The rise of tough new financial regulation in the years since the financial crisis has seen pressure mount on the correspondent banking network. The international money transfer business has been particularly affected, especially in poorer countries such as Somalia. Many banks have pulled out, ending relationships and closing correspondent accounts. Barclays was at the center of a Parliamentary debate over the issue in the UK House of Commons in 2013. The bank stated that it feared being fined by the regulator if it did not reduce what it perceived as exposure to risky businesses.
The report, Correspondence course: charting a future for US-dollar clearing and correspondent banking through analytics, adds that financial institutions are facing ‘significant penalties’ for failure to comply with AML and counter-terrorist financing rules. Apart from enforcement action, one component of the regulatory push is an increased scrutiny on correspondent accounts. PWC suggests that the banking industry faces an ‘existential crisis’ for the financial services industry, since the closure of hundreds of thousands of accounts following AML reviews effectively undermines the global financial system by reducing its ability to transfer funds across border and support international trade
Barclays has brought in a Credit Suisse banker with more than three decades of experience in audit, compliance, and quality assurance to help protect its reputation, which has been marred by scandals over the last few years. The most recent scandal to hit Barclays was chief executive Jes Staley’s attempts to unmask a whistle-blower who sent letters to the board in 2016. This led to Staley himself being fined £642k by the Financial Conduct Authority FCA and the Prudential Regulation Authority in May.
Stefano Toffolo joined Barclays as a managing director earlier this month in London. He will head the Chief Control Office and oversee its partnership with the compliance division and the company secretariat on key group reputation and conduct risk programs, according to his LinkedIn profile.
Barclays has been hit by a succession of scandals in recent years. They include controversies related to manipulating LIBOR, which resulted in a $453 USD Million Dollar Fine from U.S. and U.K. regulators in 2012, manipulating foreign exchange rates which landed the bank with $2.4 billion fine by the U.S. government in 2015, and mortgage mis-selling in the run-up to the financial crisis which saw the bank paying $2 billion to the U.S. regulators earlier this year. Barclays was also fined £72m pounds by British regulators in 2015 for failing to safeguard against the risk of being used to facilitate financial crime.
Toffolo’s expertise may therefore come in useful. Prior to joining Barclays, he spent almost two decades at Credit Suisse Bank. He started out at the Swiss bank as a director in 1998 and rose through the ranks to become a managing director in 2007. During his tenure at CS, Toffolo had various roles including Global Head of Investment Banking Operations, head of investment banking front to back process design and delivery, and chief compliance and regulatory affairs officer (enterprise front to back) and compliance QA.