Looking Back to Look Ahead

We're pleased to report that SILO is growing fast – so much so that we're adding new members to our support team.
 
Training new staff in the AML industry can be a difficult and time-consuming task, because we have to explain not only the "hows" of a job, but also the "whys" and the "what ifs". And if that's to be done properly, staff who are new to compliance have to be taken back several decades to be able to understand the history of anti-money laundering, when and why new laws were drafted, their impact on financial crime, the various players involved and so much more. 
 
This past month, new staff have been looking at the FATF's 40+ Recommendations, Mutual Evaluation Reports and the assessment methodology. And during the course of the discussion a statistic popped up: a 60% drop of Suspicious Activity Reports (SARS) filed in one jurisdiction from ten years ago. Why? 
 
Our trainees' first, and the most natural assumption was "there's been less financial crime", to which those of us more experienced in the AML industry could only smile. 
 
Experienced AML professionals will look at a 60% drop like that and ask two questions:
1. Were too many unnecessary SARS being filed 10 years ago and we've subsequently learned not to file so many? Or conversely:
2. Has the standard of suspicious activity awareness training declined over the past 10 years so that we're missing suspicious activities and not filing enough SARS? 
 
It's dangerous, particularly to newcomers, to draw snap conclusions from statistics like that 60% drop – and at the training stage they should be discouraged from doing so. Proper analysis is key: there are so many aspects of AML compliance and so many downsides, legal and commercial, to a wrong conclusion that nothing short of a deep, comprehensive understanding of the subject will prevent jumping to conclusions. And that's why training is so important.
 
Back at our training session, we then found ourselves discussing "Technical Compliance" and "Effectiveness" – as those terms are defined in the Methodology used by assessors when performing a Mutual Evaluation Review of a jurisdiction. We discussed the laws, the judicial system, the procedures, etc. that must be in place in a country for there to be any real impact on financial crime. 
 
A Mutual Evaluation is a high-level review of a jurisdiction's technical compliance and effectiveness of combating financial crime. A negative evaluation can cause further regulation to be imposed by that jurisdiction in coming years, invariably causing increased difficulty and cost in doing business.
 
But what about individual regulated businesses themselves? Does the average regulated business ever step back and compare and contrast its statistics from five or ten years ago? Does senior management know if the number of SARS they filed in 2005 differs from those in 2010 and 2015? Do they know the reasons for any change in those numbers? Can they say with certainty that, in addition to technical compliance, their policies and procedures are truly effective? 
 
Mutual Evaluations are more than just a process: they are an opportunity – an opportunity to re-examine not only how we are doing as a country, but also as a business, a team, a professional – and yes, even as a solutions-provider. 
 
Perhaps one day, when we next read of a 60% drop in suspicious activity reports filed, we'll be able to say with certainty that it is truly because there is a decrease in bribery, drug trafficking, child labor, sex trafficking, kidnapping, ransomware attacks and other financial crime. But that day is still a long way off.

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