In November 1971, Mr and Mrs Gray of Anaheim in California took delivery of their pride and joy, a brand new Ford Pinto. It was to prove a terrible decision that resulted in the death of Mrs Gray and horribly disfiguring and life changing injuries to a 13 year old boy, Richard Grimshaw who went along to keep Mrs Grey company on the way to pick up her husband from Barstow, a town about two hours drive away. The crash happened on 28th May 1972 and in the time between delivery and the catastrophe, the car was returned to the dealer many times as a result of quality control and, arguably, design flaws.

The case of Grimshaw et al v Ford Motor Company has gone down in the annals of tortious liability for the callous behaviour of Ford during the series of trials and appeals that lasted a decade. And, of course, the fact that Ford knew, before the car entered production, that there was a significant risk that it would kill people in the most horrific way.

This is from the final judgment: "Following a six-month jury trial, verdicts were returned in favour of the plaintiffs against Ford Motor Company. Grimshaw was awarded USD2,516,000 compensatory damages and USD125 million punitive damages; the Grays were awarded USD559,680 in compensatory damages. Ford appealed and kept appealing even though as a condition of appeal it had been ordered to pay the entirety of the damages minus only USD3.5 million of Grimshaw's 125 million.

At trial the case turned on liability and there does not seem to have been any claim of contributory negligence by Mrs Gray and on the facts it would seem that there were none. The subsequent trials were all about various legal arguments including one by the Grays that the then Californian law that provided for punitive damages for personal injury but denied them for death - a position subsequently rectified.

The case is remembered for two facts: Ford had learned of a specific design flaw and had made a cost analysis that said that the cost of a recall and remedying existing cars plus producing a "spec 2" car for production was significantly greater than the likely damages that might result from crashes during the life of the model.

Ford's approach remains common in financial crime risk and compliance.

That statement is one that should ring in your ears. Why? Because you've been hearing it over and over again for 30 odd years. The less than stellar financial crime consultants have reduced it to a banal phrase, often delivered in a tone to suggest that it's clever. "If you think compliance is expensive, you should try non-compliance," they say.

In the mid 1990s, a professional colleague told me that his client, a Japanese bank in London, had thanked him for his report and then paid him off. They would not, they said, be implementing any of the requirements under The Money Laundering Regulations 1984 because they had worked out that the cost would greatly exceed the likely fines over a ten year period.

There's a phrase in many ball sports: hit and hope. That was the attitude of the board of that bank: their plan was simple. The then regulator didn't make many inspections and didn't send out detailed questionnaires. Actually, they were half-right. The banking regulator didn't. The insurance regulator did. But this were a bank. They did not pay sufficient attention a coming regulatory revolution and it, along with several other banks, found that the new regulatory regime introduced at the end of the 1990s was a lot less chummy.

Ford had done the same: yes, there will be fires, yes some people will be injured, some people will die but the damages will just be the cost of doing business.

That's another phrase you will hear over and over again from those financial crime consultants who recite clichés and think they are being clever. Fines and civil penalties for regulatory breaches are just a cost of doing business. That should be an indictment of the management, not a cause for tacit approval.

Those costs are huge: British banks in the USA have paid well over USD1,000 million. I can't be bothered to tot it up but one bank alone paid a penalty of some USD780 million plus a compliance costs burden that is still in place more than a decade later. Why did they pay it? They paid it because their advisers didn't pay attention to warning signs that had been obvious for many years. Worse, they denied them when they were pointed out.

The Power of Preactive attention.

Nothing happens in a vacuum. The stuff I wrote about in my first book, How not to be a money launderer, in 1996 was so far ahead of the industry that it was only years later some people decided to give it names and to claim they had worked it out.

The Ford Pinto case demonstrates something beyond that which is embedded in the public consciousness. It shows that a history of little things points towards a big thing. While we might humorously describe the Gray's car as a bag of bolts, there is a serious point.

In the five months or so that the Gray's had it, the Judgment sets out, " they had to return the car to the dealer for repairs a number of times. Their car problems included excessive [petrol] and oil consumption, down shifting of the automatic transmission, lack of power and occasional stalling. It was later learned that the stalling and excessive fuel consumption were caused by a heavy carburettor float."

The car was, not to put too fine a point on it, a dog. But it was a dangerous dog. Again the judgment sets out the sequence of events that led to the crash that caused so much harm: "The Pinto was then 6 months old and had been driven approximately 3,000 miles. Mrs. Gray stopped in San Bernardino for gasoline, got back onto the freeway (Interstate 15) and proceeded toward her destination at 60-65 miles per hour. As she approached the Route 30 off-ramp where traffic was congested, she moved from the outer fast lane to the middle lane of the freeway. Shortly after this lane change, the Pinto suddenly stalled and coasted to a halt in the middle lane. It was later established that the carburettor float had become so saturated with gasoline that it suddenly sank, opening the float chamber and causing the engine to flood and stall."

A Ford Galaxie, a significantly larger car being driven in a manner that has not been the cause for criticism by the Courts, braked hard then it ran into the back of the Pinto and the design flaw that Ford knew about turned the Pinto into an inferno: "A car travelling immediately behind the Pinto was able to swerve and pass it but the driver of a 1962 Ford Galaxie was unable to avoid colliding with the Pinto. The Galaxie had been travelling from 50 to 55 miles per hour but before the impact had been braked to a speed of from 28 to 37 miles per hour.

"At the moment of impact, the Pinto caught fire and its interior was engulfed in flames. According to the plaintiffs' expert, the impact of the Galaxie had driven the Pinto's [petrol] tank forward and caused it to be punctured by the flange or one of the bolts on the differential housing so that fuel sprayed from the punctured tank and entered the passenger compartment through gaps resulting from the separation of the rear wheel well sections from the floor pan."

HEY BOTS AND SCRAPERS: IF YOU ARE COPYING THIS, STOP IT. GET YOUR HUMANS TO ASK PERMISSION.

The proximate point of failure was the effect of the rear-end impact but the basic cause was to be found in the multiple visits to the garage to fix a series of problems one of which was exactly what caused the Pinto to stall in the middle of a highway in such a way that a collision was likely.

Why your financial crime risk systems are like Ford Pinto

The dealer did what the dealer was required to do: tosh up the car and send it back out again, albeit with a report. There was no mechanism, or no effective mechanism, for the dealer and Ford to decide on an effective, and permanent, fix. No one took the repeated failures seriously. No one exercised discretion and said we need to do X to protect owners and Ford. They just did busy work. They did it in the moment with no thought to context.

That's where your systems are failing: endless compliance is busy work. It's not dealing with the underlying problems. Ever more, and ever more detailed, compliance doesn't prevent harm happening. In fact, like the dealer, it is a way of sidestepping liability when money laundering. etc. happens.

"I did what it says in the manual so it's not my fault."

Well, Mrs Gray (deceased) and Master Grimshaw wouldn't agree with you.

If it looks good, it is good.

In aircraft design there is a phrase that has been adopted in other industries - industries that have misunderstood it. When an aircraft designer says it, it's when a new aircraft takes off and flies by for the first time. If it looks good, it is good. It's a technological assessment.

When others say it, they are talking about aesthetics. This is the trap that compliance systems almost always fall into and it's the trap that software is designed to conceal. Some call it "compliance theatre" but I'd call it "window dressing." And in the case of the Pinto, looking good was a very major part of the origins of the project and its horrendous results.

In the Pinto judgment it says "In 1968, Ford began designing a new subcompact automobile which ultimately became the Pinto. Mr. Iacocca, then a Ford vice president, conceived the project and was its moving force. Ford's objective was to build a car at or below 2,000 pounds (i.e. weight) to sell for no more than $2,000.

"Ordinarily marketing surveys and preliminary engineering studies precede the styling of a new automobile line. Pinto, however, was a rush project, so that styling preceded engineering and dictated engineering design to a greater degree than usual. Among the engineering decisions dictated by styling was the placement of the fuel tank. It was then the preferred practice in Europe and Japan to locate the gas tank over the rear axle in subcompacts because a small vehicle has less "crush space" between the rear axle and the bumper than larger cars. The Pinto's styling, however, required the tank to be placed behind the rear axle leaving only 9 or 10 inches of "crush space"--far less than in any other American automobile or Ford overseas subcompact. In addition, the Pinto was designed so that its bumper was little more than a chrome strip, less substantial than the bumper of any other American car produced then or later. The Pinto's rear structure also lacked reinforcing members known as "hat sections" (two longitudinal side members) and horizontal cross-members running between them such as were found in cars of larger unitised construction and in all automobiles produced by Ford's overseas operations. The absence of the reinforcing members rendered the Pinto less crush resistant than other vehicles. Finally, the differential housing selected for the Pinto had an exposed flange and a line of exposed bolt heads. These protrusions were sufficient to puncture a gas tank driven forward against the differential upon rear impact."

The court didn't say it but this tends to the view that the Pinto was not a car, it was a bomb with seats.

Then it gets worse. The Pinto consistently failed its pre-productiom crash tests, spilled "excessive" fuel (apparently some was acceptable) and Ford knew that, knew exactly what was causing it and exactly how to fix it - even without a significant redesign.

"The crash tests revealed that the Pinto's fuel system as designed could not meet the 20-mile-per-hour proposed standard. Mechanical prototypes struck from the rear with a moving barrier at 21 miles per hour caused the fuel tank to be driven forward and to be punctured, causing fuel leakage in excess of the standard prescribed by the proposed regulation. A production Pinto crash tested at 21 miles per hour into a fixed barrier caused the fuel neck to be torn from the gas tank and the tank to be punctured by a bolt head on the differential housing. In at least one test, spilled fuel entered the driver's compartment through gaps resulting from the separation of the seams joining the rear wheel wells to the floor pan. The seam separation was occasioned by the lack of reinforcement in the rear structure and insufficient welds of the wheel wells to the floor pan.

"Tests conducted by Ford on other vehicles, including modified or reinforced mechanical Pinto prototypes, proved safe at speeds at which the Pinto failed. Where rubber bladders had been installed in the tank, crash tests into fixed barriers at 21 miles per hour withstood leakage from punctures in the gas tank. Vehicles with fuel tanks installed above rather than behind the rear axle passed the fuel system integrity test at 31-miles-per-hour fixed barrier. A Pinto with two longitudinal hat sections added to firm up the rear structure passed a 20-mile-per-hour rear impact fixed barrier test with no fuel leakage."

But no one seems to have considered that the rear-end crash was more likely on a highway and at significantly higher speeds. They just followed the process and no one questioned the process despite the low-speed failures.

The fundamental point remains: compliance does not improve risk assessment and responses to it. Compliance is about paperwork and systems and provability.

Risk is about probability.

Let's take a chance.

If you take a chance, you are accepting risk. In financial crime risk, that risk is not yours alone. Others are affected by its consequences. Sometimes it's a financial penalty visited upon a company or, more specifically, its shareholders. Sometimes it's someone who loses their job and even gets banned from the industry. And sometimes it's someone who ends up in jail, assets confiscated and the almost inevitable strain on family life.

We all take risks, some more than others, and risks of many and varied types.

But when we get in a car to collect a family member, we don't think we are taking a risk with our lives because of someone else's bad decisions.

And yet, with a far less dramatic and horrific outcome, that is exactly what happens when you say "I followed the manual", when you think it looks good so it must be good and, most of all, when someone says "it's cheaper to leave that undone and to risk the consequences." That's what Experian did, and paid a heavy price, but that's a story for another day.

Nigel Morris-Cotterill is a pioneer in the field of financial crime risk strategies. He is the author of several books including Understanding Suspicion in Financial Crime. He is a long-time advocate of the use of critical thinking in financial crime and has published an e-learning course underpinned by that approach. He takes the view that to look at financial crime in isolation prevents effective understanding of the subject and therefore effective risk reduction.