Friday, July 11, 2014

Barclays Compliance Programme - A Triumph of Hope Over Experience



Barclays' Compliance Programme - A Triumph of Hope over Experience

I have been giving some more thought to the proposed Financial Compliance Centre being set up at the Judge Business School in Cambridge, in conjunction with Barclays Bank.

In so many ways, this proposal is wholly predictable, and in its own way, it identifies so many of the problems which beset the management of the British financial sector, which have resulted in the creation of a monster which has become too big to fail, and whose senior executives have become too big to jail!

The first, and perhaps the most obvious piece of predictable conduct is the marrying of Barclays Bank and Cambridge University.

Barclays Bank has always thought no end of itself, its executive culture has always been one of effortless superiority and high-class status. It was a Barclays Main Board Director who, at a dinner for delegates at a very exclusive executive 'retreat' at which I had been speaking, said to me;

"...You are entirely wrong if you believe that H.M.Government will ever prosecute someone from my class for financial crime or money laundering. This will never happen, we are a protected species..."

Over the years I have come to realise he was absolutely right, and that Barclays work very hard to maintain that level of Establishment protection. It is the very essence of this class-based approach towards financial services which has always bedevilled the British approach towards the way in which it views dishonest conduct in financial markets, and more importantly, how it should be dealt with.

When I was a detective at New Scotland Yard, I was sent to America to study financial regulation, US style! John Fedders, the Head of Enforcement of the SEC said to me when we met;

"...You British assume that everyone who works in the financial sector is a gentleman and you are shocked and horrified when you discover the opposite is true. In America, we assume that everyone who handles another person's money has the propensity to be a crook, and we legislate for the likelihood. When you stop pretending that markets can be regulated by 'good chaps' in between doing deals, and make the money available to regulate your markets effectively, then we will take you seriously. Until then, don't waste my time..!"

Sadly, the 'good chaps' imagery still operates in London.

Whenever Barclays have needed to project a more compliant image, they have always found an acceptable formula aimed at placating the British Government's ire! Hence the appointment of H.M.Treasury and Banking Establishment guru, Sir David Walker whose appointment as bank Chairman came within a month after former chairman Marcus Agius and Bob Diamond resigned within 24 hours of each other in the wake of the LIBOR criminal scandal.

Among other good reasons, Sir David was appointed to the post because he has an impeccable business and regulatory track record and is respected throughout the banking and financial services industry as a safe pair of hands, as well as being seen as an Establishment figure by Government. His appointment would have been seen as part of Barclays 'doing the right thing'!

So, it was probably inevitable that when Barclays decided that they had better do something to re-engineer the public perception of their criminogenic personality, that they chose to engage in the symbolic way that all high rollers do when they need to buy good opinions, by giving away lots of money to charity, albeit in a novel manner. By partnering with Cambridge University, the image of two of the most elitist, 'good chaps' organisations coming together in a mutual synergy becomes a trifle predictable! 

"...Sploshing the dosh..." is a tried and tested practice which has worked well over the years. Al Capone, in his time was extremely generous and outgoing. He attended baseball games and city functions. He donated money to many good causes and was known for his charitable giving. 

Al Capone opened up the very first soup kitchen in Chicago. He wanted to make sure everyone in the city who were jobless or homeless had a hot meal. Capone's kitchen served three meals a day and his soup kitchens exist to this day. 

Barclays, no doubt could have opened some food banks which would have had an immediate poverty-alleviating effect, but it is unlikely that would have fitted as well with their patrician image.

Instead, they turned to Cambridge University, another bastion of the Establishment, to become the recipient of their largesse! The Judge Business School turns out lots of highly qualified post-graduates who find jobs in banking and financial services, so the donations were not going to an undeserving cause!

"...The Cambridge-Barclays Compliance Career Academy is the first programme to be established under the school's Centre for Compliance and Trust. Its focus will be on a values and judgement-based approach to compliance, leading thinking and creating understanding around the emerging regulatory regimes which are being developed around the world..."

The University will take Barclays' money gratefully, all universities need munificent donors these days. Together, the two institutions have become a self-serving marriage made in heaven, and between them, they claim to have set up the first executive education academy for compliance in a bid to change the way the financial industry is run. 

This is not correct of course, there are already extremely successful similar academic courses being run at Portsmouth University, Sheffield University and Newcastle Business School.

More expertly, the Financial Regulation and Compliance LLM Courses being run in London at the BPP University Law School in Holborn offer a wide variety of courses for international students.

...The BPP University LLM (Financial Regulation and Compliance) focuses on the law and practice relating to the regulation of investment business in the United Kingdom from the perspective of compliance. The core module on financial regulation and compliance addresses the regulatory and legal environment within which persons authorised to conduct investment business operate. It also focuses on the particular role of compliance in the control and management of primary legal and regulatory risks. It is therefore far more than a programme on compliance. It is taught by practitioners and addresses the practical and problematic issues – including, for example, the personal exposure of compliance officers to legal and regulatory risk and the relevant law and practice to the exposure of financial intermediaries and their advisors to the legal risks, both criminal and civil, in handling other people’s wealth..."

In my earlier piece, I posed a challenge to the new Cambridge course managers by suggesting a programme on white collar criminogenics which I believe should be included in the programme, to give it a real relevance.

I do not expect them to incorporate such a module because it is not the sort of study that banks and patrician universities wish to include in their Business School offerings. The traditional view of financial regulation does not wish to include any study of any topic which smacks of criminality, because that immediately aligns their role with a policing one, and if there is one thing any compliance officer knows is that they do not perform any form of policing function, yet it is these elements which pose the greatest danger to the industry, because it is this behaviour which always causes the greatest volume of loss, and which explains why practitioners are so willing to break the criminal law.

If compliance practitioners are going to be really effective in identifying and recognising egregious conduct and dishonest behaviour among the practitioners they regulate, then they need these skills, and they need to be able to recognise the 'signs of crime', otherwise, they are worse than useless in their role.

For these reasons I am going to wait and see how effective this new exercise in academic partnering will be. While it may well be successful in assisting in the resurrection of the Barclays' reputation, I truly doubt it will add anything to our knowledge of how to effectively combat financial crime!

The real test will come when graduates of the school prove their worth in their compliance role by demonstrating that they have inspired and maintained a programme of financial compliance within which ethics and best practice are extolled, and where profits are honestly earned through good business conduct and fair dealing.

3 comments:

Demetrius said...

When you have a couple of colleges called Christ's and Jesus and look at who exactly founded others you may twig what the underlying elite problem is. God would appear to be on their side giving them the Divine Right to rule, bribe and embezzle.

Demetrius said...
This comment has been removed by the author.
Nicholas Shaxson said...

Cambridge has a tradition of robust and independent academic excellence. As exemplified by its extremely close links to senior Chinese government officials
http://www.taxjustice.net/2014/06/11/cambridge-university-chinese-government-connection/
and to ukrainian officials under international arrest warrants
http://www.taxjustice.net/2014/03/21/cambridge-university-new-ukraine-scandal/