Compliance Conference Part 1 V2 20090817
•Transferir como PPT, PDF•
1 gostou•359 visualizações
![Overview ,[object Object],[object Object],[object Object],[object Object]](data:image/gif;base64,R0lGODlhAQABAIAAAAAAAP///yH5BAEAAAAALAAAAAABAAEAAAIBRAA7)
Recomendados
Mais conteúdo relacionado
Mais procurados
Mais procurados (20)
Destaque
Semelhante a Compliance Conference Part 1 V2 20090817
Semelhante a Compliance Conference Part 1 V2 20090817 (20)
Compliance Conference Part 1 V2 20090817
- 1. People Risks, Compliance Motivation and Culture PART 1: The Problem Keryl Egan, Stormont Consulting Presented at the 6 th Annual Financial Services and Compliance Conference, Sydney, February 9-11, 2009
- 10. “ The line between good and evil lies at the centre of every human heart” Alexander Solzhenitzen
- 18. Individual Pathologies and Risk Copyright 2009 Keryl Egan and Stormont Consulting Threatens litigation Resists accountability Plays the victim Intensifies aggression Criminality unmasked Anxiety, rage Defends grandiosity & ego Tragicomic, ridiculous claims Anger, Anxiety Depression Agitation Response to Effective Challenge Planned harm others in interest of self. Gratuitous verbal violence/ sadistic intent. Overt and covert assault. Harm to others for own psychological survival Shame prone Pay-back for humiliation Harm accepted in service of organizational goals Expects resilience & robustness Degree of Intentional harm Self-interest Power, Money Praise Recognition Entitlement Achievement Following orders, Survival Motivation Anti-social or Psychopathic Vulnerable Insecure Alpha Under Pressure
- 19. Integrity of the People Serial Risk and the Psychopathic personality Charming, grandiose, seductive Clever, cunning, convincing Self-interest always prevails, even if masked No authentic empathy or remorse but very good imitations of these Damage to others is intentional
- 21. Integrity of the People Falling for The Psychopathic Trap DISABLE Maintains fear via isolation Positions target as an accomplice having limited credibility Rhetoric used to reframe reality Escalates abuse & intimidation TRAP Influence network Abuse maintains compliance Rewards offered for followers Exit made difficult SNARE Seduces with charisma or promise of reward Isolates naive target Induces fear/excitement Subtle Manipulation
- 22. Integrity of the People How People Respond to the Psychopathic Trap IN TOO DEEP Confused, shamed Fearful & powerless Loss of agency & initiative NO WAY OUT Defends position Maintains loyalty to bully Stressed under-performance Fear of Discovery and Consequence SNARED Compliant Dependent Subliminal fear
- 24. Ten years ago I turned my face and it became my life Haiku “Turning a blind eye” The consequences of following
- 29. P.O. Box 327, Leichhardt NSW 2040 Ph: 02 9564 0425 Mobile: 0414 734 840 Email: [email_address] Website: www.stormontconsulting.com Thank You
Notas do Editor
- We will talk about the problems and then look at the example of the NAB Forex rogue traders through the lens of the PWC investigation and report. This will help us to work through the analysis using this example but also referring to Barings and Enron.
- The consequences of hubris, turning a blind eye and not speaking up.
- *NAB: The BOAT book – Biggest of all Time and the common lore that a “Big Personality” was needed to be a trader. ** Duffy’s ‘my way or the highway’, culture of intimidation and fear produces mindless compliance. *** The BOAT book, dismissal of all challenges, aggressive response to questioning.
- The losses increased over time as did the methods of concealment. PWC: How the losses were concealed: The practice of concealing losses by the Traders started in September 2001, and potentially earlier. Initially, by using incorrect dealing rates for genuine transactions, the Traders shifted profits and losses from one day to another. They called this ‘smoothing’. Later they processed false spot foreign exchange and false currency option transactions to conceal trading losses The Traders entered false transactions in Horizon just before the end-of-day close, at about 8:00am the next morning. Entries in Horizon were the basis for profits and losses included in the general ledger from which financial reports are prepared. The Operations Division started the process of checking transactions at about 9:00am each day. Sometime between 8:00am and 9:00am, referred to as the ‘one-hour window’, the Traders were able to amend the incorrect deal rates and reverse the false transactions in Horizon to prevent their detection by the checking process. We understand that the Traders discovered this ‘window’ accidentally during 2000. In October 2003, the Traders identified that the back office had stopped checking internal option transactions. This provided them with the third method of concealment – entering undetected, one-sided internal currency option transactions. The impact on risk: As the currency options desk’s losses increased from 1 September 2003, exposures grew larger and riskier. Although the Traders partly obscured the position by the false option transactions, many limit breaches were identified, reported and approved. VaR limits were breached throughout 2003 and approved by Mr Dillon. Other option risk limit breaches such as vega were routinely approved by Mr Dillon. The number of breaches grew significantly in late 2003 and in January 2004. ** Note in NAB culture Management had a tendency to ‘pass on’, rather than assume, responsibility. *** In the trading room - use of contempt and denigration. Luke Duffy and ‘London stench boy’, ‘rats’ and ‘Judases’. People who left were denigrated.
- Duffy ridiculed anyone who questioned him. NAB Practice of smoothing David Bullen: Your ability to smooth profits will directly influence how much risk you are willing to run as a trader. If a bank doesn’t want its traders to take much risk, it gives them a samll budget and ensures revaluations are independent. As it was, our budget was going up and we basically had control over our own revaluations so the trades we were doing and the risks we were taking became bigger and bigger.’ The willingness to do this however, I do not beliece to be simply as case of the system providing the pathway but also that some will take the path more easily than others. Note that David Gentilin, the junior trader who became a whistle-blower, may have seen things differently.
- Vince Ficarra and Gianni Gray – newspaper articles. See Frost Nixon excerpt
- Elizabeth Sheedy talks about character in agency risk but there seems to be little written about this.
- See how these factors link with the factors in the mindset of the morally disengaged.
- Normally, I talk of this in terms of bullying only. However, it applies here to both bullying and criminal activity. NAB'S so-called rogue traders operated in a culture of fear and intimidation, in which they were taught to believe that profit was king and those who left the desk were traitors. Mr Duffy blamed the bank for setting unrealistic targets, encouraging aggressive risk-taking and advocating a "profit is king" culture. See how Anti-social or psychopathic behaviour reflects Bandura’s issues in the mindset of the morally disengaged. Power and powerlessness Dominance and submission Freedom and servitude Control and rebellion Identity and anonymity Coercive rules and restrictive roles Mr Duffy painted a picture of the trading desk as a blokey, aggressive but collegiate place to work, where a "big personality" was required and the term BOAT "Biggest Of All Time" was coined to describe the status of the team Mr Gray and Mr Ficarra portrayed Duffy as a leader who presided over a culture of fear and enforced loyalty; who kept a list of people who had left the desk and were termed "Judases". accused a younger trader, Mr Ficarra, of being a "rat" and "breaking ranks". Mr Duffy admitted to referring to Mr Gray as the "London stench boy", a term he claimed reflected Mr Gray's enduring pessimism. He also admitted criticising Mr Gray for his reputation as a conservative trader, and that he encouraged Mr Gray to take risks. Gray's only intention was, the court heard, to get the books clean and rid his desk of hidden losses and dummy deals. "To get to that point I broke the rules, and I am willing to accept the consequences," Gray told investigators. Gray's involvement in the sophisticated and calculated fraud had cost him the career he had studied for. He was now juggling jobs as a ship painter and a pizza chef. Gray and his wife had delayed starting a family until this case was over. The Judge said Gray's awareness of the details of the scheme was less than the others. "It is accepted you were not the architect of this scheme. You are the least culpable of your co-accused." Aggressive to anyone who challenged them. Upper management dismissed APRA’s criticisms.
- Psychopathy is a retrospective diagnosis. The silent, hidden nature of the behaviours and the sophisticated psychopath’s ability to imitate normal pro-social interactions may make it impossible to understand what is going on. An informed mindset and political awareness is helpful in detecting early warning signs.
- No-one knows who to believe or what to do. Ken Lay political and probably covert; NAB more overt and obvious.
- Isolation : separation of targets from supportive relationships. Complicity is also isolating. Re exiting, Duffy warned Vanessa McCallum that someone who crossed him was now making bread for a living. Destabilisation : manipulation of praise and criticism to gain power Disorientation : manipulation of work demands to gain power Apart from mind-scrambling as a technique there are also distortions in language, thinking and emotional processing in the psychopathic personality. This is particularly so if the person has a paranoid edge. Conversations can therefore leave one feeling somewhat mad. No Empathy or remorse, escalated abuse, often covert assaults Bismarck: isolate, neutralise, annihilate.
- The follower may maintain their loyalty to the bully, depending on the latter’s charm or seduction. Usually the stress of being manipulated and positioned eventually takes its toll. Attempts to escape are treated as acts of disloyalty, abuse escalates and manipulation to maintain the trap. This is similar to joining a gang or the Mafia. Note how Tony Soprano begins to set the trap by offering targets money or gifts.
- The impact on risk: As the currency options desk’s losses increased from 1 September 2003, exposures grew larger and riskier. Although the Traders partly obscured the position by the false option transactions, many limit breaches were identified, reported and approved. VaR limits were breached throughout 2003 and approved by the Joint Head of Global Foreign Exchange. Other option risk limit breaches were routinely approved and the number of breaches grew significantly in late 2003 and in January 2004. The Joint Head of Foreign Exchange appeared to be turning a blind eye and also lost his job - it has become his life.