26 Mar 2018
Banks and other financial services firms are investing heavily to improve their compliance operations in the face of increasing regulatory pressure and fears of hefty penalties for misconduct or negligence.
On offer are a wide range of training courses to help compliance officers navigate and better understand their work load. What are some of the hurdles and loopholes they might encounter? Chris Usher, CEO of Jersey International Business School, discusses the issue with KYC360 editor Irene Madongo.
Usher has over 20 years’ experience in international financial services, working for financial institutions such as Barclays Wealth and Santander. He now specialises in delivering training in investment management, taxation and regulatory matters.
IM: Compliance training – what would you say are some of the challenges that compliance professionals face in terms of preparing themselves to tackle risks linked to money laundering and terrorism financing?
CU: I think the complexity and the ambiguity of the various typologies of money laundering makes it incredibly difficult to ensure that both money laundering reporting officers and their teams are fully up-to-date with some of the different ways in which money laundering can take place. And I think, additionally, the sheer breadth and depth of regulatory requirements both locally and internationally makes it very tough. So, I think there’s certainly a possibility of information overload.
IM: Regarding the content or subjects covered in compliance courses, it’s been suggested that there’s a disproportionate or much bigger focus on anti-money laundering (AML) compared to other financial crimes like terrorism financing. What’s your view?
CU: Yes, I do believe that, as well as that there’s a danger that we have a fixed mental model, and that individuals think ‘money laundering,’ when perhaps they should be thinking ‘financial crime prevention,’ because often financial crime is linked to terrorist financing and sanctions breaches, there is a degree of correlation sometimes, between these activities.
So, I think that it’s really important that people don’t become very focused on one area. It’s important to take a much broader view of financial crime generally and, most importantly, remember there’s a human impact.
IM: Can you give an example of the human impact?
CU: One that springs to mind is the modern slavery aspect, and there is also bribery and corruption, and the impact that such crimes have in certain parts of the world, in terms of perpetuating poverty and kleptocracy. It’s very frustrating for us because people often don’t take the time to understand the facilitation risks around bribery and corruption monies.
IM: How does focusing too much on AML training above others impact the work of compliance officers and other bank workers?
CU: I think it’s very difficult as people are being asked to understand a broad range of complex issues. The big problem is that they become very siloed in their thinking, they become quite myopic, this leads to a poor appreciation and understanding of wider risk.
We always talk about the importance of understanding the commercial rationale. My suggestion for those in industry is to approach it in that similar kind of way.
You know, ‘do I really understand what my risk is here? Why is this individual using an account or a structure, a trust or a fund in these jurisdictions? And do I have the tax advice?’ Tax evasion is a growing part of it, so the silo approach is dangerous; people need to understand the multiplicity of risks.
IM: Are companies providing compliance officers with enough support in terms of training i.e. helping enrol them for courses and studies?
CU: Yes and no. There is certainly a lot of training out there. However, as a provider of financial crime prevention, and wider compliance training, we would question the efficacy of some of the training. We’ve thankfully moved away from a tick box approach to conducting business, to a large extent, but I fear that in some parts of the market, we still see a tick box approach to training teams.
We very much have the opinion that it’s important that both those leading the teams, and those in the teams, need to understand the context in which financial crime sits.
IM: Why are firms still signing up their workers to take up courses that include the tick box approach?
CU: I think some would argue that in the past, compliance AML training has been seen to be a pure cost centre for businesses.
However, firms must start to shift that mind-set that this is in many ways an insurance for the business, from regulatory action, and also large fines. So, it still surprises me that some businesses don’t value training and education to the extent that certainly we believe that they should.
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