The Inside Track: To bolster fincrime compliance training, learn how to see big picture, explain small details and profit from understanding roles, revenue pressures

The Skinny:

  • In this special ACFCS look at the historic degree of change in recent years in the fincrime compliance world, ACFCS Senior Director of Training Solutions, Casey Nelson, lets us look through his eyes to hone in on ways to improve one of the most oft-criticized prongs of the program: training.
  • Nelson knows a thing or to about tweaking and tuning anti-money laundering training for a large, complex institution as the former Vice President of Global Financial Crimes Compliance Training at Citi.  
  • The U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN) analyzed these changes and industry challenges – from the U.S. Anti-Money Laundering Act to updated national AML priorities – anew last week before lawmakers.
  • The Congressional testimony by FinCEN, the architect of these initiatives, also highlighted a future with a more focused lens on training, for bank AML teams and examiners. 

The ACFCS Inside Track Series Provides Insight, Guidance and Practical Takeaways from ACFCS Thought Leaders.

By Casey Nelson
Senior Director of Training Solutions, ACFCS 
April 29, 2022

In recent years, the financial crime compliance sector has gone through historic changes – in terms of regulations, responses to a global plague and being in some cases the victim, other instances the beneficiary, of rapid technological advances.

At the forefront of transformation in the anti-money laundering (AML) space is the U.S. Anti-Money Laundering Act (AMLA) of 2020, a sweeping series of updates to expand public-private partnerships, crack open beneficial ownership blind spots and, most significantly of all, shift the industry from fearing regulators to championing the needs of law enforcement.

These changes have taken on even more importance in recent months with Russia’s invasion of Ukraine, a move that has caused worldwide scorn, acrimony and condemnation against the Iron Curtain – and a unified sanctions barrage from the United States, United Kingdom European Union and others.

By some industry estimates the sanctions against Russia – starting with its annexation of Crimea in 2014 – have soared from around 2,000 to nearly triple that in roughly two months, a breakneck pace that has challenged banks and their corporate brethren to keep up.

The sanctions have sprawled, sprung and spilled like a gushing spigot beyond just Russia itself and the military industry complex of the country, but branched to the oligarchs that have propped up Putin and grown fat with wealth after snapping up whole industries after the fall of the Soviet Union.

These are all challenges on the mind Himamauli “Him” Das, the Acting Director of the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN), in Congressional testimony last week – a charged and spirited hearing that also highlighted a future with a more focused lens on training, for bank AML teams and examiners.

The AML Act has helped put FinCEN in the “position to address today’s challenges, such as illicit use of digital assets, corruption, and kleptocrats hiding their ill-gotten gains in the U.S. financial system, including through American shell companies and real estate,” he said in prepared statements.

It also highlights FinCEN’s unique tools and expertise to combat both “longstanding threats, as well as new ones, such as ransomware and other cyber-enabled threats and the use of the dark web to engage in illicit activity, such as the online exploitation of children.”

The AML Act also provides tools to approach innovations in a way that recognizes not only the opportunities they present, but the risks that they pose, Das said, a nod to record ransomware attacks, a vexing threat vector targeting banks, corporates and governments around the globe under the rubric of cyber-enabled fraud.  

One of the purposes of the AML Act is to foster technological innovation and the adoption of new technology by financial institutions to make the AML/CFT framework more effective – efforts that also must be paired with rich and relevant training.

Improving in all areas more broadly is also a key driver of the AMLA.

FinCEN, as part of the many rolling goals, must “streamline, modernize, and update the AML/CFT regime of the United States,” with a nuance that should not be lost on fincrime compliance officers being that by statute national security is “front and center in FinCEN’s mandate” and interwoven in program objectives. 

More training for examiners means more scrutiny of AML team training tactics

The AML Act also requires “annual training for bank examiners to enable them to better understand risk profiles and warning signs that an examiner may encounter during examinations,” Das noted in his statements.

The training requirement reflects concerns that financial institutions “have long expressed about how examiners evaluate AML/CFT programs and the degree to which those programs are effective and guard against money laundering,” he said.

That one carefully worded statement is a muted expression of the longstanding frustration and gulf between how AML teams see how compliance could go – deeper and more detailed investigations producing technical, tactical, practical reports – and how many examiners see they should go: the pomp and pageantry of process, not just results.

But Das is cognizant not every bank – or regulator – has access to the highest and best sources of training.

Knowledge and skills are not evenly distributed, meaning teams in the public and private sectors must be ever resourceful with their resources.  

Options for innovative and advanced training are “largely dependent on funding: considerations include the need for human capital for ongoing design, updating, monitoring, and delivery of the annual training program, as well as technology for delivery and tracking,” he said.

To watch the hearing and read FinCEN’s full prepared statement, click here.

Not surprisingly financial crime professionals are waiting with bated breath to hear what sort of changes the AML Act of 2020 will bring and how it will impact compliance training programs, including how updated fincrime compliance priorities will shift AML duties on the ground – including the need for more targeted training.  

To read ACFCS coverage of the AML Act, which Congress enacted into law in January of 2021 after overriding a presidential veto, click here.  

FinCEN released the formal list of its national anti-money laundering and countering the financing of terrorism (AML/CFT) priorities in June, a collection of historic foils like organized criminal groups and other rising risks, like soaring ransomware blasts and requisite digital dollar demands.

The widely-watched and highly anticipated AML priorities were the first concrete update to implement the AMLA – the most significant upgrade to the country’s fincrime framework since the 2001 U.S.A. Patriot Act.

How to prioritize new national priorities, execute on effectiveness, tune training

Coinciding with and underpinning the release of FinCEN’s AML priorities, the Wolfsberg Group issued a critical missive to detail how financial institutions can concretely demonstrate effectiveness.

In short, the Wolfsberg metrics of effectiveness include:

  • Are you compliant with local AML laws, cognizant of global standards?
  • Are you producing highly useful information to law enforcement, guided by national AML priorities?
  • Do you have a reasonable compliance program that reviews internal and external threats, gaps and vulnerabilities and adjusts based on rising or receding risks and law enforcement input?

To read the full statement by Wolfsberg Group, an influential alliance of more than a dozen of the world’s largest banks, including Citi, JPMorgan, Barclays, Credit Suisse and others, click here.

FinCEN’s stated AML priorities are:

  • corruption;
  • cybercrime, including relevant cybersecurity and virtual currency considerations;
  • foreign and domestic terrorist financing;
  • fraud;
  • transnational criminal organization activity;
  • drug trafficking organization activity;
  • human trafficking and human smuggling; and
  • proliferation financing

To read the full list of AML priorities and related interagency statements, click here.

So as I watched the session where FinCEN explained to lawmakers its current progress and future plans to implement the AMLA, I kept going back to how so much change in such a short time could and would affect compliance training – one of the core prongs of any AML program.

Also on my mind: what it means to teach and how to effectively learn.

Compliance officers, investigators, auditors, and other financial crime professionals have the immense responsibility of staying up to date on the laws and regulations, enforcement actions, and other guidance from relevant governing and regulating agencies.

I’d like to share a few best practices I’ve learned during my career that can help maximize your education and your professional career. 

If you want to learn something, train someone else.

For many, this is the biggest test of if you know something: can you explain it simply, succinctly and easily to someone else.

This is one of the best methods for learning and one of the reasons I have always been drawn to training.

How to condense nuanced and complex concepts without losing understanding is a whole skillset in and of itself – and a nigh requirement for posting on social media.

Posting on LinkedIn is an excellent example because you want to sound like you know what you are talking about. I planned to watch the House Committee session with the plan of trying to explain it to someone else, so I took more detailed notes.

I also found myself wondering, what is FinCEN?

Could I explain their mission to someone else outside of my immediate experience which is mostly based on suspicious activity reporting and staying up to date on their long list of advisories of suspicious activity trends and analysis.

I listened closely as the acting director responded to the US Representatives with an explanation on how they monitor the usage of the data gathered from SAR filings and how the information is used by more than 500 US law enforcement agencies.

I’m happy to say I know the latest on executing the requirements outlined in the AML Act 2020, which unfortunately, has been beset by many deadlines being missed.

Even so, while FinCEN may skirt and fumble on certain milestones without incurring regulatory wrath, bank fincrime compliance teams may not be so lucky.

We, as a community, need to start wargaming on updating training now so that examiners will have little to criticize when they view the entirety of your compliance program through a magnifying glass of “effectiveness.” 

If you want to be better at your job, step back and look at the bigger picture.

Many people involved in financial crime investigations or compliance play a critical role in a much larger process.

I’ve learned in several of these different roles myself, you always learn more when you see the bigger picture.

The day-to-day tasks can be cumbersome but seeing the impact you play in the greater good can help re-ignite your passion and make you a more effective professional.

For example, after spending a few years investigating activity and filing suspicious activity reports, I moved into a role where I became the point of contact for law enforcement.

I learned more about what happens when we identify suspicious activity, what law enforcement does with the information we provide them and about the influence reporting has in law enforcement investigations; many of which may be ongoing.

Through this role, I was able to learn the to write more effective SAR narratives, conduct more thorough case research and ultimately provide training to more junior analysts and investigators who were not as familiar with how it all works.

I also had the privilege of building a network within law enforcement that would later prove useful in training opportunities. It’s an excellent way to network with your peers in the industry and learn more.

Compliance should learn the business before the business can learn compliance.

Many of us do this every day without even realizing it.

If you are an analyst or investigator, especially if you are relatively new to your role, you are likely trying to figure out what certain transactions are, and how or why they happened.

Or maybe you are a compliance officer trying to assess the risk of a new financial product or expanding an existing product into a new region or client base.

The financial crime professionals must learn more about how a business operates before you can understand how it can be misused and exploited.

As a global compliance officer in the training department, I’ve spent countless hours researching my company’s legal entity structure, and business organizational framework, to better align risks and controls to accountable individuals.

This is not too much different from the typical investigator, learning more about the criminal element, their fraud and illicit laundering techniques and getting a better overall understanding of how they think and operate.

So for those of you looking to be a better financial crime professional, don’t just learn how to practice compliance, learn the business.

By borrowing and walking in their shoes, you not just increase your understanding of the fincrime compliance vulnerabilities, but you improve your empathy on what they have to go through on a daily basis to comply with your compliance directives – and the conflict that can cause when those duties clash with revenue pressures.

One tactic I have used is, similar to my own experience seeing my world and its importance through the eyes of law enforcement, I try to let my colleagues in and out of compliance know they are part of the interlinked continuum of financial crime fighters.

Whether you are a federal investigator, bank examiner, external auditor, compliance officer and, yes, part of the first line of defense – tellers, revenue agents and others – you have a vital role to play in changing and saving lives, from human trafficking to uncovering and reporting on corrupt kleptocrats and odious oligarchs.

Nearly as important as crafting and delivering fresh and layered training is connecting with those you are trying to train on an emotional level and getting them to care about the your shared mission – making it our shared mission – to fight all forms of illicit finance across the spectrum of financial crime.