French banking giant BNP Paribas announced today that it is replacing its top compliance chief and undertaking a major reorganization to strengthen its compliance and internal control functions, following its record $8.9 billion settlement with the Justice Department this month for U.S. sanctions violations.
Jean Clamon, who has served as head of group compliance since 2008, will retire “as planned,” before the end of the year, BNP said in a statement. He will be succeeded by Eric Martin, who currently is head of group internal audit. Martin also will become a member of the executive committee.
Frank Roncey, currently head of retail and corporate risk management, will become head of group risk management. He will replace Michel Konczaty, who was appointed deputy chief operating officer, the company said.
Gilbert Coulombel, who currently heads BNP's Paris Basin branch network, will replace Martin as head of group internal audit.
All of these appointments become effective Sept. 30, 2014.
Remediation Plan Details
In addition to these new appointments, BNP’s internal control system is also undergoing a “major overhaul,” the company stated.
“In a banking environment undergoing profound change and becoming ever more demanding and complex, these adjustments had become vital to the interests of our businesses and our clients,” BNP Paribas Group CEO Jean-Laurent Bonnafé said in a prepared statement. “Our goal is to make our internal control mechanisms as robust and reliable as our risk control system.”
BNP’s internal control system overhaul will be based on three main initiatives:
Vertical integration of the group compliance and group legal functions. The purpose of the integration is to ensure their independence and resource autonomy, along the same lines as the risk management and internal audit functions. “The organization of these four group supervisory and control functions will, thus, be mutually aligned, with direct reporting by all their teams worldwide, independently of individual businesses and geographies,” the company stated.
Creation of a group supervisory and control committee. This committee will meet twice monthly under the chairmanship of the CEO “to coordinate and ensure consistency in the actions undertaken,” the company stated. Membership of this committee will comprise the heads of the four relevant departments—compliance, legal, risk management and internal audit—who will report directly to the CEO.
Creation of a group conduct committee. This committee includes qualified persons from outside the group to “shape and monitor the implementation of the group’s Code of Ethics and Business Conduct and the special policies relating to sensitive business sectors and countries,” the company stated.
As part of its adjustments to internal controls, BNP said it plans to increase resources allocated to compliance, including adding more head. “Over 1,600 employees are currently working in this field, a 40 percent increase since 2009, and this headcount will be further increased,” the company stated. The number of training programs designed for its compliance teams further will be increased, and the content extended.
BNP’s internal control tools will also be enhanced, including transaction filtering software and procedures for the periodic review of the bank’s client portfolio and ‘Know Your Customer’ obligations.
In addition, BNP is establishing a team whose task will be to implement a remediation plan, “designed to ensure the compliance of all group businesses,” the company stated. Nathalie Hartmann, currently head of portfolio management, will head the remediation plan.
As part of that remediation plan, BNP is establishing a group financial security department in the United States under the guidance of group compliance. Thus, the group’s entire U.S. dollar flows will be processed and controlled internally through its New York office, the company stated.
The internal audit function also plans to conduct more frequent audits at BNP’s main entities, which deal actively in U.S. dollars, with a new team specializing in compliance and financial security issues.