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The Morning Risk Report: Investors Cozy Up to Compliance Opportunities |
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New York's Financial District seen in a May 2015 photo. PHOTO: Mark Lennihan/Associated Press
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Good morning. Companies that handle financial crime and compliance increasingly are on the radar of venture capitalists and private-equity funds, Risk & Compliance Journal's Samuel Rubenfeld reports.
Following years of massive fines for money laundering, sanctions and other compliance failures, banks bulked up on compliance staff, hiring thousands of employees, in some cases to sift through transactions and monitor for suspicious activity.
That manpower has become a cost burden for banks, observers say, especially as fines dip and a cultural understanding of compliance improves. Banks are looking to explore technological alternatives and analytical research that can augment the surge in human activity.
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“Financial institutions are trying to approach compliance in a smarter way to eliminate manual, repetitive processes,” said Sven Stumbauer, a managing director of AlixPartners, a consultancy that helps banks with compliance.
Investment areas in compliance can include financial technology, regulation technology, artificial intelligence and others, he said, adding the firms offering transaction monitoring have seen particularly high interest from investors and financial institutions.
The market for anti-money laundering software is expected to reach $4.1 billion by 2026, expanding at a compound annual growth rate of 12.5% from 2018 to 2016, according to a Credence Research report released last month.
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Crisis experts review the public comments of interdealer broker TP ICAP after the company's stock price plunged following an announcement of higher costs and the departure of its chief executive in the latest Risk & Compliance Journal Crisis of the Week.
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Pedestrians walk past the TP ICAP Plc and NEX Group Plc offices in London, on Jan. 5, 2017. PHOTO: Simon Dawson/Bloomberg News
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The European Union hit Alphabet Inc.’s Google with a record antitrust fine of €4.34 billion ($5.06 billion) on Wednesday, WSJ reports, citing an official familiar with the matter. The EU’s antitrust regulator has been looking into whether Google had abused the dominance of its Android operating system, which runs more than 80% of the world’s smartphones, to promote and entrench its own mobile apps and services.
Iran is suing the U.S. in the International Court of Justice, alleging the U.S. decision to end the nuclear agreement and reimpose sanctions breaches a 1955 treaty signed by both countries, Reuters reports. The U.S. says it will fight the claims.
The House on Tuesday approved a package of deregulatory measures aimed at making it easier for smaller companies to raise money in public markets. The plan, an expansion of the 2012 Jumpstart Our Business Startups Act, or JOBS Act, would further loosen regulations on securities offerings for small companies, including by broadening the pool of investors who can invest in private stock sales, WSJ reports.
Lawmakers are searching for bipartisan consensus on proposals that could amount to the biggest legislative changes to U.S. retirement savings in more than a decade, including modifications to 401(k)-style plans and enhancing tax incentives for companies to offer them, WSJ reports.
An administrative law judge at the National Labor Relations Board rejected McDonald's Corp.'s attempt to settle a fight with some employees who said they were fired from their jobs for being active in the national effort to get a $15-an-hour wage, Bloomberg reports. The judge said the settlement was missing "certain fundamental elements" that would make it effective.
New York, New Jersey, Maryland and Connecticut sued the federal government on Tuesday, seeking to overturn the portion of the federal tax law that caps state income tax deductions at $10,000, Reuters reports. The states claim the cap will hurt their economies and make it harder to pay for essential services.
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A U.K. court ruled singer Cliff Richard should be paid 210,000 pounds ($273,726) by the BBC for invasion of privacy, after the network reported he was being investigated for child sex assault, Guardian reports. The ruling could affect how British journalists report on police actions when no charges have been filed.
The U.S. National Security Agency and the military's Cyber Command will work together to thwart attempts by Russia to hack the 2018 elections, Washington Post reports.
Tech firms, publishing executives and lawmakers broadly agree on the dangers of fake news and hate speech online, but WSJ reports they still can’t find common ground on how to define it and what to do about it. On Tuesday, executives for leading social-media firms said on Capitol Hill that they were committed to improving the quality of the content on their sites, but caught flak from lawmakers who took issue with where the companies draw the lines.
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Texas Instruments Inc.’s Chief Executive Brian Crutcher resigned over violations of the company’s code of conduct, the chip giant said, less than two months after taking the job. The company said “the violations are related to personal behavior that is not consistent with our ethics and core values, but not related to company strategy, operations or financial reporting.” The company didn’t elaborate on the nature of the violations, WSJ reports.
CVS Health said it fired two white employees who called Chicago police on a black woman after she tried to use a coupon to make a purchase, New York Times reports. CVS said it “sincerely apologized" to the woman and terminated the two employees after an investigation.
Ron Burkle’s Yucaipa Cos. is suing the buyout shop that acquired Harvey Weinstein’s former entertainment studio in a bankruptcy sale, accusing Lantern Capital Partners LP of fraud in connection with the $289 million deal. WSJ reports the allegations stem from a time when both Yucaipa—the investment firm co-founded by Mr. Burkle, a billionaire grocery-store magnate—and Lantern were involved in an effort to help Weinstein Co. avoid bankruptcy. Lantern declind to comment.
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Designed to keep food fresh longer and move it faster, a 400,000-square-foot distribution center is online grocer Fresh Direct LLC’s multimillion-dollar bet on the fastest-growing sector in the grocery business. WSJ reports. The grocer is trying to solve one of the toughest problems in home delivery: Getting food to doorsteps in the same condition consumers would expect if they went to the store themselves.
Gap Inc. is suing high-end-mall operator Westfield for allegedly overcharging the fashion retailer in an action that underscores the sometimes-tense relationship between landlords and tenants as e-commerce transforms the retail sector. Other well-known U.S. retailers, such as Starbucks and Saks Fifth Avenue, have duked it out with landlords in court recently as they’ve sought to trim costs amidst a glut of shopping-center space, WSJ reports.
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White House economists have identified a potential stumbling block to maintaining the U.S. economy’s momentum: a lack of well-trained workers. WSJ reports there is a growing gap between the rising number of job openings and the number of workers equipped to fill them, and this could limit growth in the long run, according to a paper from President Donald Trump’s Council of Economic Advisers released Tuesday.
The deluge of money flooding into passive investments can swing stock prices, but fears of widespread market disruptions are overblown, according to a new report from S&P Global Inc. WSJ reports the researchers concluded the money sloshing into and out of ETFs, in particular, is unlikely to cause widespread price disruptions.
There is one big hitch in U.S. plans to stem buying of Iranian oil: China. Some in Washington now expect that China will vacuum up much of the Iranian oil that other nations won’t buy because of the threat of U.S. sanctions, according to a senior U.S. government energy official, WSJ reports. China buying extra Iranian oil could dull the economic impact of those sanctions. It could also bring Iran closer to China at a time of elevated tensions between Washington and Beijing over trade.
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A gas flare on an oil production platform in Iran's Soroush oil fields is seen alongside an Iranian flag in the Persian Gulf on July 25, 2005. PHOTO: Raheb Homavandi/Reuters
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MGM Resorts International is suing people associated with the deadliest shooting in modern U.S. history, including victims of the attack, in an attempt to protect itself from potentially significant legal claims, WSJ reports. MGM owns the Mandalay Bay Casino & Resort in Las Vegas, where Stephen Paddock shot into a crowd of concertgoers with high-powered guns from a room on the hotel’s 32nd floor last October. He killed 58 people and injured more than 500 others before fatally shooting himself.
General Electric Co. has assured investors its long-awaited reorganization sets the company on a path to recovery, but some on Wall Street still worry its biggest problem, GE Capital, will continue to get in the way, WSJ reports. The company continues to work with bankers and advisers to shed pieces of the business, devise a way to reduce or neutralize remaining risk, or, ideally, separate the entire operation, according to people close to the process.
U.K. Prime Minister Theresa May’s Brexit strategy was in peril after rank-and-file lawmakers sought to rewrite the plan she extracted from her warring cabinet earlier this month, casting doubt on whether she can negotiate any exit deal with the European Union that Parliament would accept, WSJ reports.
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Lloyd Blankfein secured the survival of Goldman Sachs Group Inc. by leading it through the financial crisis. The challenge for its next leader: how to thrive in a radically altered postcrisis world. The bank on Tuesday said David M. Solomon, Goldman’s president and chief operating officer, will take over as chief executive from Mr. Blankfein, WSJ reports.
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Follow the WSJ Risk & Compliance Team on Twitter: @WSJRisk, @srubenfeld, @BenDiPietro1 and @LikelyMara.
Send complaints, comments and kudos to Ben DiPietro at ben.dipietro@wsj.com.
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