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Jul 22, 2022

The week in GRC: Financial firms turn to crime-detecting AI and companies will have to disclose supply-chain financing details

This week’s governance, compliance and risk-management stories from around the web

Reuters reported that Suncor Energy said it had added three new independent directors and would review a possible sale of its downstream retail business as part of an agreement with activist investor Elliott Investment Management. Canada’s third-largest oil producer had faced pressure from Elliott over its operational and safety records. The investor had been urging Suncor to bring on board new directors and undergo a management and strategic review.

Suncor named industry veterans Ian Ashby, Chris Seasons and Jackie Sheppard as its new independent directors. Seasons and Sheppard will oversee the strategic review and make a recommendation as well as join Suncor’s search committee for a permanent CEO. With the changes, the board will expand to 13 members, the company said, adding that two existing directors will retire by the end of the year.

– Jaime Lizárraga was sworn in as SEC commissioner. He most recently served as senior adviser to House Speaker Nancy Pelosi, in which role he oversaw issues related to financial markets, small business, international finance and immigration. Lizárraga was previously a senior professional staff member/director of legislative affairs for the Democratic staff of the House Financial Services Committee, deputy to the assistant secretary of legislative affairs at the US Department of the Treasury and deputy director of the SEC’s office of legislative and intergovernmental affairs.

– According to Bloomberg (paywall), activist hedge fund firm Bluebell Capital Partners is seeking a boardroom shake-up at luxury-goods company Richemont. The company, which owns Cartier and Vacheron Constantin, said Bluebell wants to appoint a board representative for A-class shareholders who have weaker voting rights than the company’s B-class shares controlled by chair Johann Rupert.

The activist is also requesting that A and B shareholders have an equal representation on the board and that the minimum number of board members be increased to six. The dual-share structure gives Rupert more powerful voting rights to control Richemont’s governance structure, including its board of directors.

An official at Bluebell declined to comment. Its request will be submitted to shareholders at the company’s AGM on September 7. The board ‘is considering the proposals and will communicate its recommendations on this subject in due course,’ Richemont said.

– The SEC announced an award of more than $17 mn to a whistleblower. According to the agency, the whistleblower’s information prompted SEC officials to open a new investigation that led to a successful covered action. The whistleblower also provided SEC enforcement officials with detailed information and documents throughout the investigation. The same information led to the success of a related action. The regular has awarded roughly $1.3 bn to 278 individuals since issuing its first award in 2012.

– According to The Wall Street Journal (paywall), experts say that with financial crime-detecting AI systems growing in profile, financial services firms and other regulated entities are likely to face pressure, both internal and external, to use more advanced technology.

‘You don’t want to be lagging behind, because that puts you in the spotlight,’ said Alma Angotti, a former senior enforcer with the US Department of the Treasury’s Financial Crimes Enforcement Network who now works as a partner at the consultancy Guidehouse. ‘It will at some point be a regulatory expectation.’ The more stringent compliance expectations of President Joe Biden’s administration have prompted companies that are lagging to try to catch up, Angotti added.

New AI-focused tools are intended to reform the laborious approach to compliance that has long prevailed at many financial institutions and other entities. Compliance departments traditionally have used manual approaches to try to spot crime amid mountains of legitimate transactions and well-behaved clients. AI can do the job better.

– Airbnb co-founder Joe Gebbia announced he is stepping down from his role at the company to explore other projects, according to CNBC. Gebbia has been with the company since it was founded in 2007 and said he will remain on Airbnb’s board. He is the first of the three original founders to step down.

‘After great consideration, I’ve decided to step back from my full-time operating role at Airbnb,’ Gebbia said in a letter to employees. ‘The primary reason for this transition is that this is the only company I’ve ever helped build, and my brain is bursting with more ideas to bring to the world.’

– The WSJ said that US companies will have to disclose the terms and size of their supply-chain financing programs under a new rule from the FASB, which approved it on Wednesday. Supply-chain financing has gained popularity as companies build up inventory and push their payment terms out further. The tool allows companies to pay bills later, while suppliers get their cash more quickly. A third party – usually a bank – pays the vendor’s invoices and takes a cut. The business pays the bank what was due under the invoice at a later date than originally required. Companies previously haven’t had to report these arrangements in their financial statements.

– According to MarketWatch, Roche Holding said it has appointed a new CEO, effective next March, and that the long-serving incumbent is in line to become chair of the Swiss pharmaceutical company. Thomas Schinecker, who is currently CEO of the group’s diagnostics division, will take the reins on March 15, 2023, succeeding Severin Schwan, the company’s CEO since 2008. Schwan will be proposed as Roche’s next chair to succeed Christoph Franz, who won’t seek re-election to the board of directors at March’s AGM, the company said.

Ben Maiden

Ben Maiden is the editor-at-large of Governance Intelligence, an IR Media publication, having joined the company in December 2016. He is based in New York. Ben was previously managing editor of Compliance Reporter, covering regulatory and compliance...