Regulatory Horizons – Episode 1 – Martin Woods

Change

In 2007 U.S. presidential candidate swept into office on the back of the slogan “Change is coming to America.”  In 2008 the Global Financial Crisis derailed plans and shrunk the US economy.  Eight years later many U.S voters determined the promised change hadn’t turned up.  Behold,  The Revolution Uprooted Mainstream Politics and change arrived in a different form.

Today is day 5o of lockdown in the UK, we are undergoing huge change and our government has become a super compliance department.  The Prime Minister appears to be simultaneously the CEO, the CRO and the head of PR.  I look at what is taking place and the government’s strategy in order to learn lessons and consider how the would transfer into the world of financial crime compliance.

We have witnessed principles based compliance in the shape of “Please don’t go to the pub”; “use good British common sense” and “Stay alert”.  All of which contrasts with the instructions within legislation driving rules based compliance which demanded we “Stay at home”; “only exercise once a day” and others.

Importantly, in recognition of the dangers presented by Covid 19 the government threw away the fiscal rule book and has underwritten huge government support programmes.  As a consequence of this I ask myself if I should consider throwing away the AML rule book or the KYC rule book? 

The fact is, in the present world change is all around us, the risks have changed, attitudes have changed, businesses have been all but decimated, our customers are struggling and we haven’t been into the office for over 7 weeks now. The way we manage financial crime compliance risk has changed – don’t resist this notion, your programme never factored in all staff working from home and customers in lockdown.

Time was non face-to-face customer relationships were considered high risk, today the opposite applies, albeit the risks are different.  Time was people were not permitted to enter banks wearing a mask, nowadays people cannot enter a bank without one.  So how are you adopting to our new world?  Were you an optical manager? What have you learned about your staff, controls, colleagues, customers, their transactions and the new risks posed?

Are you sharing access logins to vendor data systems?  In the event the answer is yes, what message does this send to staff?   How are you protecting customer data in this remote environment?  Are you able to take on new customers at the moment? 

Enough of the questions, how’s about some answers.  This will be far bigger than the global financial crisis of 2008, there are desperate people out there who are struggling.  Money is running out, as the economy shrinks the business to be in is PPE.  Whatever happened to PPI?  The price of commodities, in particular oil has crashed and some high-risk traders have been found out.  Banks are provisioning £billions for bad debts and our businesses are going to shrink.

When you eventually return to the office, with or without a mask you will be asked once again to do more with less, all the while knowing there will be reduced or non-existent bonuses this year.  Some of your staff will be late for work, because public transport will be challenging and will take a lot longer.  You may be asked to reduce headcount in your department, so prepare now, either set out your argument to resist such a change or identify who you will let go.  Don’t think change is not coming, it’s already here and it will impact you.

Divide your team, because you won’t all fit in the space we previously occupied. A friend of mine has two groups, one of which is called ‘Keep Calm’ and the other is called ‘Carry On’.  The groups work in the office on alternative weeks.  I think we have all discovered we can do it; we can successfully work from home and support our business colleagues.  We will also learn we can manage globally without jumping on plane, which is just as well because no one is going anywhere for a long time to come. 

Finally, when staying connected and important to your staff give them a good reading/viewing list, followed by a team discussion.  Do pay attention to the government’s communications strategy, where we have seen the good, the bad and the ugly.  Pay attention to the numbers, in particular the use of different numbers to deliver different messages in respective of the same situation.

Subject to the rate and scale of change I may follow up this day 50 update with a day 100 update, in the meantime stay home, alert, engaged and at the same time save lives and protect the NHS, in particular those heroic people who put themselves in harm’s way every day to help others.

Written for CLARC by Martin Woods (Financial Crime Consultant & Advisor)

https://www.linkedin.com/in/martin-woods-250ab68/

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