Current Trends in AML: A Recap of Our Webinar

AML Webinar Recap

Last week, IGCA hosted its first-ever webinar, one that touched upon the many issues that are currently trending in the world of AML.

We’d like to extend a special thank you to our two panelists, Dr. Nicholas Ryder, Professor in Financial Crime at UWE Bristol in the UK, and Sandip Patel, Managing Partner with Aliant Law also in the UK, and our moderator, Holger Pauco-Dirscherl, a Senior Financial Crime Professional based in Germany.

Their knowledge, charisma, sense of humor and ability to convey difficult topics in simple ways were of great benefit to IGCA members and those in our extended network who were in attendance.

If you missed it, don’t despair.

You can view the complete webinar on demand by clicking below, filling out a simple registration form and inserting the password 5Aqa3U%3.

 

Happy viewing!

Also, stay tuned for the webinar’s full transcript, which should be available on the IGCA website within the next week or two.

For now, here are some of the event’s main highlights as experienced by those who were with us.

How are criminals exploiting the new vulnerabilities opened up by the COVID-19 lockdown?

Sandip Patel: “Impersonation of officials, we’ve seen that in relation to bank officials and more permanently here with broad impersonation of tax authorities and that is a growing risk. Counterfeiting of essential goods such as medical supplies and medicines. In the course of my work as a lawyer, I’ve had direct experience of counterfeit PPE fundraising for failed charities and fraudulent investment scams on the increase. We know that from a recent report by Europol and, of course, general cyber crime, they’re still there, that’s proliferated, so that’s in a nutshell a short list of what’s been happening.”

Do you think lawmakers and regulators are fast enough in coping with the speed at which crimes occur and getting information out, not only to potential victims, but also to banks, so that they can adjust their transaction monitoring, filters, etc.?

Dr. Nicholas Ryder: “I think it’s very difficult to pre-guess an emerging typology or an emerging pattern. I think that governments have a very difficult job in responding. We’ve seen obviously new guidance published by the Financial Action Task Force (FATF)…I think part of the difficulty is trying to get a consistent message across to consumers and investors of these potential fraudulent scams…Maybe the members of the panel and people listening who are experts in the field are very well aware that they shouldn’t be replying to an email or they shouldn’t be able to play into a get quick rich scam and, of course, it’s members of the public who might be vulnerable consumers struggling financially with the pandemic who’ve lost their job who will think, “Well, maybe I should try out this investment and hand over my life savings or a proportion of them.”

Are data lakes part of the solution or will it increase the problems?

Sandip Patel: “I don’t think it’s a solution. I think it will create more problems. There’s a huge issue of data privacy surrounding data lakes and until there’s going to be international cooperation agreement on standards, there’s little point in having data lakes as some sort of panacea. And in my view, the fact is that these MPPs have huge technological excellence and are far more advanced than the mainstream banking system, and we’re already seeing changes in people’s behavior. Take, for example, the African countries. Mobile payments became popular across the continent through telecom companies, effectively becoming cash couriers outside of the formal payment systems. Let’s move the whole process or what we term as traditional banking away from traditionally established practices for AML. It doesn’t mean that we have to start again; it’s not reinventing the wheel. I think there is a possibility or real commitment to develop a globally accepted common set of standards and expectations around KYC, AML screening, sanctions and compliance.”

Are public-private partnerships (PPPs) the way forward in the fight against financial crimes?

Dr. Nicholas Ryder: “I think based upon the research that I conducted and we published a paper last December in the Journal of Business Law, we sort of concluded that JMLIT in the UK is a step in the right direction. It’s only been in existence for six years and it seemed to be as a best international practice but there are limitations to what JMLIT is involved in. So from my understanding it does not apply to the legal profession, it doesn’t apply to the property sector, so you have two parts of the financial system, which you could suggest are at risk from money laundering and fraud. So why are they not part of that broader discussion? I genuinely am surprised at that. And then what we recommended in the paper, we sort of identify in new money laundering, in particular terrorism financing trends, so we sort of justified a new typology but we call it the social media type or sort of networking model, where terrorists can now finance activities on social media platforms, Twitter, Instagram and Facebook. So why aren’t social media companies also part of that discussion?”

Are UBO registers a step in the right direction?

Dr. Nicholas Ryder: “I think it’s maybe a step in the right direction. Again, I don’t think it’s a perfect answer to the problems and I think…if you are collecting data, is that system open to abuse? How secure is the software? Can the software be hacked and information be stolen? So we’ve seen a gluttony of examples in the last 15 years of cyber hack activists who want to be paid in Bitcoin and we’ve seen ISIS sympathizers who will impose ransom ware on multinational corporations and if it’s paid in Bitcoin, of course, then that provides a high level of anonymity. I think it’s a step in the right direction but again I still don’t quite know what the perfect solution will be.”

Sandip Patel: “Again it’s a step in the right direction but, in my view, no one should view UBO registers as providing a holy grail for KYC. They’re useful in the sense they provide another data point, which is going to be used for streamlining KYC processes and indeed allowing for greater introduction of automation. But the experience with UBO registers has been patchy in Europe and generally, and ironically there is a view that they could actually be counterproductive because you could find yourself in a situation where banks will find it harder to keep check of criminals in their books because they’ll use tactics to bypass KYC checks by making sure that their customer-provided data, which has passed, is different. And so we know, for example, or there is a great fear that more companies will be using nominee directors including employment of relatives and other straw men to ensure that legitimate owners will fall below the 25% reporting threshold and so it becomes easier to conceal the identity of a company’s UBO. So there are real problems with UBO registers as we know indeed because they’re populated through self-reporting. Some are open, some are not. The United States has a very different view on registers, as to whether they should be public or not. And just looking at European Union, according to my calculations, only 13 countries have open registers at the moment and we all know that there are certain countries that will simply not even provide any form of register. So I’m ambivalent at the moment about the efficacy of UBO registers; I think it’s a step in the right direction but it’s nowhere near the panacea that it’s claimed to be.”

If you have any ideas for future webinars, do not hesitate to reach us at info@igca.org. We’d be happy to add them to the list!

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