I have just finished reading a book called “A Long Walk Home”, which is an account by Englishwoman Judith Tebbutt of her ordeal of being kidnapped by Somali pirates who killed her husband and then held her at various locations for six months until a ransom was paid to secure her release. It is a thoughtful book, and one issue the author returns to again and again – and understandably – is whether her captors felt guilt or remorse or regret for their actions. It made me think about the risk analysis that criminals undertake when deciding whether or not to commit a certain crime (I’m thinking of planned crimes, of course – not impulsive ones or crimes of passion).
There is no doubting, for instance, the mass migration of organised crime groups into the world of fraud: recent stories from the Telegraph and the FT testify to this. And it is equally certain that this trend is driven by risk analysis by the criminals: fraud is a crime with low rates of detection and relatively lenient penalties (usually financial rather than custodial) twinned with huge potential profit – what’s not to like? The concept of risk analysis is familiar to us all now, codified as it is in the AML requirements of most of our jurisdictions: “a relevant person must determine the extent of customer due diligence measures on a risk-sensitive basis” it how it is phrased in s7(3) of the UK’s Money Laundering Regulations 2007.
But where we in the regulated sector part company with the criminal fraternity is in the tempering of that risk analysis with an understanding of what is the right thing to do – for the customer, and for society as a whole. This desire to do not just the legal thing but also the right thing is behind all of the recent hand-wringing over de-risking – ironically much of it involving providing a remittance service to trouble-spot like Somalia. From the purely risk-based viewpoint of one institution, it is madness to continue such business – but if we prevent expat Somalis from sending money home through the large institutions, we drive them into the arms of smaller firms that cannot afford the enhanced levels of due diligence required, or perhaps even into the underground, non-regulated economy.
Criminals, however – and Mrs Tebbutt’s horrifying experience seems to bear this out – do not put such considerations into the mix. I suppose if you were troubled by what is right and what is wrong, you would not become a professional criminal. The result is that the criminals’ risk analyses are much crisper, much speedier and – some might argue – much more realistic and effective. Can we make money? Can we get away with it? Yes to both, and you’re done: that’s your action plan.