–> This is a pre-event interview in the run-up to the Leaders in Finance Cyber AML Europe event on 29 June 2023 in Brussels.
Jeroen: Chris, thanks for taking the time to talk to Leaders in Finance in the run-up to the Leaders in Finance Anti-Money Laundering event on the 29th of June 2023. We are very much looking forward to having you there. I am also looking forward to speaking to you today in this short pre-event interview. First of all, could you introduce yourself and give us some background on the things you have done, and you are currently doing?
Chris: Yes, nice to meet you too and looking forward to the conference. I am Chris Bostock, Director in Deloitte’s Financial Crime team in London. I lead what we call our ‘Forum for Tackling Illicit Finance (FTIF)’. The FTIF seeks to develop ideas about how we and other ecosystem stakeholders around the world, in both public and private sectors, should be coming together to collaborate more effectively in the fight against illicit finance.
I also work with government clients around anti-money laundering at a national level and my background was in law enforcement. I joined from the National Crime Agency, where I was the money laundering threat lead, and where I set up and ran something called ‘the Joint Money Laundering Intelligence Taskforce’ (JMLIT), which is the UK’s public-private partnership to bring together banks, insurance, and law enforcement agencies to share information to try to fight illicit finance and financial crime.
Jeroen: Wonderful, thank you! How different is it to work in the private sector versus for government agencies, although you still work a lot with governmental agencies? But how different is it?
Chris: It is different – but in a good way! An organization like Deloitte has around 300,000 people around the world – even big law enforcement agencies like the National Crime Agency will never have so many people spread across so many parts of the world. I think the key when transferring is to make sure, that if you are interested, and you are passionate about the topic, you find a firm or organization with people that share that passion. I have really enjoyed helping to bring different parts of the whole global firm together on this topic, ensuring that we share best practice with each other and our clients wherever they are – because illicit finance is a global problem that needs a global response. That kind of global reach is something you don’t find in too many government agencies and can be really powerful.
Jeroen: I think it is very important that there is some exchange of people now and then between private and public, to make sure people keep communicating effectively.
Chris: I think that the key theme that is coming out of the results of reforms all around the world – in the UK, where their economic crime plans describe a whole system approach, you see that in consultation between government and the banks on AML reform in America, you see that in the Netherlands with models like TMNL etc. And public-private partnerships to share information and intelligence (like the JMLIT) have now spread all around the world.
And I remain convinced that collaboration and partnerships are the only way that we can have a material impact on the threat. No sector working in isolation is going to solve the problem of economic crime – law enforcement can’t arrest a way out, banks can’t CDD check or SAR a way out, and regulators can’t fine or supervise a way out of this problem. So, we have to bring that whole ecosystem together enabling all parts to work together coherently against the threat towards a common objective. And this can be debated – but ultimately I think that common objective should be delivering outcomes against criminals… it is quite simple really! And if that is the objective then the key question for all of us ‘fighting financial crime’ whether in the public sector or the private should be “Does a criminal care about what I am doing?” … When I introduce this check… does a criminal care? When I call this meeting… does a criminal care? If the answer is no, then maybe do a different thing! I am being flippant, but that fundamental premise around the purpose of the system being to stop crime and to stop criminals, is easy to forget and easy to lose track of in the maelstrom of the day job!
Jeroen: Makes total sense. You have seen a long period of time from different angles, all around illicit finance as you call it, or anti-money laundering, whatever term you want to use. But what are some of the biggest changes you have seen over time?
Chris: The biggest factor driving change is the recognition that we are not doing very well. For all the money we are spending in the private sector, for all the money we are spending in the public sector, the outcomes are poor.
If you look at asset recovery rates, in most jurisdictions it is less than 1%. Fraud is now one in four of all offences in the UK, and it is a huge problem everywhere. And again, if you look at the corresponding arrest rates or prevention rates, they are terrible. And so despite all the efforts that we have put in for years, unfortunately we are not having the impact that we would like to see.
That sets the scene for change. It encourages new ways of working -for example around information sharing where stakeholders are recognising that each has information and intelligence the other needs, in order for them to deliver their role in the ecosystem more effectively. And so we see mechanisms being built to allow information to be shared, to allow that dialogue to be built up, to allow that collaboration to take root.”
And now for example we see strategic information sharing partnerships in places like Germany, a jurisdiction which traditionally has been very cautious around information sharing, we see tactical information sharing partnerships in the UK, the US, Sweden and in lots of other places… and some very interesting and ambitious ideas seeking to really scale up the power of information sharing for example in the Netherlands, with Transaction Monitoring NL and in Singapore, with their COSMIC model. And I think those innovations will lead to better outcomes against criminals.. which as I said earlier – is what it is all about.
Jeroen: Great. Maybe one challenge on the effectiveness, are preventive measures working? If you are a criminal organization, is it still as simple to work with a regular UK or Dutch bank like you did in the past? Or does it have a preventive measure?
Chris: I think we have done a huge amount over the years to try to make the perimeter better defended. We have had iterations of the MLDs, we have had changes to the FATF standards and evaluation methodology – all trying to identify and close loopholes. But what we can never do is rest easy. If we had got it right, we would not have money laundering problems, we would not have fraud, we would not have corruption or challenges around sanctioning assets… but we still do.. and so while I think absolutely, we are recognizing problems, and we are trying hard to stop them, where we are now is (to mis-quote Churchill!) not at the end… not even at the beginning of the end… but rather the end of the beginning.
Unfortunately fighting crime is it is a bit like squashing a balloon… if you press down in one area through implementation of a new and effective approach… the criminality displaces to the next weakest point in the system. You see that for example in the way that complex money laundering schemes have evolved over time.., moving from cash, to trade based ML and then onto capital markets… Criminals are always adapting and evolving their approaches… And so, we as a community need to recognize we have done a lot, we have tried hard, but there is still a long way to go.
Jeroen: That is right. If you look going forward, what are the things that you see currently unfolding? Or what are things that you would love to see happening in the field?
Chris: What I notice in doing work in several jurisdictions, both in law enforcement and now in the private sector, is that there is healthy ‘competition’ on AML reform between jurisdictions. If the US does something innovative around eg around national priorities… then others respond (eg the UK in the second economic crime plan)… If Singapore does something innovative around information sharing… then others seek to follow and go one step further… that is really healthy ‘competition’ that only disadvantages the criminal. And we see similar healthy competition around beneficial ownership reform, sanctions implementation, national prioritisation of threats, risk based supervision, measuring outcomes (not tickbox compliance), information sharing etc etc… no one has a monopoly on good ideas – and I am pleased that we often seem to inspire one another.
Jeroen: This is a good list;. If we go back to the list, do you have any tips, they are probably very much related to what you just said, but do you have any tips for either governments or business or other parts of society related to AML?
Chris: My tip for government would be to recognise the importance of leading the development of a strategic approach to fighting illicit finance. We need partnership and collaboration – but I think it is the government who needs to put their hat in the ring the first. The government sets the policy, has control over legislation and regulation and sets the tone from the top that the other system stakeholders (eg regulators and banks) will follow.
One of the other big areas I would urge governments to lead the discussion on is around capacity in the system…banks will always have more capacity ‘fighting financial crime’ than the government will have… take an example from the UK… the NCA has around 4500 staff (tackling a huge range of crimes)… a single big bank in London can have a financial crime team of 6000+… So there is a vast army of people out there in the private sector ‘fighting financial crime’ – we need to ask is enough of that army actually delivering outcomes against criminals?… Let me give you an example, I recall one conversation with a banker some years ago who had over 6000 people in their fin crime team… 3000 were doing transaction monitoring triage… 97% of alerts were false positives… so at a ‘whole system level’ you had 3000 people spending 97% of their time, not identifying financial crime!
We have got to find a way to ask what is driving that allocation of effort and those inefficiencies? Is it regulation? Is it supervision? Is it a lack of information so you don’t know what to look for? We need to find the answers to those questions to ensure that banks are able to focus that capacity where it can be more gainfully deployed against the threat and help to deliver outcomes. Unfortunately, so much of the capacity in our system that is designated as ‘fighting financial crime’… is not really fighting financial crime. Fixing that feels like a big muscle movement that needs to happen in the system if we want to shift the dial.
Jeroen: Very well put. In other words, if you could leverage thousands of people in the private sector, although I am not sure how large the percentage of these people are able do that work, but if they could be leveraged in some capacity for this case, it would be an amazing shift.
Chris: Yes – I also think people often think that fighting crime more effectively means spending more money. I do not think it necessarily does. If you can find the right ways to get the right information in the hands of the right people, and give them the tools and the technology and the systems… and the right legislative framework to work in, then you could deliver the outcomes we are delivering now for less money… And if also deal with some of those enabling factors we discussed earlier (information sharing etc) – then I am convinced we could deliver much better outcomes for equal or less spend!
–> This is a pre-event interview in the run-up to the Leaders in Finance Cyber AML Europe event on 29 June 2023 in Brussels.