Fraud and financial crime – Updating trigger mechanism beyond cash to include wire payments

Fraud and financial crime – Updating trigger mechanism beyond cash to include wire payments

by Corey A. Reason, Group Head of Financial Crime Compliance, Clarien Bank Limited

Interview ahead of Fraud and Financial Crime USA Congresstaking place March 27-28 in New York City 
Can you please tell the Risk Insights readers a little bit about yourself, your experiences and what your current professional focus is?

I serve as Clarien’s Group Head of FCC.  My portfolio has responsibilities for overall financial crime risk management including AML, Anti-Terror Financing, Sanctions and Anti-Bribery and Corruption. Prior to joining Clarien, I worked as VP Director for the HSBC Group. At HSBC I served as an International Financial Crime Executive, working in nine countries across five continents; with the goal of bolstering the local teams with financial crime knowledge and program execution expertise. I has also served as a liaison from the banking industry to NGOs and government on financial crime issues, working with the UN, World Bank, IMF and other global banks to understand new and emerging risks to the global financial system. My focus now is working with our executive management team on business expansion outside of Bermuda and how to properly execute a compliant growth strategy in new markets.

What, for you, are the benefits of attending a conference like the Fraud and Financial Crime USA Congress and what can attendees expect to learn from your session?

For me, attending a conference like the Fraud and Financial Crime USA Congress is threefold: one, the opportunity to hear from professionals across the risk function (banks, fintechs, government resources, and regulators) tell real life stories to apply to the information that they are presenting. Two, question and answer at the end; I know we all hate to be the one to ask a question in front of a group of people but it is a great chance to get a response to that burning issue you might have; I try to always take the time to submit ahead of time or ask in the room something I am seeking some guidance on. If the first two methods don’t work, seek out the panelist (without stalking J afterward and ask your question on a one to one basis) I will be around and have no problem answering questions to those interested. My third and final reason for attending a conference like this is simple, networking! Although not every question or problem can be solved over the course of a couple days, I have found a profound tool in meeting and continuing the conversation around financial crime with like-minded professionals; remember that small or large, we are all in the same boat when it comes to regulatory issues and should seek as an industry the best ways to help build bridges for our common problems.

Why is it important to update trigger mechanisms beyond cash to include wire payments?

Triggers expanding outside of cash is really the next logical step in the progression of a good financial crime risk management program. Although we have many disruptors in the market (crypto, peer to peer payment networks, etc.) for the time being the largest amount of illicit funds move via two primary means, cash and wires. The inclusion of wires into a trigger mechanism can help not only on the compliance side, but present additional information that the Lines of Business may want to know in order to target additional business that could be garnered by a client. As an example, customer A opens a small local based company 10 years ago, they choose not to take credit cards for payments or do wires to keep things simple. You notice cash within the expected range come and go month and month with no wire activity. Suddenly over the course of a couple months you are alerted to $100k in domestic and international wires. With this as a trigger it allows compliance to raise the issue and the line of business to have a focused discussion with the client on the change in business. They explain that after a number of successful years locally they are expanding to serve clients across the country and now have the buying power to procure materials internationally at a cheaper price. This information satisfies the compliance concern that the activity is legitimate and the relationship manager may now offer new products and services to this expanding company, it’s a win-win.

Could you provide brief insights on BSA and AML regulations focusing on dirty money?

BSA/AML regulations that focus on dirty money while being a good standard are in need of a refresh to reflect the changes in the economy and activity that occurs today. On many front this is already being addressed, with implementation of regulation of Initial Coin Offerings, guidance on Ultimate Beneficial Owners and sharing of Company Registry data. One critical piece that needs a review is the Currency Transaction Reporting (“CTR”) limit. When the CTR was established in 1970 under the Bank Secrecy Act the cost of a NEW HOME was on average $26,600[1]!  Clearly those making financial transactions at or above $10,000 was moving serious money; however the limit has been inflexible and rigid since it was established and factoring in inflation, that same $10k is now worth roughly $1,471 in today’s dollars.  Until this is reviewed and allowed to float with inflation and other economic indicators, rules and scenarios in automated transaction monitoring systems will be at a systemic disadvantage.


You will be joined by Ally Financial in a panel discussion on biometrics and authentication, In your opinion what are the key technology advances in attacks and advances?

I think the range of advances, from remote authentication (using data points such as your credit report to validate the client is who they say they are), biometrics (facial recognition and the like) not only bring tremendous value to a customer during the onboarding phase which can often feel like death by a thousand cuts. However, the more our information is out there and shared with institutions, we have to ensure that proper controls are being put into place; not only to ensure that external theft of data is prevented but to also ensure that data in protected from individuals within our own organizations that do not have the need to have access to it. I bring up the threat of internal disclosure or misuse as I feel that is often looked at only after securing the firm from these attacks and while our employees are the strongest asset we have, when the controls environment is lacking internally, it can become one of the biggest risks.

How do you see the impact of Fraud and Financial Crime evolving over the next 6-12 months?

The landscape for financial crime has always been dynamic but I see the next 6-12 months making two significant movements. One is one the block chain/cryptocurrency space and the other will be regulatory/jurisdictional changes. On the crypto side, companies will continue the need to increase transparency and make banks comfortable with the activity they seek to engage in (i.e. ICOs, tokenization, and smart contracts) and ensure they engage in frank discussions with banks. This will be the only real way further integration and use can occur jumping from the crypto to fiat side. Jurisdictionally, countries will need to continue to review and determine what they deem as acceptable from a risk appetite perspective and indeed from a reputational standpoint. I just recently read there is a change in the EU with regard to “golden visas” and allowing individuals on government lists to participate in the scheme where previously they would be excluded.  Changes like that can have unintended consequences when seeking ways to boost their economic situation.

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