I’m not going to attempt to foretell the impact that the current pandemic will have on our financial systems or on financial crime – there are many people much better qualified than I to do that. For instance, the tip-top think-tank RUSI has published a commentary on how organised crime – and the forces ranged against them – might react to the new environment. Anita Clifford of Bright Line Law has written a helpful piece on the implications of AML and CDD for a financial sector in home-working lock-down. And we already know that even FIUs are having to adjust to working in new ways.
Rather, what I want to consider today is the long-term impact that this unforeseen (for most of us) and devastating (for some of us) disruption will have on how we frame our future due diligence endeavours. First, in most jurisdictions the AML requirements are predicated on a risk-based approach: you adjust the level of due diligence, monitoring, training, etc. depending on the level of (money laundering and terrorist financing) risk presented by a situation – the type of client, or the size/origin of transaction, or the duties of the member of staff. Business continuity plans are coming into their own, but I am fairly sure that the majority of them were designed for a fire at the office, or the crashing of a key server, or the kidnap of the Board of directors (now, now, no wishful thinking) – I doubt many were designed with a global shutdown in mind. In other words, our concept of risk has taken a battering, and I can imagine that once we’re allowed back to work as normal, business risk assessments will be pulled out of storage for a careful examination in the light of the “new normal”.
And second, every person who goes on their first, baby AML course is told that they are obliged by law to report any suspicion of money laundering, and that this cannot be done for them by a computer (such as a transaction monitoring system) because computers have no hearts or souls and therefore can spot only the unusual, not the suspicious. So what now is “usual”? In the past, a reliable client who suddenly took out large sums of cash, or refused to come into the office in person, or changed his mind about investments or contracts on a daily basis would appear unusual – now, he’s merely being prudent. When the dust settles, how will we tell the difference between those whose finances and decisions went haywire because of the pandemic, and those who are simply using that as a cover story for illicit money movements?