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Spoiler alert: banks won’t go out of their way to stop dirty money flows

Updated: Nov 9


Apparently, a source internal to the Financial Crimes Enforcement Network – the anti-money laundering unit of the US Finance department – leaked a number of reports made to the federal agency, including suspicious activity reports. What emerged is that… drum roll…


… banks do not seem to do everything in their effort to stop dirty money flows.


Once more: banks do not keep up their promise to stop servicing high risk customers. In some cases, they don’t seem to try at all, and in 2 cases they got caught red handed.


Once you’ll have recovered from the shock, we can keep on following the developments, wondering why would banks invest in stopping criminal activity, when they know that law enforcement does not come even close to having enough resources to follow up on all the reports. Why would banks give up profitable clients, when the risk of getting caught dealing with them is so low?


The problem is that instead of focusing on effective systems aimed at flagging problematic transactions, banks seem to prefer to invest in consultants who tell them how to best perform within the law and still manage to serve as many clients as possible without risking sanctions. And the technology here is not exactly a problem: Lemonade, Inc, has been using bots to process insurance claims and stop the fraudulent ones, and we are talking about a lot of data of different kinds, since contracts have different parameters to begin with, claims are made on video, and every incident is unique. For transaction data however, the problem is much simpler. Take a look at the leaked data: there will be a beneficiary and a payer, a currency code, an amount, a date. You don’t even need Artificial Intelligence or Machine Learning to catch the biggest red flags here. Yes, there are trillions of transactions in a day, but the data is much more uniform. Once proper KYC (“know your customer”) background research is done before an account is opened, it’s not difficult to implement a system that alerts in specific cases.

Why do we keep on getting surprised when news of this kind breaks out? How could we expect anything different when the incentives are such that banks have to choose between what’s right and what’s profitable?


Are banks really to blame? Maybe, if incentives were different, their motivation would also be different. Isn't it time to start reviewing those incentives, then, so that ethical behavior gets properly rewarded too?


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