Mr. Carse gives a banking supervisor’s perspective on control issues in financial institutions Speech by the Deputy Chief Executive of the Hong Kong Monetary Authority, Mr. David Carse, at the BanComp ’98 conference in Hong Kong on 25/5/98. I am pleased to be here this morning to speak to you at the start of this conference on internal controls and anti-money laundering. The advertised title of my speech is “Understanding the role and needs of the regulator in all authorised financial institutions”. This is a very broad subject and I have therefore narrowed it down to focus on the banking supervisor’s perspective on control issues in financial institutions. I am sure there are many compliance and audit professionals in the audience today, so I trust I should not have too hard a hard job persuading you that good internal controls are not only important, but crucial to the success of financial institutions. Just consider, for example, what poor internal controls did for BCCI, Daiwa Bank and Barings. So what advice can I offer you today to help you ensure that your institution will not meet the same fate? Well, what I will do is to share with you my thoughts on the key elements of a financial institution’s control systems, and highlight some of the areas where other institutions have gone horribly wrong. I will also talk about one of the key areas of a financial institution’s controls its controls against being used for money laundering.
President Reagan thought that one element of the American dream is “the opportunity to grow, create wealth, and build a better life for those who follow,” while President Obama has described it as follows: “A child’s course in life should be determined not by the zip code she’s born in, but by the strength of her work ethic and the scope of her dreams.” One’s destination in life should not depend on where the journey begins. Equal opportunity does not imply equal outcomes – some people may work harder, be more fortunate in terms of their disposition and endowments, or just be luckier in how their lives evolve. But it does require that income mobility – in particular, upward mobility – be widely evident and remain part of the fabric of the nation. It is important to keep in mind the distinction between income mobility and income inequality. Income mobility is a dynamic concept – the degree to which individuals or families can move  1  Rajashri Chakrabarti, Andrew Haughwout, Giorgio Topa, Joseph Tracy and Wilbert van der Klaauw assisted in preparing these remarks. BIS central bankers’ speeches  1  up or down in the income distribution over time. Income inequality is a static concept – how unequal are individual or family incomes at a particular point in time. Recognizing that rising income inequality in the United States is an important issue, my focus today will be mainly on income mobility. I don’t think the issue of income mobility receives the attention it deserves.