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20150730 Beware false prophets - and "experts."

Nigel Morris-Cotterill

I am constantly amazed by the utter rubbish spouted by so many so called experts in the field of counter-money laundering, including many who proudly add various letters after their names.

The false information they spread fundamentally undermines all efforts to properly educate those upon whom the responsibility for detecting money laundering falls. That includes front line staff, new entrants to the field and those in positions of responsibility in all manner of businesses, not only financial institutions.

It undermines the comprehension of judges, of prosecutors and investigators.

And, ultimately, it leads to actions, criminal, regulatory and civil, against companies who face extraordinarily large fines or penalties in respect of risks that were avoidable - if only their advisers had been competent.

For example, it is incredible that, even a quarter of a century into the counter-money laundering project, we still read "expert" commentary, and see in counter-money laundering training, the false comment that money laundering is turning dirty money into clean money.

It isn't. It is disguising the origins and / or location and / or destination of assets that represent, in whole or in part, the proceeds of criminal conduct. Once dirty, no amount of laundering makes the assets clean. Moreover, they taint every other asset they form contact with.

The following 5 points are circulating on LinkedIn - and gaining "likes" and "shares" despite being in some way defective or, in some cases, plain wrong.

1. All financial crimes involve money laundering

This is both incorrect and misleading: It's been long recognised that all frauds, etc. result in (not involve) money laundering. As a discrete point, it is not only "financial crime" that leads to money laundering. Any crime that generates a benefit results in money laundering. Therefore burglary for the theft of a television which is then sold creates money laundering in respect of the proceeds of that sale.

2. All financial crimes result in tax evasion

This is completely untrue. Organised crime gangs often pay tax.

3. All financial crimes require a financial institution

This is completely untrue. Tricking an elderly person into paying for unnecessary work to his roof is a financial crime but does not involve a financial institution at any point.

4. All financial crimes interface with government agencies

This is completely untrue. Indeed, it is so nonsensical that it is difficult to think of an example, other than a fraud on a government department (including tax evasion) or agency, bribery or theft from the public purse, that has any direct relationship with a government agency or department.

5. All financial crimes create the need for asset recovery – All financial crime leaves someone POORER than they were before

This is true, up to a point. But not all financial crimes leave someone poorer. Bribery, for example, it is an offence for mutual benefit and both parties get something they want.

Seriously, if you have been given this information by someone who sells his expertise as a consultant, an information provider or training / education provider, find someone who knows what they are talking about.

If you've heard it from a fellow money laundering compliance / risk management officer, think again about their risk assessment capability. Doing your job is tough enough without other people's failure to understand their subject area sabotaging your own efforts.

When you are selecting your own advisers, think carefully: big law firms and consultancy practices advised HSBC, Standard Chartered, Lloyds and other European Banks on their risks in US businesses. Several of those advisers specifically told their clients I was wrong when I explained how the US Sanctions system operated , and how the USA PATRIOT Act would operate against foreign transactions. I told them that before the USA PATRIOT Act was in force. If you know your stuff, it is plain from the text of the Act.

I explained how transfer pricing and the use of royalties and intellectual property would become useful for both laundering and tax evasion almost 20 years before governments finally noticed. I pointed out the risks in trade financing and explained trade -based laundering before it even had a name.

There are far too many people who simply repeat what they hear, who have a far too shallow understanding of the issues, who focus on the simple movement of money and fail to recognise that it's people who launder and more attention must be paid to those people.

There are far too many people who are selling "expertise" that has remarkably little value to you.

And there are far too many companies and even governments that happily buy low level, repetitive, recitations of law and regulation, and the prescripted risks that so many regulators provide and do not look beyond that.

There are far too many people who focus on the acquisition of letters after their name, for which their companies often pay, rather than on the acquisition of true knowledge and understanding.

The control of money laundering and terrorist financing is for the protection of society, as well as other ends. It is a civic duty, regardless of law, to help detect and deter the commission of a crime that undermines society.

This is why Compliance / Risk Officers must identify the best sources of information, consulting and training and must insist, in the face of objections from Human Resources who have a different agenda, on using the best.

If you are not learning new stuff, if you are not being challenged, if you are not scratching your head and saying "I don't get it, but I will work at it until I do," then you are short changing yourselves and your company and - most importantly - society.

Don't listen to false prophets or the mundane. Find someone who really knows what he is talking about and book him, even though it's more expensive. Look for someone who knows his stuff and don't assume that a qualification from a commercial entity is a guide to that. Most of the very experienced people in this field do not belong to any of the commercial companies that issue certificates. That, of itself, should tell you something.

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