In the aftermath of the “FinCEN Files” investigation into the release of more than 2,100 suspicious activity reports (SARs), financial industry practitioners say changing the system needs to start within their own institutions.
Client lifecycle management vendor Fenergo polled more than 500 financial industry practitioners about their reactions to the FinCEN Files investigation, which detailed more than $2 trillion worth of fraudulent transactions coursing through the world’s financial system from 1999 to 2017.
Seventy-seven percent of the practitioners—who hail from North America, Europe and Asia— responded that they believe culture and conduct are major blockers to enforcing compliance within financial institutions, according to polls conducted of attendees to two October Webinars entitled, “The FinCEN leaks: What happens next?”
More than half (58 percent) of respondents said they don’t believe the boards of financial institutions are sufficiently focused on stopping crime.
Nearly two-thirds of respondents (62 percent) also pointed the finger at regulators, saying they are not doing enough to prevent illicit money transfers, while nearly the same percentage (61 percent) felt regulators are not doing enough to hold senior managers at financial institutions accountable.
“Organized crime is a global network that ignores all borders; we have to get through that and start thinking globally,” said Graham Barrow, director of the podcast “Dark Money Files” and an AML author, during the Webinar.
He argued one path toward limiting fraudulent transactions lies not with compliance, or even with the financial institutions themselves, but with the political system.
“The solution to all of this is political, and it comes down to transparency. If people can hide the ownership of corrupt money through corporate entities that you cannot see into, the problem will never go away. We have to stop addressing this as a compliance issue and address it as a political one,” he said.
Another AML expert, Martin Woods, agrees about the issue of beneficial ownership. But he says the onus falls on financial institutions to do their part.
“Why, when we are unable to understand the ownership and control of a complicated offshore corporate structure, do we take a risk and give said structure and those behind it the benefit of the doubt?,” Woods said of financial institutions that continue to provide banking services to customers they can’t fully vet.
Another way to strengthen the world’s financial system against fraud is to demand accountability, said David Doughty, chief executive of Excellencia, a U.K.-based corporate governance vendor.
“If you are fighting financial crime you need to prosecute people who are guilty of breaking the law regardless of which institution they are representing,” he said. “As we said, it takes a network to fight a network. Not blaming the emerging economies for their lack of regulation but try to help them and support them.”
Respondents to the poll universally called for “better collaboration and information sharing across the industry to establish best practice and a unified approach to anti-money laundering,” Fenergo said in a press release accompanying the poll results. “A common theme amongst survey respondents was a demand for more personal accountability of senior managers and for the industry to adopt a proactive approach to fighting financial crime instead of being reactive.”
Rachel Woolley, global director of financial crime at Fenergo, said in addition to collaboration among financial institutions, regulators, corporate registries, and law enforcement, technology has a role to play in a solution.
“Technology can help to drive efficiencies and streamline processes, aiding data-driven decision making and more effective outcomes in the detection and prevention of financial crime,” she said.