Research Handbooks in Financial Law series
Edited by Barry Rider
Chapter 51: Control liability and compliance: tools for controlling financial crime
This chapter focuses on the definition and scope of the concept of ‘control liability’ and the application of such liability, as well as the role of ‘compliance’ within financial institutions, as a tool for combating financial crime. The term ‘compliance’ in this context is not merely the ‘compliance function’ (as a constituent of an institution’s wider assurance, regulatory control, prudential and reporting framework), but it also encapsulates the much broader range of officers, employees, agents, professional advisers, contractors and counterparties (collectively ‘actors’) whose responsibility might variously include everyday observance with legal, regulatory and financial crime-related obligations. The genesis of this chapter is the growing influence of regulatory risk on the successful use of traditional ‘control liability’ as a credible ‘stand-alone’ tool in the battle against financial crime. The preservation of ‘financial stability’ has taken precedence over cultural and other behavioural dynamics within institutions. As such, regulatory policy and enforcement is potentially now acting with material unintended consequences upon the effectiveness of the ‘control function’. This is arguably undermining the efficacy of holding financial institutions to account (and more specifically their senior management and ‘compliance’ function) as a principal instrument in the fight against financial crime. The legal risks of increased personal liability (potentially criminal) now being faced by those who are mandated to police and in essence have ‘control’ over the detection and interdiction of financial crime must be aligned with the measured benefits expected by global prudential policy makers.
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