Banks May See Upside in Small Auditors After PwC Ban
By Matt Scully

A New York regulator’s crackdown on PricewaterhouseCoopers may effectively push the anti-money-laundering audit work of big consulting firms into the hands of smaller advisers, and the increased competition ultimately could benefit banks. Besides fining Pricewaterhouse $25 million for helping Bank of Tokyo-Mitsubishi UFJ cleanse its records of illicit money transfers, state banking superintendent Benjamin Lawsky banned the firm from entering into business engagements with major banking institutions in New York for two years. Similarly, last summer he suspended Deloitte Financial Advisory Services from doing business with New York banks for a year after fining it $10 million in connection with its anti-money-laundering advisory work for Standard Chartered. Such moves may prompt Bank of New York Mellon, Deutsche Bank, Goldman Sachs or any one of the other one hundred-odd banks overseen by Lawsky to seek out new sources of auditing help. Smaller advisory firms offering boutique audit and consulting services are poised to take up the extra work that otherwise may have gone to large competitors, and the quality of work will likely go up as a result, observers said. Lawsky’s scrutiny is a continuation of worries from regulators over third parties who perform a shadow regulatory function, according to Karen Shaw Petrou, managing partner of Federal Financial Analytics. “In potential conflicts, the third party may not be sufficiently independent or knowledgeable,” Petrou said. “If the consultant is retained to perform a regulator function, but fails to do so, then you do have concerns.”
http://www.americanbanker.com/issues/179_160/banks-may-take-second-look-at-small-auditors-after-pwc-ban-1069489-1.html