PricewaterhouseCoopers’ financial advisory unit took a hit on the chin on Monday, agreeing to a two-year ban on certain consulting assignments along with a $25m fine for reportedly watering down an anti-money laundering report for a client. The settlement won’t cripple the unit, but it could set off a chain of people moves within the industry.
New York’s Department of Financial Services (DFS) took the action after learning that the firm’s regulatory consulting unit “whitewashed” a compliance report on the Bank of Tokyo-Mitsubishi’s reported dealings with sanctioned countries.
From a workforce perspective, the key headline is the ban. PwC’s Regulatory Advisory Services is prohibited from working with new clients that are covered by the state’s Department of Financial Services. PwC also agreed to work more closely with the regulatory agency when dealing with banking clients.
At the very least, the action will open up a “hunting season” of sorts on PwC consultants working within the unit who weren’t part of the report, which was submitted to DFS more than five years ago, said one recruiter who asked to remain anonymous. It could even spur those outside of the group who worry about reputational risk to consider taking recruiters’ phone calls.
“Even if PwC doesn't expect any fallout from this you can count on every recruiter in the compliance space to call on PwC consultants non-stop (myself included) and the perception of problems will make PwC employees be more open to taking those calls,” said Peter Laughter, CEO of New York headhunter Wall Street Services. “This will, in some manner, impact PwC's ability to recover.”
PwC told us the ban won’t have any effect on its hiring plans, which have been aggressive in recent years. The Big Four firm said earlier that it planned to make 2,500 full-time professional and intern hires within its advisory business during its 2014 fiscal year.
From a revenue standpoint, the two-year ban should be “just a bump in the road,” said one former PwC consultant. He only worked on one DFS project in his years there. “The hit is to the reputation,” he stressed, opining that KPMG and EY may be the beneficiaries of new work, if not new workers.
Nick Careless, managing director of financial services headhunter Twenty Recruitment, said other Big 4 firms, as well as some of the smaller or more niche competitors in this specific space, may well see an uptick in their hiring. A spokesperson for EY and KPMG declined to comment on the ban or whether it will ramp up their recruiting efforts.
PwC isn’t the first advisory firm to face such an action. Last June, New York regulators banned Deloitte’s financial-advisory services unit from working for select financial institutions for one year in an eerily similar case involving Standard Chartered.
The actions make you wonder if the concern isn’t specific to PwC or Deloitte, but to the industry as a whole. Investigating a client has its obvious failing points.
“A good compliance professional always looks to assist clients in meeting objectives as opposed to being a sheriff dictating what is possible and what is not,” said Laughter. "Everyone avoids those guys…”
The former PwC consultant agreed. “It will likely just shift DFS work to other firms, who will in turn get in trouble in the future.”