. Whether the compliance departments are always able to match the expectations, or whether the expectations are reasonable, is another question,” Andrew Procter, a former British regulator and the chief of Deutsche Bank’s compliance department until mid-2014, told Handelsblatt Global Edition.

For the banks, it’s become a matter of simple cost-benefit analysis, said Mr. Procter, who is now a partner at the London law firm Herbert Smith Freehills. If upgrading their internal police force can save them even a fraction of the billions of dollars in fines that many have faced from regulators over the past year, the investment may well be worth it.

Mr. Procter’s former employer is a case in point. Deutsche Bank, Germany’s largest financial firm, launched an effort to reform its culture back in 2012. In 2014 alone, the bank says it expanded its “anti-financial crimes unit” by 30 percent, adding another 700 people, and spent more than €1 billion on upgrading its controls and oversight.

Just this spring, Deutsche Bank was handed the heftiest of fines – $2.5 billion, or €2.2 billion – for its role in the now-infamous Libor rate-rigging scandal that engulfed many of the world’s largest banks. It was the biggest of a series of multi-billion euro fines that have struck the bank’s balance sheet and hammered its reputation with customers over the past few years.

But the massive upgrade in internal controls is also seen as a burden within many banks. Some analysts and even shareholders also wonder whether billions of euros have simply been thrown at the problem to please regulators, without having a real concept of how to use their new staff.


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“It feels like there’s now one or two controllers sitting next to every trader,” said one employee of Deutsche Bank, who declined to be named.

The average compliance department has roughly doubled in size over the last 10 years, estimated another Sopra Steria consultant, Martin Stolberg. A poll by consulting firm Accenture found that more than three quarters of the world’s major banks expect to spend at least 10 percent more on upgrading their compliance departments in the next two years.

“Good compliance managers can pretty much choose where they want to work these days,” said Henning Sander, a recruiter in the banking sector for Frankfurt-based Hager Unternehmensberatung.

Their stature within the organization has also been upgraded. Mr. Procter said that where compliance mangers used to work “almost in isolation,” they now play a more central role and are spreading the burden of working out a plan for upgrading internal controls with other departments.

Accenture’s survey found that about four fifths of banks say their compliance managers now have a direct line to the chief executive, rather than reporting to another division in the bank. Mr. Procter said this attention should help compliance avoid missing some of the warning signs in the past.

“You saw in the FX [currency manipulation] cases in particular that, unless the front office is really involved – seriously involved in supervision – you can lack the expertise. You really can’t understand the risks,” Mr. Procter said, referring to the currency benchmark rigging scandal that struck most of the world’s largest banks.


aerial view of the city center of Frankfurt am Main in the sun, Germany
Taking a closer look at banks’ actions. Source: Fotolia


Not all compliance managers see the new glamour in the job. Even if they’re supposed to be partners, some still consider themselves outcasts. One auditor at Deutsche Bank said he has made sure his picture is nowhere to be seen in the organization – so other employees can’t see him coming. Working in auditing also brings you enemies, he conceded.

Others argue the spending on compliance has run out of control — throwing money and people at the problem will only work if the new people are used effectively.

“We’re seeing some saturation. There is a complexity trap. The structures that have been built up have to settle over the next five years,” said Martin Stolberg, who has been advising large banks with anti-money laundering operations, including Deutsche Bank, for more than eight years and is now a consultant with Sopra Steria. “We’re in a transitional phase – the organizational transformations are still being crystallized.”

Clamping down on wrongdoing is also about more than just adding enforcers – it’s about changing the entire culture of Wall Street. This, after well over a decade of profligacy before the 2008 global financial crisis.

“It feels like there’s now one or two controllers sitting next to every trader.”

Deutsche Bank employee

“Cultural change isn’t something that can be brought about in two years. We’re trying to change mindsets. That could take 10 years in the end,” Dominik Enste, an ethics and economics professor who co-founded the IW-Akademie, a Cologne-based outfit offering ethical seminars for managers, said in an interview.

Perhaps it was Mr. Enste’s optimism that things can change that helped him secure his first client – Deutsche Bank. To date, he and his colleagues have run 70 seminars with about 600 middle-to-high level managers of the bank. Another educational round is starting later this month.

While some Deutsche Bank employees complain that the new trainings are burdensome, Mr. Enste said he hopes the seminars can give at least some managers a sense of purpose – a more positive view of their roles in society.

Mr. Enste likes to use a simple trust exercise to make his point. He gives one of every two bankers 100 euro, and tells them to decide (anonymously) just how much of the money they would like to share with a colleague.

“Milton Friedmann would turn in his grave if he discovered that most Deutsche Bank managers handed over 50 euro,” said Mr. Enste, referring to the U.S. free-market economist who famously defended greed as a necessary part of capitalism.


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“The perception of most people is that bad people will do bad things,” Mr. Enste said. In fact, he argues, anyone can be led astray if given the wrong incentives.

Mr. Procter, who left Deutsche Bank in the summer of 2014, also argued that changing the incentives are key to ending wrongdoing. Here too, he says, compliance departments have become increasingly involved – often having a say in the amount of bonus an employee gets based on their record.


Christopher Cermak is an editor with Handelsblatt Global Edition in Berlin. He has also worked for financial newswires in Frankfurt and Washington DC. Laura de la Motte in Frankfurt also contributed to this story. To contact the author:

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