by clicking the arrows at the side of the page, or by using the toolbar.
by clicking anywhere on the page.
by dragging the page around when zoomed in.
by clicking anywhere on the page when zoomed in.
web sites or send emails by clicking on hyperlinks.
Email this page to a friend
Search this issue
Index - jump to page or section
Archive - view past issues
GRC Professional : GRC Summer 2013
28 GRC Professional • Summer 2013 COMMENT the organisation. It needs cultural change and proper risk allocation to encourage people in the business to take lawful actions only and to resist unlawful actions -- regardless of the potential profit that stands to be made. One tool of leverage that is in disuse in a dusty corner is consequence. GRC as a framework and as a function has never been given the power or the ability to impose consequence within organisations. The impotency of GRC as a policeman and the lack of positive drivers to motivate behaviour in the financial sector have, in effect, left us where we are today. We are now sifting through the charred remains from the global financial crisis; witnessing mammoth penalties get handed down with alarming regularity; and watching from afar as the Libor hearings reinforce the public's dismal view of the ethical standards within some financial institutions. Power of penalties If GRC is understandably powerless and ineffective in promoting good conduct, and culture change is merely a statement of motherhood, then the only remaining force weighing in on the activities of profit-makers and takers is the force of law and regulation. Law s and regulations covering the activities of financial institutions, built on appropriate criminal penalties, are the only external forces that have a chance of changing the sca ndal-laden world of financial institutions. Such laws and regulations will only work if they are fearlessly enforced by government, regulators and law enforcement agencies alike. Criminal penalties need to apply to corporations (loss of banking and other licences, penalties, liability to shareholders) and personally to directors, senior managers and profit makers and takers. When calling for a return to criminalisation of activities engaged in by profit makers and takers within financial institutions, we need go no further than the concepts of fraud (such as in the recent Libor scandal) and the crime of money- laundering. Fraud is a criminal act. Money- laundering is a criminal act. Yet those working in financial institutions are seemingly immune to any form of criminal prosecution. There are some limited exceptions, such as the criminal prosecution of Lucy Edwards and the Bank of New York resulting in a 'slap on the wrist' home detention order for Edwards, with no jail time ser ved. Yet even the Bank of New York was able to negotiate a delayed prosecution agreement after it violated a cease-and-desist agreement in the same matter. If the risk is that a civil penalty might roll out of the door of the regulator in three or five years' time, what deterrence value is there? By the time a civil penalty is imposed, the profit makers and takers involved will have moved on to another financial institution or taken up residence in other rolled- gold pastures. Despite the attempted reforms to remuneration practices, in most cases the bonuses will have been paid and options exercised long before the regulators swoop. The past decade has shown that GRC has not had an effective seat at the executive table. If it had a The past decade has shown that GRC has not had an effective seat at the executive table.
GRC Spring 2012
GRC Autumn 2013