Captivated Audience: A Financial Crime Podcast

Marie Lundberg and Sam Sheen are joined by Ina Rothe who explains the twists and turns of using Germany's Company Register (referred to as the Transparency Register) as part of the KYC process.  Did you know that Germany has more than one register or that the information you want might be spread across several different registers? Or how about needing to pay to get access to some KYC information and the various exemptions that allow some legal entities to provide nothing at all? If you work with customers who have businesses using German legal entities, this episode is a great practical tutorial on how to wrangle this no-so-transparent corporate register.

AND as they say, serendipity is a funny thing - following the recording of this episode, a new law, the Transparency Register and Financial Information Act, came into force in Germany on 1 August 2021.  The changes it introduces are intended to transform the German Transparency Register to  provide direct information on beneficial owners for all legal entities with very few exceptions - without having to refer to other registers as has been the case up until now.  Many a legal entity so far exempt from notifying the transparency register of their UBOs will now have to make the effort to report UBO information, even if it may already be listed on other registers. There is a transitional period for legal entities to comply and report and users of the transparency register may - in theory - expect completion of UBO input by the end of 2022. 

Jane Jee, Chair Kompli-Global Limited and Chair Project Financial Crime, Emerging Payments Association (UK) talks to Marie Lundberg and Sam Sheen about her involvement in the pre-consultation in her role with the Emerging Payments Association to urge the UK Government to engage more with RegTechs as part of their planned review of the Money Laundering Regulations and the plans in the UK for its well known corporate registry - Companies House. Jane shares the story of Kompli's evolution of its financial crime RegTech and how it has leveraged the data from Companies House to better detect odd things in the registry's data. 

Jane, Sam and Marie look at the nine-fold increase in requests for information by enforcement from Companies House for investigation purposes; the upcoming changes that will be introduced by the registry to change the way in which they operate, their powers to verify data, requiring companies to do more in terms of how they supply the data, Companies House business plans involving massive transformation from technology usage, process and even culture. Jane talks about the extent to which Companies House has reached out to RegTechs to see what the potential tools at their disposal are along with the overall need by regulators to also harness the use of RegTech to undertake their supervisory tasks and make them more efficient.

Jane concludes her chat by sharing some sage advice on how best to check the data on a register and the places KYC reviewers may not think to look for that might suggest a financial crime red flag has unfurled. 

Marie Lundberg and Sam Sheen are joined again by Al Catto, Managing Director of Beyond, to discuss all things change related when it comes to AML/CFT compliance programs. We start Part 2 by discussing the way in which FinTech's approach change and its impact on key AML projects; the importance of test planning to make sure the change you want has the intended impact,  and the politics involved in major change initiatives. We also explore the risk of being too inflexible when it comes to your change plan, how it's unrealistic to expect it to all go perfectly and the value in being flexible - you don't always get it right even as the Change Coordinator. We also consider how best to deal with those "naysayers" who have little faith that the RegTech you want to use will improve your customer onboarding. And finally - what makes for a a successful "change conductor" - should you wallow in the compliance drama or can you rise above the mayhem like a former colleague known as "the Smoke" (you'll have to listen to find out!).

Ch-ch ch-ch changes! Al Catto joins Sam Sheen and Marie Lundberg to talk about his company, Beyond and their speciality - change transformation involving AML/CFT programmes.  Turning around failed RegTech or even onboarding processes is no easy task. Al shares his insights on the good, the bad and the ugly when it comes to successfully implementing a transformation project.  Want faster KYC? Streamlined CDD onboarding? Will KYC RegTech solve the cost of compliance every time?  And where does customer data fit into all of this?  Learn about the tips - and traps - that firms often fall into when trying to solve that ever present problem - the balance between operations and customer satisfaction and the cost of financial crime compliance. Part 1 of 2 podcasts.

David Christie, Chairman of Bleckwen, joins Marie and Sam to chat about the amazing world of behaviour detection and how Bleckwen has harnessed machine learning to better detect fraudulent and suspicious behaviour. With a name linked to a "truth serum", Bleckwen has been involved in some "deep truth" investigations dealing with better detection of complex fraud such as PPP fraud, where it is a challenge for banks with larger legacy systems. Credit origination fraud, synthetic ID fraud, and oddities in transaction monitoring patterns, according to David it's all about behaviour.  Marie dives into the use of graph theory - did you know it was used to design London's tube system? - the same approach is used by Bleckwen to identify patterns across banks accounts and parties, how they interact, how often and other similarities.  David also explains how they encourage their team to go further afield to keep their thinking fresh - could Tweets prior to the Catalan unrest in 2018 have helped to detect it earlier?  Sharing their intelligence and some of their algorithms to the wider financial crime prevention community (for free) is an important part of Bleckwen's approach to being a part of the financial crime community. 

Sam Sheen and Marie Lundberg are joined by Aamir Hanif, a globe-trotting financial crime compliance expert, to talk about all things related to free ports and free trade zones.  Having been identified as having an elevated risk for financial crime, Aamir explains how Free Trade Zone companies are operated, who controls them, accessing KYC information about their UBOs, while Marie raises a good point: Maybe when it comes to free ports, what do we need to do to "know your container".  With reported risks of FTZ and the link connected to the volume of conterfeit goods traded in a country.  With the UK soon introducing its own free ports post-Brexit, this is a must listen for fellow financial crime compliance professionals.

Elizabeth Slim joins Sam Sheen and Marie Lundberg for part 2 to chat about the Anti-Money Laundering Act 2020 (AMLA) and how this significant reform will impact areas such as new protections for corporate whistleblowers that now includes MLROs, auditors or even an attorney, along with the upping of the payments made to them. They also consider whether an overseas staff member is protected under the AMLA if they blow the whistle on financial crime in their sister company in the US, an update on Virtual Asset Service Providers, antiquity dealers joining the regulated AML family and new provisions for enforcement actions and penalties.  Look out - bonus claw backs and banning from acting as a director in the future are now in the goody bag of penalties!

Elizabeth Slim joins Sam Sheen and Marie Lundberg to chat about the Anti-Money Laundering Act 2020 (AMLA) and how this significant reform will impact areas such as Beneficial Ownership rules, FinCen's planned review of the art market from an AML perspective and whether overseas businesses with subsidiaries in the US need to comply with these requirements. They also consider the not-so-simple UBO rules, when companies must register their owners and the many exemptions offered under the AMLA Act , expanded provisions for US government to obtain records from non-US banks and how they could lose their correspondent bank account if they fail to cooperate. And of course, sharing of information between entities as part of a new pilot project.  Part one of two.  

Eric Sohn joins Marie and Sam to talk about some recent decisions and fines imposed by the US sanctions regulator, OFAC, and their possible implications for firms and how they conduct sanction KYC and screening. This is a must listen to episode as Eric and Marie share their practical advice the different ways professionals can approach their list management practices, how they conduct sanctions KYC and what it means to take a risk-based approach. 

Marie Lundberg and Sam Sheen chat with Encompass Co-Founder and CEO Wayne Johnson currently in Australia, to chat about the goal of achieving a single digital risk profile of a customer, as part of a tech-enable financial crime prevention programme.  Wayne explains the concept of "Intelligence Process Automation" or IPA, and how it's intended to make the onboarding process of customers more efficient and effective, while still detecting bad actors.  And no chat about KYC would be complete without  touching on the challenge of adverse media screening, the goal of having a "single KYC digital customer profile" and a "show and tell" us story where Wayne explains how his company, while running a demo of their technology to one bank, revealed just who really owned and operated one of its customers.

Sam Sheen and Marie Lundberg welcome George Voloshin back to the podcast, where they look at the European regulations that prevent businesses from refusing business on the grounds of needing to comply with the USA sanctions regulations related to Iran.  George and the hosts look at court decisions where companies have been challenged by customers who've refused services or ended business relationships - and whether the reasons they gave were considered compliant with the EU Blocking Regulations.  This podcast considers how contract clauses used in your customer agreements may clash with your firm's sanction compliance obligations under those Regulations. Why did one firm successful defend their "No Iran business" OFAC clauses because of correspondent banking?   As always, nothing is as simple as it seems when it comes to sanctions compliance!

In Part 3 of this series, Sam and Marie discuss the concerns that EU AML regulators continue to have around crowdfunding platforms - both as customers of financial institutions and as businesses in their own right.  They also consider the EBA's assessment of fraud and related financial crime risks that have arisen in 2020 during the COVID pandemic - what should firms have been doing to mitigate those risks? What should regulators have been doing to keep supervising, despite lockdowns 1 -2 and now 3.  And despite requiring Business Continuity Programs, could regulators have done more to ensure that firms were "risk ready" and able to adapt to the new normal in which we're currently working? 

In the final part of the series, Marie and Sam discuss how remote onboarding has proven to be an essential lifeline for many businesses during the pandemic.  However, the European Banking Authority's Opinion reflects that AML regulators in the EU are still concerned that businesses may not be onboarding customers in a way that effectively mitigates those classic "non face to face" financial crime risks. Hear what their proposal to address this is - and of course, no opinion would be complete without revisiting the UK's departure from the EU. Have those dreaded financial crime risks identified by the EU in 2019 related to Brexit actually come true?

Continuing with a detailed review of the European Banking Authority's Opinion on the Financial Crime Risks facing financial services businesses in the EU, Sam and Marie discuss how FinTechs are still considered to pose an elevated financial crime risks in the EU, concerns around the use of remote onboarding and other RegTech and why the terrorist financing risks are not seen to have changed since 2019 and what's needed to address it. Sam and Marie also take a quick peak at what the newly revised Risk Factor Guidelines require when it comes to addressing terrorist financing, and its possible impact on existing financial crime compliance programs.

After a short hiatus, Sam and Marie return and kick off 2021 with a detailed review of the European Banking Authority's Opinion on the Financial Crime Risks facing financial services businesses in the EU. Looking at the updated to the EBA's findings first published in 2019, Sam and Marie explain the methodology applied in assessing various financial crime risks and the measures the EBA proposes will help to mitigate them. Part 1 of this series looks at the EBA's assessment of the Cryptocurrency sector - and which types of businesses are thought to have the greatest financial crime risks when dealing with both virtual currency providers, and the virtual asset service providers. 

Marie and Sam chat with Araliya Samme about her role at RegTech firm, Featurespace, the detection of unusual behaviour using machine learning as part of financial crime investigations to better detect and report suspicious activity,  How behavioural analytics work in practice and why the 'one size fits all' approach to compliance monitoring is quickly becoming obsolete.  They also explore the crime trends seen during the COVID crisis and how the use of money mules has been on the increase, where Araliya shares a case study on "inter-minglers"  or customers who hold multiple bank accounts as a tactic to obscure the overall flow of funds and the sources from which they came.  She also shares a great illustration on why source of wealth and funds forms a part of CDD and how Featurespace technology was able to  help one bank say in relation to one customer, "I don't think so".

And forget about how to tame your dragon, how do you go about taming and training your behavioural AI? Listen and find out?

Gavin Keeley, CEO of  Search 365 in Queensland, Australia joins  Marie and Sam to chat about his company's search engine technology and his partnership with Basis Technology, Gavin's global work in the regulated insurance sector and how fraud risks have arisen for that sector during the COVID crisis and a solution formulated for one insurer when 980 000 Australians were made redundant, triggering a mass of insurance and all of their support centres  were unstaffed due to COVD restrictions. How did they come to the rescue? You'll have to listen to find out how they 'just let the AI rip' , extracting data from documents, handwritten content and other diverse data sources, in a matter of minutes. At the same time, hear how Gavin's company combined 365's search tech with Basis' semantics technology to detect those "suspect salmon" fraudsters trying to hide amongst a school of claimants.

Elizabeth Slim joins Marie Lundberg and Sam Sheen to chat about the recent FinCen Guidance on politically exposed persons ("PEPs")  in the USA and how it differs from similar regulations in the UK, her work in founding her local ACAMS Chapter. Elizabeth chats about the PEPs identified in the FinCen leaks, the changes to PEP lists anticipated following the US election and what financial institutions need to do now to stay ahead of the game.

Marie and Sam chat with Vincent and John from Facepoint about identity fraud concerns including identity impersonation versus identity theft, tactics used by fraudsters to conceal their identity, data and risks related to demographic data discrimination, and how biometric technology is being used to detect and disrupt fraudsters and other illicit actors.

Dr Annalise Vineer joins Sam Sheen and Marie Lundberg for a chat about the thorny issue of financial crime investigations - are banks hitting the mark? What causes their investigations to "fail"? Why are relationship managers so critical to an effective investigation? Annalise also explains why knowing how and what to ask bank personnel AND customers is not a skill to be taken for granted and what can be done to make those SARs more useful for law enforcement.