FinCen 2 Fallout.

I am in the midst of the BigCompFest 2, a virtual conference. Perfect timing to assess the compliance industry’s reaction to the revelations of the FinCen files.

Tim Tyler (TT), Head of Financial Crime at the International Compliance Association (ICA) led a conversation with Pekka Dare (PD), Director of ICA, and Martin Wood (MW), who featured in the BBC Panorama documentary on the released data.

TT suggested that many compliance professionals feel somewhat betrayed by the release of so many Suspicious Activity Reports. (SARs). In a regulated entity, the ultra-confidentiality of SARs is drummed into every single member of staff. It’s so secret, that in theory, the only person who really knows what SARs have been submitted is the MLRO. This is a legal requirement, and also serves to protect staff. It may come as no surprise to hear that some organised crime groups take a dim view of snitches. Shocking, I know. So, for 2,000+ reports to leak out of the US Treasury department, is worrisome.

SARs are a source of huge frustration to compliance professionals. Essentially, one crafts a perfect SAR, with all the relevant information, sits back and waits for the law to catch up with the bad guy. Then…nothing happens. Listen carefully and you might get crickets.

Now, there was a time, when a SAR was thought of as a good way to cover your backside. MW suggests that many institutions still think this way. He posits that the financial services industry acts as an intelligence gatherer, rather than taking a proactive role. If anti money laundering is about “detect, deter and disrupt”, he wants to see more “disrupt.”

I might, at this point, note that MW started out in AML as law enforcer, a policeman.

The law is pretty straightforward. If I have the elements necessary to form a suspicion, then I must also be unwilling to transact, without putting my suspicion to rest. It's possible to form a suspicion after a transaction, say as part of a customer review, but if there's enough to submit a SAR, then there's enough to suspend further transactions.

Some (many?) institutions appear to have continued to trade away, despite having made reports.

MW is right - and every compliance professional I know, would agree with him. However, there are dangers in the regulated sector overreaching. We have law enforcement agencies to, well, enforce the law. We have courts to serve justice, and we have legislators to write laws. Much though I think I’m right most of the time, I’m not sure making me judge, jury and executioner ends well.

The debate will continue.