Al Rosen Opinion

Misguided, uncontrolled compliance has gone completely LOCO

Growing compliance profession needs government oversight, says Al Rosen

Author: Al Rosen

TORONTO – The effectiveness of rapidly growing compliance demands in our lives is long overdue for a thorough evaluation. How many puzzling requests have you recently received, requiring updates of your personal information? They seem to come from everywhere — insurance companies, banks, brokerage firms, credit card companies, even your dentist. 

The letters, typically requests for updated information, are signed by a “licensed official compliance officer,” or LOCO. If you do not reply completely within 21 days, LOCO will call you to explain the assigned penalties, including his policy of taking no prisoners. Have a nice day. 

I believe that the LOCO gang should be brought under control through an effective oversight body that restricts the collection of data. Why some entities need answers to specific personal finance questions should be explained and justified. 

We already know that leaks from massive databases are all too common. Look no further than the massive leak from Equifax in 2017, which may have affected as many as 100,000 Canadians. Too many of these compliance update requests from the LOCO gang seem like mere make-work projects. 

A weird letter will arrive in the mail that essentially asks whether you are still alive. And, if you are still alive, would you please pay your tax bill, make a dubious donation or take a special trip. Of course, you must complete a number of written forms that absolutely must be notarized. These are apparently essential so that some personalized future plan of attack against you can be formalized. 

After writing in your birth date on Form #1001, you will be asked again for your birthdate on Form #1002. Do not write “It has not changed since I completed Form #1001, one hour ago.” Your obedience is required on all forms. Graciously, not every form will ask you for a separate I.D. or access code, or birthdate. 

LOCO has completed courses in Stern Behaviour. Thus, you would be wise to hire an interpreter so as to not annoy him, especially if you haven’t fully answered every question on every page. 

Obviously, the compulsory forms were designed by another person of LOCO’s calibre. But don’t try speaking to LOCO in person to protest the duplication of questions or underlying logic, if any, of the forms. LOCO did not enrol in the “Why the Information is Needed” course and LOCO’s employer long ago stopped offering it. A willing instructor could not be found and the instructors’ manual has been lost. 

The LOCO pattern is to ask a bunch of questions that can easily be circumvented and prove nothing. For example, passports are now valid for 10 years; an insured policy holder may have died years ago but their relatives are still cashing their pension cheques. In my opinion, much of compliance is about fooling the public into thinking that regulations do exist, and that they are enforced. Well, it’s wake-up time.    

The LOCO gang apparently are seeking to grow their own power base, whereby they can set their own levels of ethics and other niceties. Canada’s lawmakers have long-approved of freely delegating oversight to self-regulating bodies without any useful external controls. Personal data collected from updated individual forms can be and is being sold by some organizations to others, presumably to pay for periodic meetings in Las Vegas. 

In 2016, the B.C. government took away the regulatory power of its provincial real estate association, declaring that it had lost the public’s confidence, and placed it under government oversight. The same potential for power cancellation has to exist for LOCOs, external auditors, and so on. The proliferation of compliance regulation and the potential for crisis speaks for itself. 

Dr. Al Rosen, FCA, FCMA, FCPA, CFE, CIP and Mark Rosen, MBA, CFA, CFE, provide independent, forensic accounting investment research. They are the co-authors of Easy Prey Investors: Why Broken Safety Nets Threaten Your Wealth. Learn more at Accountability Research Corporation and Rosen & Associates Limited. 

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