Major compliance scandals and enforcement actions, nonstop political and regulatory drama in Washington, D.C., the rise of transformative technologies, and much more all made compliance headlines in 2017. With the inauguration of President Trump, the year began with an air of regulatory uncertainty as compliance officers wondered exactly what rulemaking the new administration would roll back, defund, or overturn with a stroke of an executive pen. And there was further uncertainty with a Congress that promised to overturn healthcare reform, diminish the Dodd-Frank Act, and overhaul corporate taxation. Meanwhile, major enforcement actions continued to roll in, as did major corporate compliance failures around the world, some of which merely resulted in reputational damage while others resulted in massive financial losses. And as the year wound down, we saw yet another massive leak of confidential legal files that uncovered what the world already knew: that many of the most powerful individuals and organizations on the planet routinely use, abuse, and misuse financial law to preserve wealth and exert influence. With 2018 on the horizon, the question on everyone’s mind is not whether the next year will top this one in terms of attention-grabbing developments … but by how much it will do so.
Wells Fargo: Eight isn’t so great Last September, retail banking giant Wells Fargo announced it would pay some $185 million in fines to the federal government and the state of California to settle charges that it had opened millions of unauthorized accounts and credit cards for its existing customers as part of an aggressive cross-selling strategy that had turned toxic. But that settlement announcement was just the start of things, with the news creating a reputational firestorm that would haunt Wells for the duration of 2017. CEO John Stumpf at first tried to pass the scandal off to some 5,300 “rogue employees,” but the public wasn’t buying it. Stumpf was called before Congress, where Senator Elizabeth Warren and Treasury Secretary Jack Lew upbraided Wells in general and Stumpf in particular. As Wells went into damage control, it announced it was axing its “eight is great” sales goals. But further outcry ensued when it was discovered that Carrie Tolstedt, the head of the sales unit responsible for the unauthorized accounts, retired before the scandal was discovered with a huge payout. Amid growing calls for his ouster, CEO Stumpf would also retire in October, taking some $133 million with him. In reaction, the Wells Fargo Board retroactively terminated Tolstedt for cause and partially clawed back both her compensation as well as Stumpf’s. But neither executive will suffer that much for their actions. Meanwhile, Rep. Maxine Waters has unveiled the Megabank Accountability and Consequences Act, legislation demanding that federal banking regulators initiate proceedings to wind down big banks that repeatedly violate consumer protection laws.
