I had the pleasure of interviewing Luis Cifuentes a seasoned expert in the international financial sector, with extensive experience in a wide variety of compliance and internal control functions. Currently he is the CCO for Banco Bradesco (New York) one of the biggest banks of Brazil.
Thank you so much for doing this with us! What is your “backstory”?
Before joining Banco Bradesco ( NY), I was the Chief Compliance Officer at Bladex New York Agency, including the Investment Advisor and the Miami Rep. Office. I had a global role and worked across world wide offices in order to advise Senior Management for compliance-related matters. Prior to that, I was the Head of the AML at Sumitomo Mitsui Banking Corporation’s American operations, where I led a team of anti-money laundering specialists in enhancing their compliance tools such as KYC and Monitoring tools, helping the Bank to solve their regulatory problems in less than two years. My work at Banco de Chile, where I served as First VP Compliance Officer and BSA/AML/OFAC Officer for the American operations included spearheading the design and implementation of customer due diligence and BSA/AML programs to ensure compliance with concurrent FRB, OCC and different States’ remediation orders. I also worked with high net worth individuals within KYC practice at Citigroup Private bank for EMEA region. During my career I was fortunate to be working on a number of global projects in various countries at the most renowned banks.I started my career in Chile at a local commercial bank managing the trade finance department and then rest is history.
What do you think makes your bank different in these disruptive times? Can you share a specific story?
The tone at the top. The senior board and the management need to be in sync with how compliance and risk is being managed. Banco Bradesco is committed to comply with the existing regulations in every place we operate.
What are the risks that boards are currently concerned about in the Market, Liquidity, Credit, Operational, Financial and Compliance risk categories?
From what I see in global markets, following are the top risks in each category:
Market: High volatility
Liquidity: High volatility can affect liquidity. Many new aggressive unregulated products in the market competing with traditional products making traditional products unmarketable
Credit: The large amount of debt, at some point is going to be a problem, for example look at student loans.
Operational: Probably the biggest risk of all. The lack of training and the sophistication of the products, services and Systems can have a big impact on operational errors, especially in relation to compliance.
Financial: Continuing with operational risk can be relevant in this area as well. Operational problems can be damaging to the reputation of the entities, therefore impacting their financial risk.
Compliance: The most critical risk; the great impact on reputation and financial impact due to fines and other sanctions.
What are the risks that you are concerned about in those same categories over the next three years
Geographical vs. Debt Levels, including the big players USA, China, India, etc. Banks should expect a larger number of bad debts
Technological risk including disruptions and compromising of data due to security violations, Cyber-attacks, human errors, insiders’ data thefts and terrorists threats
The failure of the three lines of defense. Clearly the 3 lines of defense are not working as planned. Most of the effort remains on Compliance; the area usually with the lowest budget and least access to top decisions. The tone at the top sounds good, but the tone at the top normally means business at any cost. The squeezing for lower revenues will lower the quality of controls on the front line
Crypto Currencies, soon or later, will become an issue for the financial institutions and governments.
Regulatory risk will always be there, especially due the appetite for revenues that are getting scarce and push the bankers to push the business to the limit in the search for those revenues.
Operational Risk: Most banks don’t put enough attention to the operational area resources, creating a constant turnover of said resources. This forces the operational areas to deal with an untrained workforce or the need to outsource some of the tasks, increasing the risk for the financial institution.
In your view, should Conduct risk be among the top risks to be concerned about? Can you elaborate or share a story?
Absolutely. If we look at one of the biggest fines ever in the US financial sector,such as BNP, a tremendous financial and reputational damage to the entity was originated by bad behavior and violations to the code of conduct of the bank
Building a “Lean Risk Culture” is crucial in strengthening risk management practices at a holistic level. What is your approach in building a lean risk culture? Can you share a story or example?
Lean in the senses of efficiency, eliminating waste, improving processes and creating value for customers and the organization? I believe this means that banks need to have an investment in resources, get the best and not only get them, but retain them by providing long term commitment, credibility, and above the market salaries and benefits, the turnover ratios in financial institution can break any lean approach.
With an increasing amount of data breaches and financial crimes , what do you think is the most effective way to manage this risk ?
Again, investing in the right resources, human and technological. Any breach in this area can be greatly damaging for a financial institution. A lack of credibility and that “unsafe” feeling can be a disaster.
Can you name one area within risk management that will see the most benefit due to advances in technology?
I believe it will be compliance, the ability to analyze large amounts of data that otherwise would be impossible, or take an exorbitant amount of time to process, will greatly benefit from technological advances. The number of options and competition would also make the technology more accessible to the different sizes of enterprises.
Can you please give us your favorite “Life Lesson Quote”?
Financial Institutions should learn that in terms of risk management there are no shortcuts, you will pay now or pay later.
Some of the biggest names in Business, VC funding, Finance, and Investors read this column. If you could have private breakfast with someone who you consider really successful , who would that be and why?
Bill Gates, I think he changed the world, converting his hobby and interest into one of the most profitable businesses in the history. And yet, he too is one of the biggest philanthropists in the modern era.
Originally published at medium.com