Individuals not Immune to Regulatory Penalties

Recent regulatory actions against directors and officers (D&Os) of financial institutions under examination or investigation for wrongdoing have seen civil money penalties (CMPs) reaching well into the tens of thousands of dollars. Such cases can offer clear evidence of how civil monetary penalty liability insurance may be well worth the investment. The fact bank regulators do not need proof of negligence or wrongdoing to impose penalties is an even stronger argument.

In one example, on February 14, 2017, the FDIC imposed Bank Secrecy Act-Anti-Money Laundering (BSA-AML) CMPs, ranging from $30,000 to $90,000, on three Banamex bankers, in addition to Consent Orders and further prohibitions. Earlier in February 2016, putting a finer point on regulator intentions, the OCC revised internal guidance on CMPs and enforcement actions. Components of those revisions addressed the weight afforded certain factors within the CMP matrix and were taken as clear indications of the OCCs inclination to consider more actions against D&Os or other bank individuals.

While the banking industry waits to see how the new administration in Washington will address regulations in the financial industry, any changes in policy will have to pass through a partisan Congress. Since changes will likely not be sweeping or immediate, and considering the level of risk D&Os currently face, civil monetary penalty liability insurance may offer some insulation from an aggressive stance towards CMPs for individuals. D&Os may do well to consider their exposure and weigh the benefits of coverage.