All about prepositions

On 11 September 2016 (following industry consultation that said that current CDD requirements are too burdensome), the Australian Anti-Money Laundering and Counter-Terrorism Financing Rules Amendment Instrument 2016 (No. 1) came into force, amending Chapter 4 of the Anti-Money Laundering and Counter-Terrorism Financing Rules Instrument 2007 (No.1).  Chapter 4 sets out the minimum requirements in relation to customer identification and verification, and used to say that reporting entities were required to collect KYC information directly “from” a customer.  The amendment says that now they can collect KYC information “about” a customer.

This change has generated quite a few AML column inches in Australia, and it made me go back and look at the specific wording of other legislation.  In the UK, our Money Laundering Regulations 2007 state that CDD measures include “identifying the customer and verifying the customer’s identity on the basis of documents, data or information obtained from a reliable and independent source”.  (The exact same wording is used in Gibraltar’s Proceeds of Crime Act 2015.)  In Guernsey, the Criminal Justice (Proceeds of Crime) Regulations, 2007 require that “the customer shall be identified and his identity verified using identification data”.  And the Money Laundering (Jersey) Order 2008 defines “identification of a person” as “(a) finding out the identity of that person, including that person’s name and legal status; and (b) obtaining evidence, on the basis of documents, data or information from a reliable and independent source, that is reasonably capable of verifying that the person to be identified is who the person is said to be and satisfies the person responsible for the identification of a person that the evidence does establish that fact”.

In short, based on this very limited sample, it is only the Australians who bother much with a preposition – changing “from” to “about”.  Everyone else seems not to worry about the source of the documents, as long as they are reliable, independent and verifiable.

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Game for AML

At some training recently, we had finished the serious business of the day and were cruising into the home straight with a quick round of my Countries Quiz.  As I was asking people to match capital cities to countries, one of the delegates harrumphed a bit and put down her pen.  “I can’t see why we’re doing any of this,” she said, “as it’s nothing to do with money laundering”.  I had in fact explained to the group that the purpose of the quiz was to revise those countries that are known for good AML controls (we call them “equivalent jurisdictions” here in the UK) and those that have inadequate AML regimes (“high risk jurisdictions”), as the appearance of either in your client relationship will have an effect on the amount of due diligence that you have to do on the client and/or their transaction.  I was happy to explain that again, and she seemed mollified, but I did wonder whether I have lost sight of what I am supposed to be doing – i.e. alerting staff to their AML obligations.

Time permitting, I always like to include a “game” in my training.  I spend hours – literally hours – reading books about training games and thinking of ways that they can be adapted to AML purposes.  And I am quite fierce with myself: there does have to be that AML purpose.  Often it is simply revision – an excuse (as when I play AML bingo) to go back over material we have covered in the training.  (“Tell them what you’re going to tell them, tell them, then tell them what you’ve told them.”)  Sometimes it is a sneaky way – as in the Countries Quiz – to make a dull topic (lists of jurisdictions) more palatable.

But I will be honest and say that I have another, more dastardly purpose.  People like games.  People like prizes.  And if I can end a training session on a high note, with people laughing at the end of a game and enjoying the little prizes, then they will be happier to attend AML training the next time.

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ID and me

I’ve just been on holiday to Italy, where – in common with many EU and other countries – it is compulsory to carry photographic ID at all times.  The only photo ID I have is my passport; my driving licence is still the old photo-less paper kind, because I never move house and I drive like an old lady.  And so I went everywhere with my passport hidden carefully in a zipped inside pocket of my handbag – there, that’s my grandma talking, right there.  Of course no-one demanded to see it, although – with it being Italy – we came across plenty of officials in all sorts of dashing uniforms with braiding, peaked caps, stripes, insignia and the rest.  Until, on our last day and with poor travel connections, we wanted to leave our suitcase in the left luggage place at the railway station, and the fellow manning it asked to see a passport.  And I had a revelation: as he asked, a little voice in my head said, “How dare you – why should I have to prove to you who I am?”  Thankfully for international relations and marital harmony that voice stayed in my head and I handed over the passport.

But it made me think.  Anyone responsible for conducting CDD checks knows that customers can cut up a bit snippy when asked for documents, but is it worse with customers from jurisdictions – such as the UK – where the carrying of ID (indeed, the possession of ID) is not mandatory?  Whenever the idea of ID cards is raised in the UK, as it is regularly, I always say that I would be happy to comply because I have nothing to hide, but if I am honest, I am always secretly rather pleased when it doesn’t happen.  It’s not that I am a big privacy advocate – as I say, I have nothing to hide, and I save my energy for fighting battles that matter more to me – but having grown up without the obligation to carry ID, I would find it tricky to start.

Also – please bear with me while I try to formulate my thoughts – I think I find being asked for my ID rather impertinent because I know that I have nothing to hide, and I tend to think that nearly everyone around me has nothing to hide either, and so on balance, the fact that the authorities cannot identify us all on a whim doesn’t actually matter.  If we change and say that we must all be identifiable at all times, does that suggest that the balance has switched, or that my optimistic perception is wrong, and that nearly everyone does have something to hide?  And before someone jumps up and down and accuses me of undermining my life’s work, much of which is built on identifying users of the regulated sector, please remember that there is a difference between being identifiable when you’re just living your life, and being identifiable when you want the privilege of being granted access to the international financial system.  Goodness, who knew that taking a week off work and eating one’s own weight in ice-cream could render one so philosophical?

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Bollards to money laundering

Like most people, I am a (very) amateur psychologist, in that I often ponder on why people do certain things.  I live in Cambridge, and the local council tries to keep traffic out of the very centre of the historic city – basically, a triangle of narrow streets going past our loveliest buildings.  Until recently, access to this area was controlled by sets of rising bollards, which could be lowered by the use of a magic card issued to vehicles who were allowed access.  A couple of weeks ago, the bollards were removed and cameras installed instead.  Both systems – bollards and cameras – are accompanied by large No Entry signs, warnings about penalties and night-time flashing illumination.  A friend who works in local transport tells me that the council expects to make more money from camera transgressions than it did from bollard ones (people would often tailgate, or sneak through if the bollards were down by mistake).  So does this mean that people are more deterred by a physical barrier (bollards, whether up or down) than by the idea of being witnessed breaking the law?  Or do they only believe it is a real transgression if there is a physical barrier?

Comparing this (at last, I hear you say) to our AML endeavours, what works best?  Physical barriers – you must supply these documents, you must give us proof of this information – or the knowledge that you are being witnessed in your lies (sign this declaration that what you have told us is true)?  Do people take AML more seriously the more barriers we place in their path?  I have no answer, as – see my first sentence – I am merely an amateur psychologist, not a professional one.  But it’s interesting to mull as I cycle with impunity past the bollards and the cameras, for bicycles are exempt – being low risk, when it comes to pollution and damage to ageing streets.

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Silver screen laundering

I have yet to see it myself – hampered by as I am by a full diary and a dislike of movie violence – but I am enjoying reading all about the new movie “The Infiltrator”, based on the memoirs of undercover DEA operative Robert Mazur and starring Bryan Cranston (who earned his money laundering chops in “Breaking Bad”).  Mazur talked about his experiences on a recent edition of Radio 4’s “Today” programme (thanks for spotting this, Jason in Guernsey).

I myself have come across a fascinating website that compares movies to the original stories on which they are based (and the actors to the characters they play), and they’ve had a look at “The Infiltrator”.  Don’t look at it if you’re planning to see the movie and haven’t already read the book – there are plot spoilers!  Sadly, as many other people will find this website as they hunt for information about the movie, it ruins things by getting the basics wrong: money laundering is not “the practice of moving traceable tainted cash (drug money, etc.) into a variety of accounts or businesses that appear legitimate”.  If only it were that simple and still limited to cash.

And should you now wish to invite Robert Mazur to speak about his experiences, he has his own website (which makes mine look jolly tame).  Quite how this publicity ties in with his need for discretion (“Robert Mazur has received death threats from the cartels, forcing him to keep his appearance concealed”) I am not sure – perhaps he sends Bryan Cranston along instead.

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A consultation too far?

Regular readers will know that I am quite taken with consultations: I like people asking my opinion nearly as much as I love giving it.  I tend to respond to AML-themed ones most avidly, but in recent months I have also given my view on the function of the modern Neighbourhood Watch, the best street lighting to have in my town, and whether our local roundabout should become a junction again.  Consultation is a good thing when done well: it allows those affected by an issue to have their say, and it enables those tasked with dealing with that issue to frame their response to get the most support.  But I sometimes think that it is forgotten that responding fully and thoughtfully to a consultation takes a lot of time and effort.  Really, a lot.

May I present as evidence the latest AML consultation from HMG here in the UK, launched on 15 September.  It’s a really important one: “Consultation on the transposition of the Fourth Money Laundering Directive”.  Important and fascinating and long-reaching.  Right up my street, I thought, opening a new packet of Jaffa Cakes, sharpening my pencil and getting started.  I worked my way through twenty-eight questions, and then realised that we had only really covered due diligence…  So I looked ahead (I tend not to do this with consultations, as I prefer to address the questions in the order in which they are raised without clouding my response by knowing what is coming next) and there are eighty-seven questions.  Eighty-seven!  And many of them require you to go off and read the text of MLD4 before answering.  All by 10 November 2016.

I appreciate that time pressures are there (as stated crisply in the consultation itself, “the government intends that the new provisions will come into force in national law by 26 June 2017”), but I do wonder whether it might have been better to issue two or three smaller consultation documents, or indeed to get rid of some of the questions (nearly all of which carry the disheartening reminder to “Please provide credible, cogent and open-source evidence to support your response”).  My husband, who has experience of dealing with central government, will snort when he reads this: he often comments that consultations are issued because they must be issued, and the fewer responses that are received, the better – the consulting body can then do what it wants and say that they asked but no-one cared enough to reply.  I will battle through, of course, but I’m going to have to take several bites at it – and order in plenty of Jaffa Cakes.

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Thrill-seekers and risk-takers

In a recent post I talked about the work of Keith Vaz as the chairman of the Home Affairs Select Committee, which has been responsible – among many other things – for a review into the UK’s proceeds of crime regime.  Everyone seems to agree that Vaz has been an excellent chairman, and his questions and pronouncements around proceeds of crime certainly seemed well-informed and balanced.  But, as you will all know by now, he has resigned because of a little local difficulty concerning allegations around rent boys.  Since then, my husband and I have been debating what it is that makes people with so much to lose take such (alleged) risks: is it that you have to be a risk-taker to reach prominence in the first place (shrinking violets get nowhere), and then your appetite for thrills and danger needs constant feeding?

It has rather put me in mind of KPMG’s regular report into “The Profile of a Fraudster”, in which they – through surveys of firms that have fallen victim to fraud – put together the main characteristics of white collar criminals.  In their latest version (published in May 2016 and summarised in this handy infographic), it seems that fraudsters are generally well-liked, co-operative (“fraudsters need to collude to circumvent controls”) and overwhelmingly male, and nearly half of them have “unlimited authority” (which is handy when circumventing those controls).  Interestingly, when you look at the full KPMG report and delve into the reasons fraudsters give for their actions, although greed is popular, over a quarter of them do it simply “because I can”.

I used to think that confidence tricksters were so-called because they gain your confidence, but maybe the name is cleverer than that: they do gain your confidence, but they also have confidence.  Confidence in their story, confidence in their abilities, confidence in the weakness of their victim – and this confidence prompts them to take risks.

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Box-tickers, and worse

I don’t often do this, as it feels a bit lazy (and I certainly don’t want to incur the wrath of Liam Fox), but a blog reader in the Isle of Man forwarded this other blog post to me (thanks, Tess), and frankly it’s so good that I think you all need to read it.  I won’t paraphrase – just read the original.  It’s by a chap called Geert Vermeulen, who runs a company called Ethics & Compliance Management & Consulting (ECMC).  All I will add is that this is surely the next step in the debate about “reliance” – placing your due diligence faith in checks done by others.

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Money laundering on the menu

I’m not a fan of sushi myself (it’s raw fish, guys – plus I have an uncle who breaks into singing “If you knew Sushi like I know Sushi” whenever he sees me), but plenty of people are.  And the Mizu Sushi Lounge in Puerta Vallarta in Mexico was very popular with the trendy set.  Until the US Office of Foreign Assets Control got involved, and on 17 September 2015 froze the assets of the restaurant, along with four other businesses in Mexico, on the basis that “these entities provide financial support to and are controlled by Mexico’s Cartel de Jalisco Nueva Generacion (CJNG), which OFAC designated earlier this year due to CJNG’s significant role in international narcotics trafficking”.

So how does it work, this laundering through restaurants?  Of course, even in these days of credit cards and contactless payments, they are still cash-intensive businesses – and it seems you can charge a lot for sushi (again, guys – raw fish).  And a successful restaurant is particularly useful (especially a high-profile one), as the bank will believe you when you bring in bumper takings every week.  After all, no-one is checking whether restaurants are full or empty – there’s no regular supervision, apart from the occasional food safety checks.  Indeed, the most efficient laundering businesses will have accounts at several banks so that they can pay in the same bumper takings many times over.  (So if you have a restaurant business as a customer and they keep moving money between your bank and other banks, you might want to consider this possibility.  Have you all been told the same story, each of you believing yourself to be their only bank?)

When it comes to this type of local knowledge, the local bank can really earn its keep.  Head office in Mexico City might have no idea about restaurants in Puerta Vallarta, but you can bet that the local bank staff know the popular spots and the places to avoid, the hot ticket restaurants and the ones that are empty even on Saturday night.  For those of you operating accounts for local restaurants and cafés, it might just be worth handing out the luncheon vouchers to get your staff to keep tabs on them.

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Making a money laundering ass of yourself

It will come as no surprise at all to you to learn that I am the Neighbourhood Watch co-ordinator for my little street in Cambridge – the Neighbourhood Witch, as my husband likes to call me.  (Don’t worry: he pays for it in small ways, like when I “forget” to record a crucial rugby match.)  Neighbourhood Watchery is not the curtain-twitching of years gone by; what we modern witches do is keep an eye on elderly neighbours, push protruding post through letterboxes so that absences are not advertised, and pass on warnings sent out by central NHW command.  Usually these are along the lines of “lock your shed” and “don’t leave valuables on display near open windows”, but recently we received one entitled “Don’t Be a Money Mule”.

Those of us seasoned by years in AML will be well aware of what a money mule is, but I thought it very interesting that public information is being promoted in this way – and from the tone of the email, it’s been sent out with more than half an eye to the bright-eyed young things about to start college or university courses and being, perhaps for the first time, in proud possession of their own bank account.  “Criminals advertise fake jobs in newspapers and on the internet in a number of ways, usually offering opportunities to make money quickly, in order to lure potential money mule recruits.  These include: social media posts; copying genuine company’s websites to create impression of legitimacy; sending mass emails offering employment; and targeting individuals that have posted their CVs on employment websites.  Students are particularly susceptible to adverts of this nature.  For someone in full-time education, the opportunity for making money quickly can understandably be an attractive one.  The mule will accept money into their bank account, before following further instructions on what to do with the funds.  Instructions could include transferring the money into a separate specified account or withdrawing the cash and forwarding it on via money transfer service companies like Western Union or MoneyGram.  The mule is generally paid a small percentage of the funds as they pass through their account.”

I’m sure I’ve mentioned this before, but I really do think that financial education – how to manage a bank account, what a mortgage is, the road to hell that is compound interest and so on – should be part of the standard school curriculum.  In the same way as we warn our children about stranger danger (and now, of course, online risks) we should also warn them about financial dangers, which can be devastating in a different way.  As the NHW email warns: “Money laundering is a criminal offence which can lead to prosecution and a custodial sentence.  Furthermore, it can lead to the mule being unable to obtain credit in the UK and prevented from holding a bank account.”

And for financial institutions providing accounts for all these new young customers, it is a timely warning to check that those accounts function in the expected way (arrival of a lump sum from government and/or parents, followed by speedy expenditure on beer and pizzas at the start of term, dwindling to porridge at the end).

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