My Unusual Hobby

13-06-2021

Everyone’s got a hobby. Mine happens to be money laundering – specifically, its prevention and detection.

I first became interested in AML in the process of designing Seedbox, a Web platform for selling mutual funds. As an outsider to the world of financial services, I had very little understanding of what was needed for AML. What questions should I ask to determine political exposure? What is enhanced due diligence and why did we need to plan for it? Why did we need to determine high net worth? Each of these meant another question to be asked and another opportunity for a user to drop off our platform. It frustrated me that I understood so little.

To her credit, our Compliance lead did her best to guide me, but her understanding was grounded in “the regulations” and I needed more. So I did what any good technologist would do: I turned to the Internet for answers. What I discovered surprised me. I learned that many other people were struggling with problems like mine. The world had become global very quickly and financial services were beginning to find homes on the Internet and in connected devices. New services and products – cryptocurrencies chief among them – were gaining a following online and there was talk of these replacing big, centralized financial services. The discipline of AML was being challenged by technology, and at the same time, being transformed by it.

My AML journey started in 2017 and the world has changed so much since then. The pandemic has forced most of us into our homes. Digital onboarding and account management is the norm. Organizations that have, for years, invested little in building up digital capabilities are suddenly hard-pressed to put up Web sites and to bring back-office processes online. And through all this, the need to protect the integrity of these systems and the broader financial ecosystem remains.

This blog is my way of documenting this journey. When I left Seedbox in early 2020, I thought I’d get over this fascination with AML. But the truth is that I’ve gone deeper and deeper into the rabbit hole. From getting my CAMS certification in 2020 to joining the RAW Compliance Crypto Compliance Masterclass in 2021, I’ve found myself pulled more and more into this fascinating, frustrating, exciting world.

AML specialists know without my needing to say it, but I’ll put it out here anyway: I’m going to be writing about a few related but distinct threats to the financial system, known locally as “ML/TF” and internationally as “AML/CFT”:

  • Anti-Money Laundering (“AML”) – the discipline that guards against the misuse of the financial system to launder the proceeds of crime (money laundering, or “ML”),
  • Counter-Finance of Terrorism (“CFT”) – the discipline that guards against the use of the financial system to channel funds to terrorists (terrorism financing, or “TF”),
  • Proliferation Financing (“PF”) – the oft-forgotten “third pillar” of AML, the discipline that guards against the use of the financial system to channel funds to the development, purchase, maintenance and use of nuclear, biological and chemical weapons, and
  • Financial Crime (“FC”) – a broader, catch-all phrase which covers the misuse of the financial system in order to commit crimes, usually involving the transfer of assets. Money laundering is a type of financial crime.

I’m also going to cover a few things that aren’t, strictly speaking, AML, but which are closely related. First, the need for privacy and transparency in the use of data has emerged as an area of social concern over the past few years, and has a tremendous impact on the conduct of AML. Often, the drive to collect and process more information – central to the conduct of AML – is at odds with the need to protect against the misuse of personal data. While the rulemakers have taken great pains to avoid these conflicts, they remain a practical concern for everyone doing AML work.

Similarly, cybersecurity has emerged as an area of primary concern for practically every organization on the planet. Even organizations that don’t store data must take steps to secure their systems from intrusion. Weak or flawed cybersecurity can increase risks of financial crime or cybercrime occurring despite best efforts. Also, cybercrime is sometimes also financial crime, which is another area of concern for AML.

While I don’t claim to be an expert at any of these things, I like to think my opinions are grounded in knowledge, if not expertise. Let me also add that these are expressly my own opinions and should not reflect on any organization to which I belong – especially not those that have nothing to do with financial services, compliance or AML!

Lastly, I should point out that I live and work in the Philippines, a developing nation in Southeast Asia. Any perspective I have on AML – pretty much anything I will write about here, as well – will come from that perspective.

Now let’s get to it.


Photo by NeONBRAND on Unsplash

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