Reading the
article “Open Secrets” by Malcolm Gladwell (published in 2007, but reprinted in
his bestseller “What the dog saw”) about puzzles and mysteries makes me wonder
if there are any analogies with the field of AML/CFT.
His basic
line of thinking is that “a puzzle grows simpler with the addition of each new
piece of information”. He uses a few historic cases like the Watergate scandal
and the search for Osama bin Laden as classical examples of a puzzle. And he
uses the Enron disaster as an example of a mystery. Enron used – amongst others
– Special Purpose Vehicles to inflate revenues; they used thousands of them.
But all information about these SPV’s was disclosed; the journalists starting
the investigations had access to all data. The problem was not a lack of
information, the problem was an overflow of information. Information that was
not only overwhelming in quantity but also in complexity.
Relating
this to CFT we’re often dealing with partial hits if we’re filtering transactions.
In that case we need to solve a puzzle; we need more information to determine
if we’re dealing with e.g. a black listed beneficiary.
In AML
processes however we’re more often than not dealing with mysteries… We have
lots of transaction information at our disposal but we cannot detect a pattern
that indicates we’re dealing with a money launderer. We have all information
about a PEP we can possibly think of, but we cannot properly assess the risk
that this poses for our organization. We have risk information and corruption
indices of all countries our clients operate in and yet we have difficulty to
use that information to allocate an adequate risk rating to our client.
The key
learning point is that dealing with a puzzle differs from dealing with
mysteries. The approach needs to be different and the mindset of people needs
to be different. A puzzle requires a black-or-white approach; hit or no-hit;
the transaction is blocked or not. A mystery needs a risk based approach, an
assessment of different bits and pieces of information and an investigative
mind that can connect-the-dots and can think out of the box.
In our
design of processes, allocation of tasks, segregation of duties and training
approach we should remember the characteristics of the tasks at hand.
