Each week the entire Napier team is honoured to spend a virtual hour in an ‘Ask Me Anything’ session with a heavyweight in the world of AML, compliance or enforcement.
These sessions are a fabulous learning opportunity. They provide us with highly personal experiences and insights into life on the front line of fighting financial crime. While much of what we talk about is sensitive, we’ve also been able to share many highlights over the last few months.
In July we were delighted to talk to:
• Alan Morley, Independent Consultant, Adsideo LLC
• Nicole Rose, Co-founder & Creative Director, RAW Compliance
• Michael O’Grady, Liaison Officer, HMRC
• Jakub Kohout, Financial Director, Seedrs
If there was one theme that came out of these sessions, it’s that the devil is in the detail. Analysing the intricate workings of customer behaviour is integral to money laundering intelligence and effective AML compliance. Here we gather their many years of experience to explain why.
Alan: “Traditional transaction monitoring looks at face-level red flags, such as a country being high-risk, but this isn’t behaviour. Analysing from the human perspective is really important. If you do something that is wrong or unusual, it is behaviourally deviating from the norm. It is therefore important to look for the manifestation of deviation across different datasets.”
Mike: “Is paying £200,000 in cash normal? Quite simply, no it’s not.”
Alan: “Analysing behaviour is the best way to really get smart and actually understand how criminals may be laundering money through your organisation. But this, of course, depends on data.”
Jakub: “It’s no secret that aside from having an AML system capable of effectively analysing customer behaviour, having access to accurate and reliable data is one of the big challenges in AML.”
Alan: “But data is vital for intelligence. For example, as they attempt to remain undetected, money launderers will also carefully model their behaviour to look legitimate. Only through data can we know this. Regardless of whether money is being laundered through the supply chain or profits, their behaviour can be suspiciously regular.”
Nicole: “Transactions can be too perfect. If they’re too timely, this is actually suspicious in itself and warrants further investigation. 10 years ago money laundering was far less sophisticated than it is now.”
Mike: “These days, so many ways of money laundering have developed, from smurfing to establishing cash-based businesses to ‘legitimately’ get cash into the system."
Nicole: “Moving a large sum of cash out of a country via a suitcase was once the done thing. But now we’re seeing smaller, multi-level transactions and fraudsters coercing victims both locally and globally through various money mule scams, including romance fraud."
“Money mules represent a significant challenge for less technologically sophisticated organisations. In the absence of continuous automatic customer reviews, many low-risk customers are manually reviewed on a relatively infrequent basis. A significant amount of time may therefore lag between the transaction occurring and the transaction being detected.”
Alan: “Since the signs of money laundering can be very subtle, financial institutions also need to think differently. Ultimately, we need to be searching for a sweep hand moving like a swiss watch.”
Nicole: “Money laundering tactics are often not what we imagine but this is not about thinking the unthinkable – it’s about irregular human behaviour. This is why it’s so important to look at behaviour. How can we identify what is out of the ordinary and what can we do with it?”
Alan: “This is where Napier’s unique technology comes into itself. Napier’s artificial intelligence and machine learning can detect inconspicuous behavioural patterns in massive datasets that would be next to impossible for humans to see."
“Unfortunately, many governments, regulators and organisations are not aware of what’s technically possible right now.”
Mike: “One of the biggest challenges is that criminals are always going to be a step ahead. They’re planning their activities and innovating. The question is how quick we can catch up with them – this ultimately affects how much money they will make.”
Alan: “Many AML systems are not sustainable in terms of efficiency and an enormous level of false positives. Napier is the wild card banks need to take on money laundering.”