Create a Culture of Compliance to Boost Growth

 In a world where eighty-one percent of Millennials expect organizations to make a public commitment to being good corporate citizens, and more than nine-in-ten Millennials would switch brands to one associated with a cause, it’s time for financial institutions to stop thinking of compliance as a necessary burden. Instead, look at it for what it is: an opportunity for growth – both for the business and the brand.

Fighting Financial Crimes is not just a FI’s business regulatory responsibility – it is also an investment in their corporate identity. An anti-money laundering scandal can forever associate a financial institution’s brand as profiting from the underlying criminal activity such as traffickers who sell young women into slavery or drug-dealers who claim the lives of innocents as collateral damage. The illegal activity that generates all this ‘dirty money’ ruins lives and destroys communities. Money that could have been invested in building schools and rebuilding industries is now diverted to helping heal these broken lives.

When viewed from this reality, compliance teams are no longer the business prevention unit, but rather the business growth unit. They are the individuals responsible for ensuring the value and longevity of a banks’ reputation with customers, regulators, and investors, which ultimately translates to real, lasting value.

This novel perspective helps to empower compliance teams, which should be connected with a financial institution’s marketing team. After all, where else in a bank can you find a team charged with putting the right thing over the bottom line? It’s a compelling story, and now is the time to tell it!

Here’s another great reason to embrace a compliance culture: regulations aren’t going anywhere. You can count on them to be updated continuously. Even as banks started the year having to comply with the Fifth Money Laundering Directive (AMLD5), before the year is through, they’ll have to abide by the Sixth Money Laundering Directive (AMLD6).

To keep up with ever-changing regulations and boost growth, develop a culture of compliance across your organization, including leadership. Doing so marries growth with compliance instead of pitting them against each other.

3 Ways to boost growth through a culture of compliance

Humanize Compliance

It can be easy to focus on the challenges of compliance and forget about the why. Why are all these regulations passed? We have to connect to why this matters. A lot of people think of money laundering as just tax evasion or a dodgy accountant. But that’s not true. Decisions financial institutions make impact whether a baby starves to death in parts of the world. It sounds dramatic, but it’s true.

Build a culture that acknowledges that to say nothing is to be complicit. Real change only happens when we connect to why it matters. Here are some urgent reasons for why it’s critical to stop criminals from laundering money.

Human trafficking

Human trafficking refers to using violence, deception, and coercion to trap someone for financial gain. Human traffickers rape children, women, and men. They trap people into forced labor and physically abuse them, often with no way out.

According to the UN’s Global Report on Trafficking in Persons 2018, victims of trafficking are:

• 49% adult females
• 23% female children
• 21% adult males
• 7% male children

These aren’t just statistics. These are women like Luiza Karimova, who thought she’d found a much-needed waitressing job, only to have her passport stolen, sent against her will to Dubai, and forced into sexual slavery.

Corruption

Organized crime can infiltrate private and public institutions. Bribes offered to officials, be they CEO of companies or Presidents of countries, erode societies and democracies. And again, the human cost is staggering.

Consider Yemen; the country loses about $10 billion each year because of corruption. Yet, Yemen has 24 million people who need assistance, and eight million people are at risk of famine. Imagine what $10 billion a year would do for the Yemeni people? How much suffering could it stop?

Terrorist financing

Three thousand lives lost, six thousand people injured, and an economic cost of $3.3 trillion – that’s the personal and financial devastation of the September 11, 2001, attacks in America. All of it made possible via money laundering.

According to the Center for a New American Security, ISIS and Al Queda raise funds through private donations, state sponsorship, and several abhorrent schemes, including kidnapping for ransom, drug trafficking, and exploitation of natural resources.

ISIS doesn’t keep its $2 billion budget under a mattress. They launder it in banks. By driving this point home with fraud and AML teams, organizations help ensure it won’t be their banks laundering money for terrorists.

Laundering funds linked to human trafficking, corruption, and terrorist financing requires a willing network to allow criminals to continue undetected.

Calling these actions “money laundering” might help some stay numb to the consequences, so call it what it is: crime that creates significant and preventable human suffering.

By keeping the human cost of money laundering at the forefront of your anti-money laundering programs, you’ll increase accountability and motivation. Make it personal; it is.

Leverage the right technology

It is only by investing in technology that we can identify and fight financial crime today and tomorrow while remaining competitive. Advanced technologies provide the business benefits that empower compliance teams to get ahead of the curve and ahead of regulation.

FIs should stop focusing on price per payment. Instead, they should consider that faster and better payments can be achieved by planning for the long term and empowering compliance teams to do their jobs more effectively. Doing proper due diligence ahead of buying a solution can equip teams to:

• Use machine learning to turn your data into accurate predictions and actionable information.
• Make better decisions and ensure that you analyze the “trustworthiness” of a transaction, e.g., use technology to identify normal behavior and flag unusual or suspicious behavior. By understanding the actual risk versus the inherent risk, you can amend alerting behavior to make alerts more accurate and keep customers that don’t lead to fines.

Technology and directives impact your bottom line, so why not leverage it as a competitive advantage? The tolerance for doing bad business is dissipating, and smart financial institutions will invest today for a better tomorrow. By choosing a robust solution and developing a strategy that integrates technology, workflow, and compliance requirements, organizations can become sustainable in the long run.

View new regulations as a source of support

As new regulations continue to be enacted, organizations benefit from viewing them as a green light for compliance teams. Here are two recent examples from 5AMLD:

• Expanding the definition of Politically Exposed Persons (PEPs) and requiring organizations to accurately maintain these lists, while making it easier to identify potential risks. Transparency helps organizations and can provide an avenue for growth.
• The interconnected registers between European Union states give law enforcement access to accounts regardless of whether or not a SAR has been filed. This better equips law enforcement to catch criminals but is more reason to enforce better systems within an organization to detect risks.

 

Every additional directive that follows AMLD6 will only hold organizations to higher standards and expectations, so there are benefits to integrating compliance into the company culture. However, banks should adopt these changes across all teams, and leadership should be engaged as well. Supporting a culture of compliance and having a clear understanding of new regulations will help stakeholders make informed decisions when allocating resources to compliance teams and enable them to make smarter investments in technology.