Understanding Suspicion in Financial Crime

Understanding Suspicion in Financial Crime

The Essential Guide to suspicion in financial crime: Understanding Suspicion in Financial Crime

Every Financial Crime Risk Officer (FCRO) dreads being asked one, simple, question. It's the same question every time: "How do I know if I'm suspicious?"

It's a simple question without a simple answer. Until now.

In "Understanding Suspicion in Financial Crime" Nigel Morris-Cotterill, a former litigation lawyer who has been a counter-money laundering strategist for more than twenty years, analyses legal and regulatory regimes, psychology, social sciences, even metaphysics and pop culture.

He draws on a huge range of material from academic studies to regulatory and legal findings, from movies to his own ability to identity and manage far-off risks. He identifies characteristics that encourage or discourage the recognition of suspicion and the filing of SAR / STR s.

The book is non-linear, in "phases" rather than chapters, as multiple approaches are examined in parallel rather than in sequence. There are surprisingly few overlaps until the moment when a decision as to suspicion has to be made. This, Morris-Cotterill, says is at the heart of why the question is so hard to answer. Simply, there are far too many and far too diverse starting points - and law and regulation are, more often than not, not among them.

The book is a serious book covering a serious subject but it is written in a simple way. Many readers will have English as a second or third language. And many do not want and do not have the time to dredge through academic terms and management-speak. "Understanding Suspicion in Financial Crime" is a jargon-free zone. Morris-Cotterill hunts for that elusive answer, the one simple, single sentence that all staff can understand, the sentence that will give the beleaguered FCRO peace of mind, that will mean they do not stand, eyes wide open like a deer in the headlights, hoping for inspiration.

The answer to the question is as unexpected as it is simple, and easy to understand by staff at all levels.

Equally importantly, the book answers the hard questions asked by investigators, prosecutors, judges and regulators: what is suspicion, how is it formed, when it is acted upon (or not formed or not acted upon). Across the world, cases report Judges lamenting the lack of guidance on these matters, and the lack of an effective definition of suspicion.

Now, at last, there is one, drawing on cases and legislation from many jurisdictions, using non-legal sources to provide both context and explanation.

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Introduction 3
About the Author 4
Dedication 5
About Phases 6
Notice regarding source material. 11
Notes 12
Terminology 16
Preparation 18
Basics 1
 What is money laundering? 2
 Literal v lateral thought. 8
Phase One : Managing expectations 19
Phase Two : Rationality or feeling - an introduction 33
Phase Three : The role of facts in defining suspicion - or - the MLRO as "judge" 43
  Case study 59
  Case study 59
Phase Four : What is a fact? 63
 Facts and Evidence in Court 64
 Evidence and Fact outside Court 68
 Fraud, recklessness & negligence 89
 Facts change depending on the circumstances. 97
 Do we all know the same facts? 100
Phase Five : The relationship between facts and suspicion 103
 Are facts conclusive or indicative? 104
 Editorialising and "fact." 105
 Means, Motive, Opportunity - just dots in a picture. 113
 Predictive policing. 118
 The absence of facts is a fact in itself. 121
 Pattern Recognition 122
Phase Six : What is suspicion? 129
  Case Study 137
  Case Study 139
Phase Seven : How do regulators define suspicion? 147
Phase Eight : How do we decide if we are suspicious? 161
 We know what we know but how much do we know? 186
 The strange case of Holly Williams 196
 More on Holly Williams and the consequences 201
Phase Nine: Are we there, yet? 205
 When is a transaction money laundering and when is it part of the criminal conduct? 210
 Defensive and discretionary reports. 218
 At what stage should I report suspicions? 223
 Note re systems in non-reporting institutions 225
Phase Ten: Trust=Truth=Fact? Is suspicion the opposite of trust? 227
Phase Eleven: Challenges in a multi-cultural society. 247
Phase Twelve: Due Diligence: the human perspective 267
 Identifying suspicion: corporate crime 291
 The changing nature of relationships between bankers and clients 304
Phase Thirteen: cause for reasonable suspicion v reasonable cause for suspicion 309
Phase Fourteen : nature v nurture. 313
Phase Fifteen: Call centres and other remote operations 327
  Point of Interest 356
Phase Sixteen Money Laundering Risk Officers and the need for full information. 361
  MLROs must have full information: bank secrecy 362
  The end of the global financial institution? 374
  Internal information flows 375
Phase Seventeen : building a simple money laundering risk matrix 379
 A risk matrix is an algorithm 386
 Can we trust our own judgement? 387
 Building a simple risk matrix 390
 Formulating a risk policy: Country Risk 394
Phase Eighteen: Where does "belief" become "fact" and where does it become delusion? 403
Phase Nineteen: Can compliance be measured? 411
Phase Twenty : the role of language in relation to suspicion 435
Phase Twenty-one: The danger of autocracies. 459
 Phase Twenty-one - Annex: Cross Border Manipulation of Equity Markets 475
  Accounting standards 483
  Audit 486
  Valuation of companies 487
  The marketing of shares to offshore persons. 490
  The marketing of shares by offshore persons (boiler rooms) 494
  Due diligence issues of alternative / private investment vehicles. 498
  What does it tell you? 503
Phase Twenty-two: of trees, forests, sound, a cat in a box and black holes. 505
Phase Twenty-three: What is money? 515
Phase Twenty-four: Politically Exposed Persons (PEPs) 541
 What is a Politically Exposed Person? 542
 Diplomatic Immunity 581
  Genesis 581
  What is a diplomat? 582
  Who can be a diplomat? 582
  Abuse 592
  US Law: Foreign Sovereign Immunities Act 595
  The Diplomatic Relations Act of 1978 596
  Vienna Convention on Diplomatic Immunity 1961 596
  Government Linked Companies (GLC) / State Owned Enterprises (SOE). 598
 PEPs & Terrorism. 604
 PEPs and Sanctions 604
 Extra Territorial effect of anti-bribery laws 605
 USA: Foreign Corrupt Practices Act 605
 UK: Bribery Act 2010. 606
 Tests under the UK Bribery Act: 607
 Corporate Social Responsibility 610
Conclusions 612
Exercises. 618
Postscript: What is the biggest lesson in this book? 620


Note: This work was previously available under the following title:

How does that make you feel?
Understanding suspicion in money laundering and terrorist financing

It was relaunched under the title "Understanding Suspicion in Financial Crime" with correction of typos, etc. and no material content changes, with a publication date the same as the original so as to avoid confusion as to the effective date of the work.


© Nigel Morris-Cotterill
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