CONDUCT ADVANCED AML/CFT TRAINING AT ALL LEVELS IN YOUR UNIT, TO ELIMINATE COMPLIANCE RASHOMON

 

Train Everyone, Please

Inasmuch as we have been talking about the necessity of teaching advanced and obscure money laundering strategies and methods to your frontline compliance officers, there is an important point that must not be overlooked: the need to train at all levels in the compliance department, including senior executives and managers who do not conduct investigation (CDD/EDD) of files for client onboarding, as well as transaction monitoring.

What we are seeking to avoid is what I like to call the Compliance Officer's Nightmare: he or she identifies a suspicious transaction or chain of events that, from experience,  constitutes a serious risk that money laundering or some other financial crime is in progress, and the bank is likely to be damaged. This conclusion is based upon some prior exposure to a similar event, most likely through training, and not through a previous encounter. The officer brings this quickly and directly to the attention of a superior, who dismisses its validity, for no other reason than the senior officer has never been exposed to such a fact pattern, and for that reason, hesitates to  investigate further, let alone confront a lucrative existing client about it. Call it ignorance and politics trumping compliance. We've all been there, my friends.

It is is known as the Rashomon Effect, but with a twist: Different compliance officers seeing the same set of facts, and coming to different conclusions. The reason this occurs is simple: the senior compliance executive (Director of Compliance perhaps?) has never had the advanced training undergone by his frontline staff. It seems he, or the board, thought such training should be confined to those individuals who review new client files, or transactions, all day, and not executives, who are supposed to manage them. That results in failure if professional ignorance results in malpractice.

In truth and in fact, if EVERYONE doesn't have the benefit of upper-level training, then what some junior person sees may be discounted by the people above him, with a potentially damaging outcome down the road, when law enforcement arrests the client, and his uninterrupted criminal operation in your bank. Insure that all compliance department staff, even those never directly involved with checking clients and transactions, get the same practical education as the workers. That way, you never have to endure what I call ignorance from above; train everyone, please, in Tradecraft. This includes the lawyers who are running your unit.