"Isn't it funny how day by day nothing changes, but when you look back, everything is different." C.S.Lewis.
Does the current teaching of money laundering typologies help those working in financial services to understand it properly? Let me relate a story told by David Foster Wallace at a commencement address to graduates of Keynon College in 2005.
Let me relate a story told by David Foster Wallace at a commencement address to graduates of Keynon College in 2005.
There are these two young fish swimming along and they happen to meet an older fish swimming the other way, who nods at them and says ‘morning boys, how’s the water?’ The two young fish swim on for a bit, and then eventually one of them looks over at the other and says ‘what the hell is water?’
What is the message? No, I am not presenting myself as a wise old fish… but I can relate this to all the years working within financial crime teams where attention to detail, awareness and discipline are important but often forgotten traits that are essential and hidden in plain sight. It is also why I use the mantra that nothing is new, only an upgrade of a previous version.
When I first read about the Pinkas affair I was struck by how a story from 43 years ago which contains a Swiss version of the so-called Ponzi scheme, payments through Panamanian companies, a master swindler, 141 million dollars missing, 18 banks involved and suicide by cyanide capsule could happen again and again (well not the suicide by cyanide bit).
One quote from the article tells me that today, nothing has changed, ‘What is incredible for us is how easily he was able to obtain credit’.
Another stated ‘To obtain credit of several thousand francs is very difficult, but if you ask for millions, it's easier.’
The ongoing scandal involving former FTX CEO Sam Bankman-Fried uses the same modus operandi. Nothing is new, although the details may vary, Lou Pearlman, the man behind boy bands NSYNC and Backstreet Boys, Texas tycoon R. Allen Stanford and Bernie Madoff are just some of the variations of a scam that fools the greedy, unwary, naive and stupid people of this world.
An International Monetary Fund working paper issued in 2009 called ‘Ponzi Schemes in the Caribbean’ addressed some key policy lessons and stated
‘The main policy lesson that can be extracted from countries’ experiences with Ponzi schemes is the need for a rapid and early response from financial regulators and law enforcement authorities to identify and stop the schemes and protect investors’ interests. However, responding swiftly has proven to be a challenge in many countries. Other policy lessons involve tackling the social dimensions of the phenomenon by means of programmes to enhance financial literacy and personal financial responsibility amongst members of the public. In the case of Ponzi schemes operated by regulated entities such as offshore banks, the lessons point more simply towards the dangers of weak regulatory frameworks and inadequate supervision’.
Like the fish in the water, anyone working in financial crime teams that is not aware of the history of fraud, corruption and money laundering et al, will not have understood what their work is really about, what their role is and why they are ineffective at what they do, regardless of the inefficiencies of the money laundering regulations and AML systems they use.
Des Hellicar-Bowman is Senior Executive with over twenty years' experience at Board level within the payments industry. Well versed in regulatory and risk requirements. Experienced in compliance and MLRO roles and a knowledgeable individual within industry, regulatory and card scheme circles.
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