The 2021 New Zealand FIU & ACAMS Conference gave local AML reporting entities, professional services, and software vendors plenty to consider, as they each work together to fight and stamp out financial crime from the community.
From mutual evaluations to details of operations, the life of a SAR to the importance of a name, there were plenty of insights and takeaways for the network of those who join forces to crack down on criminal activity.
This article provides a summary of some of the points raised across the two days.
Investigations & operations: Putting your hard work to work.
Those in the AML/CFT space should never forget the role each of us plays in stopping the harms caused and enabled through the laundering of money and the financing of terrorism. In the conference, we were given another reminder of how this plays out, emphasising what takes place in the 48 hours following an act of terrorism.
While physical investigations were taking place, financial investigations were carried out in order to corroborate the facts and timelines uncovered by others in the police. And this is where reporting entities and detailed SARs come into play. Does the financial information and known activity of the suspects match other findings? Can they identify how many (if any) other people are involved? What sources of income or wealth were used to fund the activity? The list goes on.
These findings help to not just provide confidence in building a case against the suspects, but also to help inform typologies and red flags which can be used to identify and prevent other individuals or groups from carrying out something similar in the future.
What’s in a name: the importance of truly knowing your customer.
Who would have thought a name could be so critical in the investigative efforts of the FIU? At a high level, most people would agree that it’s an obvious question. But, as Dr Fiona Swee-Lee Price reminded us, the very nature in which we design our customer experiences plays a massive role in thwarting the efforts of financial investigation. And this isn’t something that sits within the remit of an AML compliance officer.
Dr Price, a leader in onomatology (the study of names), demonstrated how much we (typically in ‘the west’) are missing out on when designing websites, apps, quoting systems, and application processes. By adopting a Romanised approach (first, middle, and last name), organisations make it incredibly difficult for people from non-Romanised countries to fill out our forms – especially when there’s not even consistency of last name vs surname vs family name or first name vs given name.
The assumptions of titles, given names, surnames is case and point. Prime Minister Jacinda Kate Laurell Ardern was one example given. Many English-speaking countries would know that Prime Minister is a title. But others may not. Compare this to Ravindra Narayana Ravi, the Governor of Tamil Nadu, India. One could easily assume that Ravi is his surname, when in fact, it is his personal name.
If reporting entities are not catching full names of their customers, preferably in their native language, then financial investigators will have a difficult time putting together the necessary pieces of the puzzle.
Demystifying the anonymity of crypto
One of the biggest takeaways from the interview with David Lewis, Executive Secretary of the Financial Action Task Force (FATF), was around virtual assets. As cryptocurrencies were first flooding the world, authorities were extremely anxious about how these would be policed and regulated – and for good reason too, with such technology inherently promoting anonymity. But this perception has been proven incorrect, as an increasing number of investigations around the world have led to the seizure of virtual currencies, wallets, and coins.
FATF have shifted their thinking to be less focused on the technology, as blockchain has significant benefits, and more so on the cryptocurrencies themselves. Taking a neutral approach to such technology ensures they can provide the best advice to reporting entities. After all, it’s still very much a case of same business, same rules.
Crypto does not necessarily change the game for reporting entities, as they still need to carry out their AML programme according to their risk profile. For instance, if they can’t verify the source of funds and something seems suspicious, a report must be lodged.
Lewis also reiterated the critical need for technology in helping reporting entities cope with the increasing volume of transactions and customers. And this is all about the effectiveness of the AML system, which enables AML compliance officers to focus on investigative efforts. This provides the FIU with the best possible intelligence, which helps minimise the operational overheads caused by false positives.
The crucial role of high-value SARs in financial investigations
The title of this final section is intentionally somewhat incomplete. It really should include PTRs. It does not because PTRs are legislated and have very clear guidelines on when they are required. Clearly, these are very important.
SARs, on the other hand, are equally, if not more important, as they are a little more subjective on when they should be filed. The FIU currently processes approximately 24,000 SARs a year, which is a significant number. Therefore, reporting entities need to focus on enabling AML/CFT compliance teams to effectively spot suspicious activity and deliver high-value intelligence to the FIU.
Time is crucial in preventing further criminal activity. And the more time FIUs spend adding value and building a case around a bad actor, the more damage this actor could cause in the community. Therefore, the more comprehensive a SAR, the faster authorities can respond. If no additional evidence is required to build the case, then action can be taken to protect people from further exploitation. Never underestimate the reports your organisation submits.
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