The Deepening Shark Pool
A (Fictitious) character by the name of Avon Barksdale (From The Wire)-
Strolls into a Baltimore City bank accompanied by two gents with ill-concealed handguns. At the counter, Avon fills in a form, giving a West Baltimore address. He then, opens a large suitcase and extracts bundles of very used notes. Half these bundles are soaked in what appears to be dried blood. The other half, covered in an almost an invisible film of white powder. Avon explains that there are another fifteen cases, over in the West Side projects, that he needs to shift, due to a cat named Omar-
Having got wind of them…
Were the above to occur, it is probable that enough will have been gleaned about Mr Barksdale to forgo KYC/AML and, very politely, decline his custom.
How convenient it would be if all drug dealers presented like Avon but they don’t. It is far more likely that we will encounter a character akin to-
Skyler presents as respectable and, despite her Car Washing business, being a potential Red-flag. The accounts, like Skyler, appear very professional. For those unfamiliar with Skyler White, she is a character from the acclaimed TV series ‘Breaking Bad’. In which, her husband Walter, who’s a Chemistry teacher. Uses his knowledge to manufacture drugs and Skyler, who’s a bookkeeper, uses hers, to ‘wash’ the money Walter amasses.
From a bank’s perspective, nothing about Skyler White will set alarm bells ringing. She has no Criminal Record, history of bankruptcy or any other fiscal impropriety. Her business is registered in Albuquerque rather than any off-shore Tax Heaven and, as stated, her books are clean. Even if the bank decides all cash based business warrant a Red Flag and monitor her company’s account no wild fluctuations will be discovered. Nor will anything else, warranting further investigation. Given which, how do banks ‘deter and detect’ the likes of Skyler White?
The screenshot below features an excerpt from a UK bank’s AML Policy:
AML Policy, and common sense, dictate banks verify all prospective clients are exactly who they are claiming to be. See below:
The Money Laundering Regulations 2007 and 2015 make it mandatory to apply a risk based approach to the verification of identity as well as further customer due diligence.
Verification of Identity won’t be difficult for Skyler as her identity is not what she’s lying about. What Skyler White’s lying about, is the money. Chances are, unless she makes a mistake Skyler is destined to remain undetected. As bookkeeper Mrs White will be conversant on US Tax Law and to a lesser extent, bank procedure but she is no criminal mastermind. The stark truth behind Compliance regulations is that they are of no value in deterring/detecting criminals, if the criminals themselves, abide by them.
What purpose then, do Compliance Rules serve? They ensure that if a bank follows protocol, it covers itself from potential liability by way damaged reputation (they care), fines (ditto) and prosecution. Civil or Criminal. So, if the Regs don’t help detect (Which deters) criminals, what does? The answer and large elephant in the bank, is extraordinary simple: Clean Data. Without which, all else is, and I personally guarantee this, futile.
Aside from a multitude of other benefits, clean data enables us to create a Single Client View and once that’s achieved, Skyler days are numbered. Because, while it’s relatively easy for a criminal enterprise to maintain a façade of propriety on one, two, maybe even three fronts. Applying that discipline to every aspect of its operation is considerably more difficult. Monitoring a suspect account in isolation is an exercise in futility but once we have access to the entire fiscal flow, we’ll find the leaks because where criminal activity exists, regardless of the level of sophistication, there will be a leak-somewhere.
In the instance of Skyler, Single Client view reveals two other Albuquerque bank accounts for her Car Wash, displaying the same levels of income. Skyler is not a professional career criminal and as such, despite her relative intelligence, is rumbled the instant the spotlight is on her. How convenient it would be if all drug-dealers presented as Skyler White but they don’t. It is far more likely we’ll encounter a character akin to….
She has two other accounts, in might be able to resist new cars and expensive holidays but how long can she resist paying for an operation for her disabled son. Or begin ploughing money into a fund for her new-born daughter’s education.