Following the Money Trail
When you are looking for trends, threats, or risks to be concerned about, one of the simplest ways to choose a path is to follow the money. For a regional bank or credit union, you have a great roadmap that is occurring real-time when it comes to compliance requirements in your industry. Look no further than the action of Wells Fargo over the past few weeks for an example of what to be concerned about.
Wells Fargo has announced a two-year internal probe to examine the standards by which employees should act and the procedures for handling conflict. Great, right? Huge investment for sure, but one has to ask, can any two-year probe stay organized and efficient enough to drive true change?
Why take on a project of this size? And why are other huge financial institutions like Deutsche Bank AG and JPMorgan Chase doing the same? All are still dealing with the financial crisis hangover and the continued government scrutiny (CFPB, anyone?) that is forcing these “too large to fail” companies to invest hundreds of millions in compliance.
The scope of investment is truly staggering, which tells you that these companies see the risks of non-compliance as even more financially devastating. Collectively, over $51.2 billion…that’s right – billion, has been set aside by four of the nation’s largest financial institutions to deal with litigation and legal costs associated with compliance. JPMorgan has allocated at least 5,000 people to compliance to battle their woes.
None of us are going to feel sorry for these companies. They were reckless and are paying the price. We should be instructed by their efforts and realize that regulators will be busy with them for a while; but as the CFPB and others build their infrastructure with the fines and penalties amassed from these companies, these regulators will eventually need to move downstream.
Following the money trail on both sides of this story should give the third and fourth tier financial institutions a good roadmap to follow so they are prepared for the eventual scrutiny that will fall on them.
