Blogs & Vlogs

Great Chatwell Academy invests in technology to enhance interaction and deliver results!

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"At GCAL we are taking classroom engagement and experiential learning to the next level" In 2019 our goal was to go that extra mile for our clients, bringing something different and innovative to the classroom. That was when we discovered the intuitive audience response system, combining speed, anonymity and accuracy whilst gathering performance data and keeping the audience focused and engaged. Twelve months on and we have been delighted with the response from our clients to the results for two main reasons: Firstly, anonymous voting by workshop attendees provokes honest responses which are unbiased. Whether measuring the results to technical questions or assessing the diversity of opinion our technology allows us to focus discussion on those subjects where the results indicate it is warranted, or where there is a healthy difference of opinion! Our audience response systems also offer an unprecedented level of interactivity between audience and speaker which in turn allows for far greater levels of engagement and interactivity, keeping delegates engaged and on track. Secondly, we are able to provide forensic analysis of delegate performance during and after sessions to help senior management to reward success and identify areas for further follow up and support. This is fundamental for any business that wishes to adopt a risk-based approach to training and has a limited budget that must be forensically allocated to those issues and employees that need it most. Contact Us for more details on how our audience response system can help your business.

Great Chatwell Academy continues to go from strength to strength with our loyal customers

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Watch an update from our founder and MD of the Academy, Lee Byrne - reflecting on the past 12 months but looking forward to exciting new products and services coming in 2020 and beyond.

Another year older but are we any wiser and what have we learned over the past 12 months?

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Well, there is no doubt that we wouldn’t have achieved our continued growth and success without the generous help and support from our associates and loyal clients, who are such an important part of the Great Chatwell Academy of Learning story. So, on behalf of everyone at Great Chatwell, let me first say a very simple but heartfelt and sincere, “thank you!” It hasn’t always been easy, but with a continuing commitment to care and excellence, and not to mention many long hours,  we have stayed focussed and true to our convictions. Our aim is to engage, inform and inspire those that we work with, and to provide our clients with a memorable and outstanding service that they take pride and comfort from. We will never be content with just being good. We are always looking to improve and over the past year, we have continued to grow our proposition by working with other trusted professionals who are experts in their field and who share our commitment to excellence. We identified ManchesterCF as our preferred provider for advanced online e-learning and we have developed an outstanding programme of personal communication skills development for financial crime professionals with Amaze Training. We believe that by providing engaging learning and helping professionals to be more effective in implementing and communicating change, then we will make a difference in the fight against crime and terrorism. In June we moved to our new offices and we also rolled out new technology in our workshops. This supports even greater engagement and interactivity for delegates, whilst providing insightful management information about individual learning needs and achievements to senior management. We believe that we are the only learning provider that is providing this support from workshops and our clients are now able to strategically identify those learning intervention requirements that will make a real difference to their success. Later this year other courses will be announced and will include an advanced trade-based financial crime compliance workshop for risk professionals and experienced trade services professionals and we will shortly be inviting firms to talk to us as we will be providing a very exciting customised e-learning programme for firms that want a fully tailored programme of workshop training and e-learning.
And finally, as the MD and founder of the Academy, I would just like to publicly express my personal gratitude to my team who are so hardworking and dedicated to supporting Great Chatwell and our clients to be successful. It is never taken for granted. This year couldn’t have happened without you.

“Growth is never by mere chance; it is the result of forces working together.”                            (James Cash Penney) 

What is Customer Due Diligence?

What is Customer Due Diligence (CDD)? Do you know your SDD from your EDD?  Do you understand the significance of 25% beneficial ownership?  Can you differentiate between passive ownership and effective control?  Do you know the difference between a bare trust and a discretionary trust? Why does it matter? The above terms are commonly used when talking about Customer Due Diligence (CDD) – so what is it? Customer due diligence (CDD) underpins a firm’s enterprise-wide management of financial crime risk from money launder to fraud, from market abuse to corruption, from tax evasion to sanctions evasion and everything that falls in between. It is the process by which a firm identifies with or for whom it is conducting business, who is benefiting from any arrangements, the source of wealth a firm might be managing, the business arrangements of clients and both the upstream and downstream supply chain, the political status of clients or any potentially unsavoury information about a client or their business arrangements. The aim of CDD is for firms to ‘know’ their clients (a requirement under the Money Laundering Regulations) in order to identify risk so that it can be appropriately managed or mitigated, and to assist in the identification and reporting of suspicious activities to the relevant competent authorities. The application of CDD measures can also help protect clients e.g. from falling victim to fraud. You may have heard the following terms:
  • “KYC” (Know Your Customer/Client)
  • “KYCB” (Know Your Customer’s Business)
  • “KYCC” (Know Your Customer’s Customer)
  • “KYCS” (Know Your Customer’s Suppliers)
  • “KYE” (Know Your Everyone/Everything)
“Knowing” this information, understanding the implications from a financial crime risk management perspective and is all part of the wider CDD obligation but you cannot “Know” any of this unless you have undertaken appropriate due diligence on your customer and made enquiries into areas such as legal form, business models, geographical footprint and beneficial ownership. CDD helps identify ‘red flags’ – indicators of potential risk (e.g. complexity or opacity in a corporate structure) that might require further investigation or highlight illegality. Can you identify the red flags in the below structure chart?  What are the implications for the CDD process?  What are the potential risks for the firm? A money laundering tree diagram “Knowing” your client is the ultimate destination, with CDD the journey to get there – but this crucial journey never ends and it is not always straightforward (I feel a John Lennon song[1] coming on….).  It might require unwrapping corporate structures across multiple jurisdictions or the identification of beneficial owners hiding behind nominees or proxies. (How did you do with the teaser above?).   It means understanding why a corporate entity is structured the way it is, not just how it is structured.  CDD means understanding where to get information and how to make an assessment of relevance and reliability.  It also means e.g. understanding the legitimate reasons for complex corporate structures. CDD also includes the ongoing monitoring of a client’s activities and transactions to ensure they are within expectation, to ensure that there have been no changes in ownership or control and that the relationship is still acceptable from a risk perspective. CDD requirements vary according to perceived risk, legal person type, product or service requirement and jurisdiction, to name a few criteria.  There is no one size fits all approach. GCAL can help give you the skills that will enable you to maintain, develop new or enhance your level of understanding of financial crime risk management responsibilities. Contact our team to discuss your requirements or send us an email to [1] 10 points for those that got ‘The Long and Winding Road’!!

What are Crypto Assets?

What are Crypto Assets? Crypto Assets? What are they? That’s easy – you’re talking about a fancy new term for Bitcoin, aren’t you? A bit like when we stopped talking about KYC and started talking about CDD. It used to be a virtual currency and now it’s a “crypto asset”. Well - yes and no! In the same way that money laundering is a criminal activity that comes under the wider umbrella of financial crime, crypto asset is an overarching term that includes (but is not limited to):
  • Cryptocurrencies
  • Initial Coin Offerings (ICOs)
So you mean a ‘digital currency’ then? Again – yes and no! Many people get confused between what a digital currency is and what a cryptocurrency is. PayPal, Apple Pay and even loyalty points (e.g. frequent flyer points) on a platform can be considered as a digital currency. Bitcoin, Ripple, and Ethereum are also digital currencies but what makes them cryptocurrencies is the use of ‘cryptography[1]’ to encrypt publically recorded information held on a blockchain. Still with me? Clear as mud? So a cryptocurrency is a form of digital currency that uses encryption to keep transactions private? Yes. Now we are getting somewhere. So what is a crypto asset then? A crypto asset is essentially any asset held digitally that uses encryption and blockchain technology. Consider the traditional Initial Placement Offering (IPO). A way for a company to raise investment capital by offering to pay dividends on profits made. An Initial Coin Offering (ICO) is the crypto version. Investors receive digital tokens with a monetary value attached to them. So crypto assets are really just a more hi-tech way of paying for things or holding value e.g. investment value? You could put it like that. Sounds great. I don’t know what all the fuss is about. Why are regulators worrying about all this? For a number of reasons, including financial crime and consumer protection. OK – let’s start with financial crime. I thought encryption made things secure. It does – and that can be a double-edged sword. It means that value transfer by cryptocurrency can be hidden by those with criminal intent. But wouldn’t this be picked up by the banks? I thought they monitored transactions for suspicious activity. They do – but crypto assets move outside of the traditional banking sector. Value transfer is either peer to peer – What – like me giving you a tenner? – Yes. Or they are via crypto exchanges. Crypto exchanges typically fall outside of the regulated sector. Oh. I see why that could cause concern. So, what is the consumer protection angle? There are a couple of issues here. The first one is the volatility of crypto assets. Take Bitcoin for example – because it is decentralised and therefore not pegged to a fiat currency it is governed by supply and demand and is extremely volatile. There is regulatory concern over people losing money if they invest in cryptocurrencies like Bitcoin. Some banks try to protect their customers by preventing them from purchasing Bitcoin with their credit cards. Another issue is the potential for fraud. Unwitting investors might invest in an ICO that turns out to be a scam. This was highlighted by a ‘fake’ site that set out show how dangerous it could be. Take a look at: One of the key differentials between crypto assets and regular fiat currency deposits and investments is that typically the entity that offers the investment is required to meet certain regulatory safeguards, and those consumers who make deposits with regulated banks, will receive some level of protection of the deposits if the bank fails. These safeguards are not available in many instances, particularly unregulated investment and ICO activity and cryptocurrency balances are therefore at risk in the event of a cyber attack or the loss of the private keys that provide access to the assets held. So how can Compliance help? "You and your business may not have direct dealings with Crypto Assets today, but learning more about the risks and opportunities that exist directly and indirectly may protect you and your business going forward, whilst providing new commercial opportunities. Great Chatwell Academy of Learning provide briefings, workshop training, and certified online training courses suitable for individuals, small teams and larger businesses." Our team will be happy to discuss with you your requirements. Contact Us to find out more [1] From the Greek for ‘secret writings’

What is tax evasion?

Tax evasion, tax avoidance, tax efficiency, tax arbitrage, tax rationalisation, tax management – these are all terms used to describe the various methods of reducing the tax bill of a legal or natural person. But how do you distinguish between them?  What is allowed and what is not allowed?  What happens if you get it wrong? The most simplistic way to think about this is that tax evasion is illegal whereas the others terms refer to activity that is not illegal. It is, therefore, not allowed. So how do you know what is tax evasion or what falls into the not impermissible category? You are not a tax expert.  You are not omniscient.  You do not have a crystal ball.  And tax evaders are not renowned for their honesty and integrity! AND tax evasion covers all types of tax including corporate tax, personal employment tax, inheritance tax, excise duty and value added tax. Tax evasion is a sticky subject with increasingly onerous obligations put on the regulated sector to play their part in its deterrence and detection and failure to have in place reasonable procedures to mitigate the risk of a firm becoming involved can result in the commission of the offence of ‘failure to prevent the facilitation of’ in relation to domestic and foreign tax evasion (Criminal Finances Act 2017). Spotting tax evasion can be difficult enough, but increasingly the powers that be are using the terms tax evasion and tax avoidance interchangeably in an example of regulatory creep - with more and more expected of the regulated sector to form the first line of defence for UK PLC because whilst not actually illegal, tax avoidance involves bending the rules of the tax system to gain a tax advantage that Parliament never intended. It often involves contrived, artificial transactions that serve little or no purpose other than to produce this advantage. It involves operating within the letter, but not the spirit, of the law and is very much on the regulatory radar. So what does that mean for firms? Firms need to take a number of steps to protect themselves from exposure to, and risk of being involved in, tax evasion:
  • Understand the legal and regulatory framework in which you operate. g. do you have reporting requirements under FATCA or the CRS;
  • Identify, understand and assess the tax evasion risks you are exposed to as a firm and areas of vulnerability (clients, employees, products and services, jurisdiction, operating environment, internal governance framework);
  • Understand typologies and risk indicators for tax evasion such as complexity in a corporate structure or choice of jurisdiction known for tax advantage and secrecy laws;
  • Put in place policies and procedures – both preventative and detective; and
  • Educate employees on their obligations and what they must/must not do.
As more emphasis is placed on challenging the legitimacy of avoidance schemes firms must also be constantly horizon scanning for changes to legislation – the upcoming DAC 6 being a prime example of legislation that will expand the remit of regulated firms to report avoidance schemes so that tax authorities can focus their efforts and clamp down on those. Tax evasion, and avoidance are subject to intense legal and regulatory scrutiny with the onus on firm to show that they had in place reasonable procedures to mitigate the risk – reversing the burden of proof. It is therefore imperative that employees understand where they might be at risk and are able to take the necessary action.

What is money laundering?

Much has been written about money laundering and what it actually is – in terms of the concept itself and the offences of money laundering. It seems simple – it has been drilled into employees, in financial services particularly, that money laundering is placement, layering and integration, a three-stage process that seeks to ‘clean’ ‘dirty’ cash – cash typically generated by the drugs trade. Cash is ‘placed’ into the system by ‘smurfs’ acting on behalf of the criminal gangs using a series of ‘structured deposits’ where multiple small deposits are made into various, connected, bank accounts or where different branches of the same banking institution are used to avoid detection. This cash then passes through a number of transactions, property, such as art, might be purchased to add ‘layers’ to the money trail to confuse law enforcement and the ill-gains are ‘integrated’ by being used for legitimate enterprise such as the purchase of a business, which generates legitimate income, having ‘washed’ the original drugs money. Unfortunately, this basic rendition of money laundering is far from the truth.  Even the term ‘money’ laundering is a misnomer. Why? The concept The concept of laundering differs by jurisdiction.  Some jurisdictions will attribute laundering to proceeds of specifically identified ‘serious’ crimes (such as drugs smuggling or corruption), others (like the UK) have an ‘all crimes’ approach and refer to the concept of ‘criminal property’.  Any criminally derived benefit can then, technically, also be subject to UK anti money laundering provisions under the Proceeds of Crime Act 2002. It is therefore not just ‘money’ that can be laundered. The process The three-stage process has its place in explaining laundering but as a model is too simplistic to really deal with the reality of laundering:
  1. Laundering is not restricted to cash generation.  Some acquisitive crimes generate proceeds or benefits that are already ‘in the system’.  Think of tax evasion. You retain the benefit of the tax you didn’t pay. The value of that benefit is subject to laundering laws.  Crimes that generate a benefit already ‘in the system’ obviate the need for placement activity.
  2. It is not necessary to ‘place’, ‘layer’ or ‘integrate’ criminally derived funds to commit a laundering offence.  A laundering offence can be committed by the simple possession of criminal property. If you rob a bank and steal £3,000 and hide it under your mattress you haven’t placed it into the system and you haven’t layered it through multiple transactions.  The funds have not been integrated in any way as they were kept under the mattress. But you have criminally derived property in your possession. You have self-laundered the proceeds of your own crime.
  3. Even if the three-stage process was adopted e.g. by a drugs cartel, it would be almost impossible to identify all stages of the process as different actors play different parts.  What some might see as layering, others might see as integration. It is not a nice, clean process
Summary There really is no ‘one size fits all’ approach to money laundering Money laundering can be simple, or it can be incredibly complex.  It can involve the proceeds of serious criminal activity or what one might consider ‘nuisance’ crimes. The key to understanding money laundering is to dispense with preconceptions about what it entails and to dispel the most common myths that money laundering must:
  • Include cash
  • Take part as a set process
  • Include an actual movement of funds

What is Bribery and Corruption

Often spoken about as partners in crime (pun intended), bribery and corruption are not the same.   Corruption is the umbrella term for various activities conducted by those in positions of power, quite often those with political power, by abuse of those powers entrusted to them.  Bribery is, perhaps, the most commonly cited form of corruption but the concept of corruption is much wider and is not restricted to the politerati. Fundamental to identifying and mitigating corruption risk is an understanding of corruption in its various guises. A particularly hot corruption topic is that of graft – where those in political authority use that authority for personal gain.  This might take the form of diverting state assets for personal use, awarding state contracts to cronies and family-owned business or by activities such as rezoning development land from commercial to residential to benefit from the higher returns on residential development.   The UK is currently under a great deal of scrutiny by anti-corruption bodies such as Transparency International for its role in laundering the proceeds of graft by foreign politicians leading to significant changes in UK law to help identify property with illicit origins (see Unexplained Wealth Orders and the Criminal Finances Act 2017) Corruption may be termed as ‘petty corruption’ such as the waiving of a speeding ticket for a small payment – although this could lead to bigger issues should an accident happen as a result of excessive speed; or corruption may be termed as ‘grand (political) corruption’ whereby the effects are significant e.g. changing or implementing laws to benefit from that change, e.g. passing a law to grant immunity from prosecution for MPs under investigation for corruption Corruption also occurs in the procurement process, where kickbacks might be offered or provided to secure contracts e.g. for the provision of services or might be requested in return for favourable treatment. As probably the most recognised form of corruption, bribery can take many forms and is not restricted to cash payments in brown paper envelops.  A bribe is anything that might ‘induce’ improper performance and can take the form of, for example, gifts and hospitality, providing employment for a family member or making introductions to (other) influential people. In some instances, jurisdictions take a different view on what constitutes ‘corruption’ with ‘facilitation payments’ causing divergence between UK and US law with the US Foreign Corrupt Practices Act seeing them as ‘grease’ payments to expedite a process and permissible as long as they are recorded in a firm’s books and records; and the UK taking a much harder stance and deeming them impermissible as a form of corruption.  Understanding differences in jurisdictional law is essential to avoid the commission of a corruption offence, as is understanding the reach of jurisdictional law which, in respect of the UK and the US, is extraterritorial in reach. Most forms of corruption have the common themes of secrecy, collusion and personal gain which can provide those in the regulated a thread to pick at in terms of detecting the proceeds of corruption – if they are empowered to recognise them.  Firms therefore must understand and be able to identify the risk indicators for dealing with the proceeds of corruption and have in place adequate procedures to deter the commission or perpetuation of corrupt activity internally.

What is Terrorist Financing?

What is terrorist financing? Terrorist financing, as a concept, is concerned with the provision of funding or resources to proscribed terrorist organisations.  The devil, however, is in the detail, e.g.:
  • There is no internationally agreed upon definition of terrorism with different jurisdictions disagreeing with which organisations are deemed to be terrorist in nature.
  • Terrorist financing does not just refer to money.  Resources such as equipment, shelter or identification documents can also be captured within the terrorist financing umbrella.
  • The funding or resources do not have to be allocated to a specific act or terrorism e.g. the organisation could use them to provide health care for dependents of terrorist fighters.
As with other types of financial crime, terrorist financing continues to evolve.  Once described as ‘money laundering’ in reverse with a staged process (generation, aggregation, transfer, end use) ascribed to it; as with money laundering, terrorist financing is not that simplistic. To complicate matters further, terrorist financing can often look and smell like money laundering as financiers use many of the same methods and mechanisms to move value and hide its origin or ultimate destination (such as shell companies, complex structure, nominees or proxies) or, conversely, terrorist financing, and specifically resourcing, might not be detectable at all. Raising funds Funds can be raised from legitimate or criminal enterprise.  Historically, funds have been raised via charitable donations – either overtly from donations made by the donor who knows that the funding is going to support terrorist activity or covertly where the trust and generosity of donors is abused, and funds are funnelled away from legitimate charity work. Increasingly, terrorist groups have been identified as engaging in criminal enterprises such as the sale of weapons or narcotics to provide a steady source of illicit income, alongside looting, extortion, kidnap for ransom and the sale of stolen artefacts or commandeered commodities. Lone actors, also known as ‘lone wolfs’, and smaller groups and cells of disaffected individuals have also been known to raise funds by taking out loans or credit cards or by fraudulently claiming state social benefits. When it comes to raising funds, terrorist organisations, or lone actors representing them, are limited only by their imagination in what is an ever-evolving digital world. This new age of technology and social connectivity has provided a new pool of funding from methods that include crowd funding and simple appeals to sympathisers to pay using prepaid cards, international payment systems and more recently using cryptocurrencies. The challenge for compliance practitioners and front office staff is to learn more about these typologies and keep abreast of new and as yet unreported newer sources of finance. Value Transfer A key concept to consider when addressing the question of ‘what is terrorist financing’ is that ‘value’ can be made available to using financial and non-financial means.  There are many mechanisms by which ‘money’ can be collected and sent, e.g.:
  • Wire transfers
  • Prepaid cards
  • Physical cash
  • Cryptocurrencies
Equally however, value can be provided in the form of goods and services which can be sold to generate funding. Some of this value can be transferred through the unregulated sector, sometimes referred to as the ‘Hawaladars’, whilst there is increasing evidence to prove that value is also moving across international borders through the abuse of international trade and documentary trade finance. Case examples include designated terrorist groups ‘taxing’ exports of charcoal from Somalia, or through the importation of goods in to West Africa. Of course, the most simple and effective way of moving value to a terrorist is to purchase commodities in one jurisdiction and send these in a container for sale in another jurisdiction, with no invoice being submitted by the exporter to the importer. No paperwork, no payments between banks and limited scrutiny by any third parties! The challenge Often the poor partner and subject of training behind money laundering, there is an opportunity for compliance practitioners and relevant front office staff to enhance their personal performance and contribution to detecting and disrupting terrorist financing by:
  1. Taking steps to understand more about what we mean by terrorist financing and terrorist resourcing (
  2. Developing personal skills and awareness of the risk indicators that may indicate terrorist financing and resourcing,
  3. Analysing terrorist financing in a more modern way, recognising that the sources include many different criminal and non-criminal sources, and challenging pre-conceived ideas
  4. Including commodities, international trade and goods that have a dual-use ad purpose in the risk assessment of what terrorists require to commit their crimes and atrocities.
Summary What is generically referred to as ‘terrorist financing’ is not simply money laundering in reverse and it does not occur in nice, neat stages of a set process.

Crypto News - Volume 3

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We continue to work closely with leading cryptocurrency technology...


Happy Birthday to Bitcoin, but what will we see in the next ten years?

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“Commerce on the Internet has come to rely almost exclusively on financial institutions serving as trusted third parties to process electronic payments. While the system works well enough for most transactions, it still suffers from the inherent weaknesses of the trust based model. What is needed is an electronic payment system based on cryptographic proof instead of trust, allowing any two willing parties to transact directly with each other without the need for a trusted third party. Transactions that are computationally impractical to reverse would protect sellers from fraud, and routine escrow mechanisms could easily be implemented to protect buyers. In this paper, we propose a solution to the double-spending problem using a peer-to-peer distributed timestamp server to generate computational proof of the chronological order of transactions.”

Taken from ‘Bitcoin: A Peer-to-Peer Electronic Cash System’, by Satoshi Nakamoto

Bitcoin ("BTC") was issued ten years ago and is still polarising risk and compliance professionals. Whether you believe that it is a force for good, or that it is simply a disruption that we could have lived without, there is no doubt that it is here to stay.

So, what can we expect in the next ten years?

I predict a very different future, with global standards and regulation adopted, even in those jurisdictions that are currently prohibiting its use. Why? To prevent regulatory arbitrage and to enable new challenger firms to harness the opportunities that are presented by blockchain.

We will have a regulated and unregulated sector, rather like we have today with banks and 'Hawaladers', and we will continue to have to manage the risks in havens of secrecy that are offered by Altcoins, rather like we do today when payments and value passes or is held in jurisdictions with higher levels of data security. According to the risk based approach, there will be adoption of global standards in how to identify and detect 'shell banking' risks that will be applied, just as we apply these today to manage correspondent banking risks and third party reliance. In short, the risks of managing value transfer will be the same, but look different, because the nature and aims of criminals will largely remain unchanged. 'Old crime, new technology'! We will be required to find a way forward.

In my crystal ball I also see coins published by major financial institutions, jurisdiction coins such as 'ruble coin' and new players from hitherto undisclosed new entrants. The name of BTC has become synonymous with 'crime' simply because criminals have acted faster than regulators to utilise its features, but would you be more inclined to trust BTC if it was actually released under another name by for example Microsoft or Apple to support financial inclusion and was supported by Bill Gates for good causes? We trust their devices and use them to convey messages and critical personal data, so why not value?

Whatever the future holds, it is going to be interesting, and I very much hope to be part of history, and to have the opportunity to witness the changes and evolution of this fascinating and exciting technology over the next ten years!

Thank you Satoshi Nakamoto!

Winning support for training spending in 2019, a case study to warm your heart!

Obtaining the resource and budget that is required to train and educate staff on their financial crime management responsibility is sometimes challenging, because how do you measure the return on investment if this investment is designed to deter illicit activity ever happening? Here is a very timely and simple story that might just help! For more than four years I’ve had the pleasure of working in support of international regulated businesses to train and educate all levels of staffing, from the shop floor through to the boardroom, and I consider this to be one of the most privileged and rewarding roles that I have held.

As a former MLRO I’m acutely aware that this training comes at a cost, and that often the greatest difficulty and challenge is trying to articulate what the return on this investment will be to the senior management of a bank who have several competing demands on limited resources.

This is not an unusual challenge it appears and has been recognised in an earlier thematic report provided by the Financial Conduct Authority (FCA) ‘How Small Firms Manage Money Laundering and Sanctions’ (TR14/16, November 2014) [1]. In this report the FCA noted that 33% of firms visited were considered to have insufficient compliance resources, and in multiple enforcement actions by the FCA, MLROs have almost without exception cited a lack of resources as being a significant factor in under performance.

And so, on the 3rd October 2018 it gave me immense pleasure and satisfaction to read the following headline in the Wall Street Journal, “The $500 Million Central Bank Heist—and How It Was Foiled’. [2]

The root cause of my happiness was that the report appears to confirm that a $500 million fraud was identified because of the actions of a bright and risk-aware cashier, who reported a personal suspicion within HSBC.

Having had the pleasure of working with HSBC over the past three years, this report gave me enormous gratification, because I know just how hard many, many people have worked diligently since 2012 within HSBC to repair and enhanced the financial crime controls and compliance framework that were sadly lacking prior to this date. (As an aside, it is interesting to note that I have seen little in the way of enthusiastic reporting or headlines supporting and recognising the success of HSBC in identifying and preventing this significant alleged fraud. I guess poor performance sells more print!)

HSBC has invested significantly in training and education in recent years, and this single story of success, serves to demonstrate just how a business that really does commit to a culture of compliance, and the principles of reporting with courageous integrity, can make a difference in the fight against crime.

For me, what the story does reassert is that investment in people, in providing effective and experiential learning, really can make a difference at a time when several commentators are questioning the value and effectiveness of the UK’s suspicious activity reporting system.

I’m not party to how the particular cashier in HSBC was trained and inducted to their role, but I do expect that the training that has been provided has been carefully considered and is role-specific. What is more certain, is that the investment in training by HSBC has contributed to this report being made with the utmost good faith, supported by a culture of compliance, and that this has resulted in the identification and seizure of $500 million of illicit value.

This action was important to the victims of the fraud, in this case the people of Angola, but also strategically to HSBC and the United Kingdom. How important? Well, in the National Crime Agency report on financial crime reporting activity across the UK in October 2017, ‘Suspicious Activity Reports (SARs) Annual Report 2017’, the total amount of assets denied to criminals as a result of Defence Against Money Laundering requests (refused and granted) over the preceding 18-month period was £56,541,579. [3]

In simple terms therefore, the actions of a single, well trained employee of HSBC has resulted in the ‘effectiveness’ of the UK system improving (subject to currency conversions) to the tune of approximately 600%!

So, if you are asked to measure and explain the return on training investment, it may be appropriate to share the details of just what can be achieved from just one report of high value money laundering, and how the business can bask in the rewards of this success, or else, you could share the inflammatory headlines that we are now reading concerning several other regulated banks across Europe, who are now feeling the considerable heat from criminal, legal and regulatory inquiry.

We now appear to have a wonderful case study that has grown and developed between 2012 to 2018, on the value and benefits of training and investment in our people, and that finally gives us a measurable and quantifiable value assessment to support why people really are our most valuable resource and line of defence in the fight against crime, and why approving that budget is so important.

Good luck!




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