Service Provider To Profit: Deloitte and Standard Chartered Bank

This is a very hot story. I had no idea until I put up something on Forbes late this afternoon, after editors requested with a “very important” red arrow on the email, and I got 23,000 hits in an hour.

Lots of good comments, too.

Here’s a quick excerpt.  Go to Forbes to read the rest, please.

Back in October 2004, New York State and the Federal Reserve Bank of New York issued an enforcement order to Standard Chartered Bank requiring it to “adopt sound”  Bank Secrecy Act/Anti-Money Laundering practices with respect to foreign bank correspondent accounts. That order also required the bank to hire an independent consultant who would report periodically on the bank’s progress to the regulators and conduct a retrospective transaction review, or “look back” review, covering the period July 2002 through October 2004.

Deloitte was chosen as the “independent” consultant. But it didn’t take very long for Deloitte to become more than just an “independent” consultant hired to help it fix its BSA/AML issues.

According to the results of a New York DFS investigation published yesterday, before long Deloitte had morphed from “independent” consultant, in service to the regulators, to “service provider”. As a “service provider” Deloitte apparently aided and abetted the bank’s continued illegal activities by sharing confidential information about other clients’ similar illegal activities and “watering down” reports to the regulators.

There’s big temptation for Deloitte or any of the Big Four audit firms who get the growing number of plum “governance, risk and compliance” roles as supposedly “independent” consultants to the banks. There are so many consent decrees and settlement subjects looking for help to reassure regulators they are on the straight and narrow now, it’s inevitable that the auditors would look at the banks and see dollar signs from future work rather than scofflaws who need to be scrutinized.

Being adversarial is not profitable.

2 replies
  1. Oversight for the Better
    Oversight for the Better says:

    Maybe the BIG 4 are barking up the wrong tree. Their expert finagling skills might be a big turn on for the Mafia or a drug cartel here and there.

  2. Richard
    Richard says:

    This is one of the unintended consequences of having only four firms in the audit and audit compliance business. With so many consent agreements floating around, it is impossible for a company under such an order to hire an unconflicted consultant for every order. For years pressures on audit firms to be consistent and directly accountable have escalated, forcing them to become larger and larger to be able to comply with every new audit requirement that came along. Mergers for scale eventually changed a diverse business into an oligopoly of uniformity. Then when the entire Arthur Anderson was driven out of business by the US Government for shady audits by one small group, the Government left America with only four audit firms. Sad

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