Given that we recently had Earth Month, can we talk about our impact on the environment? Do you remember the video of the turtle with a straw stuck in its nose? It galvanised the compassion of millions of people worldwide, and before we knew it, plastic straws became so unacceptable that we now have several alternatives which won’t hurt turtles anymore.
‘It had a very emotional effect on people and it definitely fueled the movement that already existed.’
In the turtle example, people – just like you and I, got active in creating new solutions. We harnessed a collective will and challenged big corporations to see the unintended yet harmful impact of their products and take our demand for change seriously. We would all benefit if we led a similar charge across Financial Crime Compliance (FCC).
Many people who work in Financial Crime Prevention began their careers with an ambition to ‘do good’. Heck, when we were kids who didn’t enjoy playing cops and robbers…and for some of us it even became a career. But somewhere along the way, the vast majority of us lost that sense of adventure and achievement that comes from catching the ‘baddies’. The job might have even become hard work and a thankless task. That’s no fun, right? And could we go as far as saying that because the current approach is so common, some of us might have given up trying to remedy the ineffectiveness?
About ten years ago, companies, regulators, and policymakers began using a new term: Financial Crime Compliance. Maybe we didn’t notice the shift from Financial Crime Prevention? But herein lies a truth that many of my peers discuss openly. When did our collective ambition shift from Prevention to Compliance?
Dawn Fisher wrote to me: ‘I don’t know if it is truly appreciated that the shift from FCP to FCC is a paradigm shift from what should be our intended outcome to prevent financial crime (or the furtherance of financial crime via detection) to complying with our regulatory obligations to have in place a governance framework which is not proven to prevent financial crime but does tick boxes for compliance’.
It is vitally important that we ask ourselves what our approach is to change and social activism. Many professionals in FCC strive to make a positive contribution to the fight against financial criminals. However, why have we accepted that all our current collective efforts to stop illicit financial flows are shockingly poor? The United Nations Office on Drugs and Crime (UNODC) report is widely quoted: less than 1% of global illicit financial flows are currently seized and frozen. If we applied for a job and told the prospective employer, by the way, we’re going to be hideously expensive, very noisy, and make the right decisions one-to-two percent of the time… do you think any of us would get hired? How depressing that is our current industry benchmark. It is therefore understandable that some could question the value of our current efforts. We might as well just join the swaths of companies producing hazard-light approaches to financial crime compliance and admit defeat.
Ray Blake, the director of Dark Money Files added that company executives make multiple choices that directly impact effectiveness. ‘Faced with what they perceive as the high cost of either hiring capable people or training people to become capable, most firms choose instead to hire inexperienced, less capable people, and keep them in that state. It’s about seeing KYC and the other routine compliance obligations as low value and a drain on costs. So, it’s afforded minimal development’.
First, we have to admit there is far more we can do and that it’s time to have an introspective look at things we may be doing that contribute to low effectiveness. I’d like to assert that we may have an attitude problem. Countless boardrooms discuss the high costs of AML and Compliance. That is a concern a business needs to evaluate critically. However, all AML & Compliance professionals must prove their worth not just through legal necessity to comply but also in terms of how we can improve sustainable development for the companies we work for. Perhaps now is the time to investigate our motives and what we are each doing to PREVENT & DETECT financial crimes. Is this all we can do?
However, it is vitally important we do not get complacent or discouraged. If we lose sight of the victims, which is all of us, we may cease to be creative and passionate in identifying new approaches to detection. In 2022, the UN confirmed the importance of the reduction of illicit financial flows (IFFs) as a priority area to build peaceful societies around the world, as has been recognised in the 2030 Agenda for Sustainable Development. Perhaps, if we have an agreed way to meaningfully identify, measure, and track our collective effectiveness we will ignite global willingness to combat it at the root.
Fincrime professionals openly share mutual frustrations. Some think the industry is doing the best it can whilst others want to radically change our approach but get overwhelmed with the sheer size of the task if we really want to be effective. ‘At the same time, the effective and efficient use of technology has been a challenge, as not many solutions truly address the needs of the FCC community in the right way’, says Dr. Ruth Wandhöfer.
We were joking about cake and half-eaten hash browns as an illustration of our Financial Crime Compliance programmes and controls. We joked that our Transaction Monitoring systems were like half-eaten hash-browns and not very nourishing, that our compliance programmes were rarely as welcome as cake when shared in the office and that the office caterers (MLRO) had just resigned because anything they served was never good enough. We laughed but it got us thinking, critically, about how we have ended up in such a mess in FCC.
There are countless articles, lectures, and webinars talking about the burdens faced by those working across regulatory compliance. The burden of keeping abreast with current regulatory change and corporate frustration. The burden of filing suspicious activity reports, the burden of understanding the technological advancements that are being used in many technical solutions, and the sheer burden of the volume of work to do. We rarely hear the word compliance in ML in the same sentence as fun. And maybe that’s part of what’s missing. As kids, most of us enjoyed playing good guys versus bad guys, but do we still bring that useful exuberance to our jobs as MLROs? Can we truly say we wake up eager to catch the bad guys? Or do we envision our day as a series of meetings, political arguments, and requests for help that may go unresolved? Are we completely resigned before we even begin? Are we too afraid to challenge ourselves because we risk failing or losing our professional reputation in the process? Are we too afraid to admit our fears and flaws so we just keep doing what everyone else does but sacrifice making a real difference to effectiveness? When did we stop being courageous in our endeavours in favour of being comfortable?
I like fables – they ignite the imagination, and each reader can apply the lesson differently. When working with people in FCC I always suggest an important book to read called ‘Who moved my cheese?’ I’m sure you’ve heard of this popular book by now – if not, read it. The TL: DR is that change happens, prepare for it, and embrace it. What if we brought this simple idea to bear in financial crime compliance?
Dr. Mario Menz suggested two questions. ‘First, what’s the goal of FCC? There are at least two and sometimes we focus on one more than on the other. The second question is what motivates people to do a good job as an FCC professional? Or in other words, where do they get job satisfaction from? Some people may not know they are complicit because of their goals’.
‘There is a much higher tolerance to white-collar crime than to street crime. Why? Because we are all able to identify with the stabbing or mugging victim. We have an emotional response because that victim has a face, and it could have been us. But when it comes to white collar crime (like money laundering) we find it much more difficult to empathise with because we can’t see the victim. There is no immediate emotional response because we can’t see ourselves as the victim’.
If you follow this train of thought, you could argue that FCC competencies and commitments will change if we put the victims of fincrime at the heart of what we do by helping people understand that it could have been them and how IFFs affect us all.
Perspective is decisive – so, if you think you can or think you can’t, you’ll prove yourself right. Your perspective can also be a source of your power or your prison. It’s time for our industry to choose: do we just keep following a vision that does not resonate with our goals or can we focus on what inspired our career choice and collectively identify and try new approaches to make a difference? Let’s find the straws in our Financial Crime PREVENTION approaches and create new ways to be effective against the ‘baddies’ who rob us all of peaceful communities. Let’s turn the tide against complacency and illicit financial flows. But please, don’t lose your inspiration to keep trying, every day. We won’t get to 100% effectiveness overnight, but each incremental improvement changes the lives of countless victims worldwide and is worth striving towards! Be passionate, be bold, and be courageous in the ways you detect and prevent financial crime – it’s what is missing and will make a real difference!
This editorial was initially published in the Financial Crime and Fraud Report 2023 which dives into the captivating world of fraud management, digital onboarding, and financial crime in the financial services industry. You can download your free copy here.
MLRO & Head of Compliance
Meg is an enthusiastic MLRO & Head of Compliance who wants to encourage the industry to challenge what we accept as effective now and always keep the victims (which is all of us) at the heart of our programmes.
Director of Dark Money Files
Ray Blake of the Dark Money Files is a former MLRO, now a speaker, writer, trainer, and podcaster on anti-financial crime matters.
Author, Speaker, Adviser & Coach
Ruth operates at the nexus of finance, technology, and regulation and is passionate about creating the digital financial ecosystem of the future.
Social Scientist, MLRO, and Head of Compliance
Dr. Mario Menz is a social scientist, MLRO, and Head of Compliance. He specialises in behavioural change and organisational transformation.
Industry Practitioner, AML Trainer
Dawn Fisher is a current industry practitioner, an esteemed AML trainer, and a speaker/content contributor on AML and related topics.
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