Newsletter | Volume 1

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Even if you are doing God's work you have to understand the importance of controls. Goldman Sachs failed to implement policies and procedures that adequately controlled the risks



Goldman Sachs has been fined $22m (£13.8m) by US regulators to settle charges that some "top clients" may have been tipped off about stocks. As part of the deal, Goldman neither admitted nor denied the charges. The SEC has been criticised over its continued use of settlements where banks do not admit liability in the aftermath of the financial crisis

The Securities and Exchange Commission (SEC) said that the bank lacked policies to prevent leaks from their weekly "huddles" on equity research. Goldman has also been criticized over its role in the global financial crisis, including the US housing market slump and the Greek government's debt problems.

At the Copenhagen Compliance conference senior manager of PwC Thomas Bøgballe, previously VP Internal Controls dept at Carlsberg Breweries, will discuss the importance of internal controls, and review the consequences of failure to implement policies and procedures that adequately controlled the risks.

Violent criticism for doing God's work

Greg Smith, who headed Goldman's equity derivatives business in Europe recently, quit the bank in a scathing editorial for the New York Times, saying its environment was "toxic and destructive.

Rolling Stone magazine once disgracefully likened the bank to a vampire squid wrapped round the face of humanity. But Goldman's boss, Lloyd Blankfein, rightly rejected these claims as the attacks did not reflect the banking giant's true values.

The SEC opened a fraud investigation in 2010 over the marketing of mortgage investments as the US housing market faltered. These featured e-mails from trader Fabrice Tourre saying that "the entire system is about to crumble any moment" in 2007.

Goldman agreed to pay $550m to settle civil fraud charges of misleading investors in 2010 - the biggest fine for a bank in the SEC's history.

Goldman was also fined £17.5m by the UK's financial regulator, the Financial Services Authority, for failing to tell it that the bank was being investigated by the SEC.

Perhaps it's only the clergy and bishops that are exempted from documenting and implementing controls, policies and procedures if you are doing god's work, probably because they are accountable to a higher authority. Fuzzy Logic is not one of the 32 different subjects that will be discussed at the Copenhagen Compliance Conference, however effective internal control environments are an essential part of the Risk Management function are.

Internal controls are an important component of effective management of any business because they increase the awareness across the organization. The challenge associated with implementing and maintaining an effective control environment is ongoing.
  • The world and organisations are constantly changing, such that measures are subject to review and revision regularly. Ensuring that your organisation is prepared for this and that they are acting accordingly when the business may span a large number of different cultures is a complex problem.
  • How an effective internal control environment can be established and maintained in an international organisation

Speaker
Thomas Bøgballe, Senior Manager PriceWaterhouseCoopers.

Source: Wall Street Journal