Complying with the US Patriot Act is a top concern for boards of financial services firms, according to a PricewaterhouseCoopers survey of 2...

Complying with the US Patriot Act is a top concern for boards of financial services firms, according to a PricewaterhouseCoopers survey of 210 board members, conducted at its recently-held 2005 Financial Services Audit Committee Forum. Sixty-five percent of those surveyed were audit committee members or chairs, all with a corporate governance role. The Patriot Act, passed after the 9/11 terrorist attacks, requires financial services companies to enhance customer identification capabilities, monitoring systems, and suspicious activity reporting. Increasing scrutiny by regulators has led to harsh penalties having been paid by many institutions for non-compliance. The increase in SAR filings, has made audit committee members particularly concerned about how their organizations manage compliance with the law. The survey asked the respondents to rank their four top areas of concern. The Patriot Act ranked higher than: the disclosure of financial measures other than those prescribed by Generally Accepted Accounting Principles; the impact of a major US housing bubble burst on their organizations and the economy; the risks associated with off-shoring critical functions and confidentiality of customer information. "We are not surprised to see the range of concerns expressed by audit committee members about regulatory compliance. Requests for compliance training have doubled in the past two years. Fraud hasn't doubled, but regulatory concerns have. Financial institutions live and die by their reputation and the confidence of the capital markets, so even an inadvertent compliance error can be devastating," said Timothy Ryan, leader of the US Financial Services Industry Practice of PricewaterhouseCoopers. Respondents also expressed concern over the difficulties of monitoring and assessing problem areas. The top four areas of concern in order of importance were: shareholder disclosure; sales practices; service provider oversight; and revenue sharing. Almost half of respondents thought their compensation was not adequate given the environment of increased regulatory scrutiny.