I recently attended a conference on money laundering. You're probably thinking, "Don't you mean 'anti-money laundering?'"
Well, maybe. As one attendee - a compliance officer at a major financial institution - put it, KYC (Know Your Customer) is only part of the equation. "KYA," he said. "Know Your Attendee."
How could the organizers prevent someone from the criminal element from paying the conference fee in order to gain first-hand exposure to the latest thinking on the defenses of the financial networks? The answer: They can't.
Fortunately, the quality of the ideas on display was apparently designed to lull money launderers into a false sense of security.
For instance, one speaker talked about instituting a system in which a bank would assign a red, yellow or green risk weighting to each transaction, partially based on whether the participating banker had handled risky transactions in the past.
That's all well and good, but how can a bank prevent rogue employees from gaming the system? If I'm a banker and I know that I'm going to be monitored more closely if I handle risky transactions, wouldn't I refrain from doing so until I had a transaction that I wanted to hide? Then, the bogus transaction would be more likely to skate through unchecked. Similarly, if I were a money launderer, wouldn't I seek out "clean" employees to handle my transactions? These are questions that have yet to be answered.
Anti-money laundering systems shouldn't be designed to placate regulators, but rather to foil those who would enrich themselves with the proceeds of crime. Yet the mind-set on display at the conference was one of compliance rather than justice, and that's not how you catch the bad guys.
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