Episode 6: Let’s Talk FinCrime and its Hidden Costs

Financial crime affects us all on different levels, from stolen identities to human trafficking. Luckily, financial crime investigators are working hard to protect us all and fight financial crime – but what tools do they need to be most effective?

As we wrap up season 1 of Let’s Talk FinCrime, anti-money laundering expert Adam McLaughlin talks about his background as a police detective in the UK and how we can all be more effective in fighting financial crime.

You can hear more of our conversation with Adam  by visiting actimize.nice.com/podcast

Transcript

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Hi, and welcome back to let's talk fin crime. The show where we explain not only what compliance and financial crime are, but most importantly what it means for you and how it affects your daily life. I'm your host, Dave Ackerman. I'm a lawyer, the former Chief Compliance Officer, and financial regulation expert for nice Active Minds based in New York City, we strive to bring you conversations with some of the most interesting people that we can find. Over the course of this show, we've tried to help you understand how to arm yourself against different aspects of financial crime. This week is the final episode of season one. So we're talking about something a little different. We are going to talk about a day in the life of someone who actually fights financial crime. In this episode of Let's talk fin crime, we discuss something you've seen on TV and movies time and time again, money laundering, the mafia, Don, who must clean his profits from their illegal enterprises, or an internet scammer who has to find a way to get the cash they stole out of the bank without being caught. But if you ever stopped to ask yourself, what is money laundering? Think about it. Aside from a word and movies do you actually know? Most don't. But there are many dedicated men and women around the world who spend entire careers protecting you and me from those engaged in money laundering. We're going to talk a little bit about what money laundering is, how it affects you, and the steps that you can take to become more aware of its impact. So with that, I'd like to introduce our guest, Adam McLaughlin, is the Global Head of financial crime strategy in any money laundering massively long title right here at atomise. Formerly, he was an AML, compliance manager for JPMorgan. And me being from a first responder family myself, I really appreciate this part. Adams spent nearly 10 years as a police detective in the UK. Part of his job as a detective, was managing financial crime investigations for the City of London police. And with that, I'm really excited to introduce Adam. Adam, thanks for joining us. Thank you, Dave. Pretty excited to be here. And hopefully everyone find it interesting what what to say, let's jump right into this right. Like I like I said, in the introduction, most people have heard about money laundering and movies and TV, I would venture that most people have no clue what it is. So what is money laundering? What does that mean to the average person? So quite simply, it's, it's the movement of illicit wealth. And I guess what is that? So lots of crimes, great money, drugs, human trafficking, wildlife crime, you know, crooks don't do it, they love the job, they don't go to work. And I love this job today, they do it because they make money and they make lots of money. Okay, the problem with that money is it's tainted, it's dirty money, as some people might call it. So you can't go and get your drugs, you can't sell drugs, get some money, and then go to a bank account, especially when you're talking millions and millions, millions, because the banks will raise questions and raise eyebrows while you're walking to the bank with a few million pounds when you're, you're telling them you're cleaner. So you have to find some way to what we call clean that money. So you have to make sure do things with that money, you put it through various companies, pretend companies, give it to people to put into their bank accounts. And you have to what I said, clean that money to distance it from the criminal activity that you that's derived from, once you've cleaned that money, but let me understand this correctly, then. So So if I'm engaged in illegal enterprise, you mean to tell me that I can't just walk into any bank off the street with a million dollars in cash in a suitcase? And say, Can you put this into my account, please? Probably 3040 years ago, you probably could have done but nowadays, no, there's software out there. There's technologies out there and there's bank tellers, and people on the front line know what to look for. And they know what looks odd. And so they have a duty to report upwards and ultimately report to law enforcement. So you know, they call the days of walking in there with suitcases of millions of dollars and saying can you bank this for me? Okay, so we've we've kind of dispelled that kind of movie rumor. And even though it may have been true years ago today, it's definitely not okay. So then once I have my ill gotten gains, I loved how you put that illicit funds. I have to find ways then to take that money and look like it was earned using legitimate means. Is that correct? Absolutely, absolutely. Yes. Yes. Okay. So that's what we see in things like Ozark or, you know, a bunch of other different movies out there where, where they'll own a bunch of different characters. And try to clean that money, as you said. So it looks like it comes from a legitimate place. Okay, so now that we understand, at a very, very high level, the last thing I want to do is give a masterclass on how to engage in money laundering. But now that we understand what money laundering is a question that I often ask people that come on the show, who cares? So what, what's the big deal? How does that affect people? How does that affect society? So what everyone should care because I think there's the misperception that it's a hidden crime, money laundering, I think your point there, who cares? Why does it matter to me? Well, it totally does matter to you. Because, you know, drug dealers, sell drugs to people, you get drug users who commit crime, you know, might be petty shoplifting might be assaults, robberies, burglaries. If the criminals and the organized crime gangs don't get the money and can't use their money from drug dealing, then drug dealing, you then look at things like wildlife crime, they won't exist for our children, our children's children, they people want a lion skin or tiger skin, or they want the tusks from elephants. And so poaching is happening because of illegal wildlife trade. Okay? deforestation, you know, soffits for grazing animals, but others, you know, you got highly valuable wood, or ferns or other exotic plants that are stolen and acquired illegally, to sell to people in the on the black market. So it affects us all we know it's affecting climate change is affecting the extinction of animals, you know, it affects our streets, our communities, because you have drug users, drug dealers, you have violent crime associated with that. So it actually does affect us. And then you've got things like human trafficking, okay, you know, the house next door, there could be somebody in there who's a slave, domestic slave, a sex slave, who are hidden from view who've been stolen from their families who have been taken across borders. You know, I'm sure they wouldn't say that it's a basis crime, you know, they are the victim, and people are making lots of money out of them. And the crazy thing is, when you see those types of crimes that are busted, and they, you know, the news cameras interview, the neighbors, they always say the same thing. I had no idea they were such a nice person. It just goes to show you that people don't always necessarily understand what's happening behind the surface. So okay, so then let's pivot for a second. So now that we understand, we should care, because I think your point is well taken. It's anti money laundering is essentially the concept of removing the ability for criminals to use the money that they're gaining from illicit activity. So what So what you're saying is, we are trying to remove the benefit of them engaging in these illegal activities by making sure they can't spend that money. And that, to me makes a lot of sense, if you're able, you know, how many different shows we see on Netflix and things like that, where you have drug enterprises, the Pablo Escobar series that name escapes me for some reason. So but to me, that's insanely interesting, because it's something that's happening that people don't realize, no people think, see things like Tiger King or I read a, I read an article not too long ago, there is a zoo, that has a lion, a tiger and a bear all living together, because they were they were a victim of wildlife trafficking. And they were purchased by a drug dealer, and kept in this cage. So when they were rescued, they ended up actually becoming their own little family. So, you know, that particular story had a happy ending, but it sounds to me like there's a lot more going on here than what people realize. Absolutely. Just Yes, that with you. So I find this absolutely fascinating. And when I do talks, I give us that because I just find it crazy. And in terms of how much money these criminals are making, you know, we're not talking small change here, we are talking some serious money these criminals are making across the board. So it's estimated, you know, criminals don't present their accounts every year. So you know, it's it's estimations only because, you know, they don't go to their counsel and go, here's all our money. And here's what I'm making from realistic crime. Right. It's all hidden behind the scenes. But the estimations are that between two to 5% of global GDP annually, is illicit crime is illicit money movements. Okay? I'm sorry, say that again, two to two and a half to two, five, no, no, two to 5% of GDP is illicit wealth movements. And if you convert that into into financial terms, you know, what is that financially? You know, two to 5% could be anything, right? It's between 800,000,002 point 5 trillion US dollars. Is laundered by criminals every single year? You know, we're talking big Wow. That's okay. So now you've got my attention, that's for sure. Alright, so you were with the City of London police for a number of years. And part of your job was economic crime. So let me ask your opinion, strictly your opinion. how effective are we at stopping this? It sounds to me like this is a big problem. And, you know, human trafficking, terror finance and wildlife trafficking. This is this is big, big crime. This is big stuff. And there's a lot of us that are dedicated to stopping it. But how good are we really? You know, this answer? We're not. Quite simply, you know, in my view, we're not we're not good enough. You know, everyone's hearts in the right place. Everyone wants to do good. Everyone wants to stop this crime, you know, from law enforcement through to the bank and staff who are reporting this stuff. But we're just not good at it quite, quite simply, you know, another stat I've got so you know, this is UK base, but the National Crime agency is the agency where reports from the banks are fall to and they look at investigations and whether they want to investigate it. The National Crime agency in the UK estimated, you know, 100 billion is laundered through the UK every year. So this is just one country 100 billion is laundered through the cave, every year. You look how much was seized by UK law enforcement. And this is 2018 to 2019. That's unfortunate, don't have anything more recent, but just under 217 million was seized off that 100 billion estimate. And so you look at conversion that is around that 1%, we actually just under 1%. So that's sort of estimation figures globally is probably about right. So clearly, we're not good at really stopping it, quite simply. And the police numbers. So in the UK, you've got about 150,000 police officers, across the whole in the UK, across the country across the whole of the UK 150,000 police officers that's made up from uniformed officers, detectives, and all the various you know, traffic, police. These off, you do lots of different roles. You've got detectives, you method murders, you know kidnappings, who investigate robberies and burglaries. And he also have a number of officers who investigate financial crime who have dedicated financial crime investigation. Detectives, like myself when I was in the City of London police, those officers total 1000 officers tops, I would say nationally across the UK. And that's probably similar stats, I would say across other parts of the globe, including the US. So you look at me thought so the reports fold by the banks, law enforcement, they numbering 10s of 1000s. Right 1000 staff trying to investigate 10s of 1000s of reports. If somebody doesn't compute, it's not possible. Yeah, it's not gonna work. So pleasing has to be intelligence LED, right? If we don't know it, we can't act on it. Okay, so we have to have the information to be able to act on that information. And I guess this is where everyone comes into play, you know, members of the public, the banks, you know, if people see something suspicious about terrorism, you know, they say See, report it. And I think the same should be true for financial crime. If you see something suspicious, the house next door, for example, the slave has been kept in the house against their will be seen, so specialists report it. It's, in my view, as an ex law enforcement, it's better to report it and be wrong than not report it. and wish you had, you know, down the line. It's funny you say that? Because I mean, so there's a lot in there that I would love to get on. But I'm ironically in New York City, and like I said, I come from a first responder family. There's 36,000 uniformed officers in New York City alone. And I would venture just because of the the amount of money and the amount of suspicious activity that comes through. I mean, it's like you said, it's a numbers game, there's no way that the officers of that 36,000 who are dedicated specifically to financial crimes, are able to handle it. And then additionally, how many of those officers are doing multiple different things like homicides, or robberies or whatnot. And then when they do come across something like this, it is unrealistic to think that they would have a level of expertise to effectively investigate something along those lines, without going to a dedicated unit like yours. So to me and in my mind, I think it's a bit of I love that idea of if you see something say something that is something that is posted on New York City subways since 911, and it's been a very effective campaign. But I have noticed and we did a show on this previously, that people don't like to get involved. People feel like I need to mind my own business. And and, you know, who am I to judge another person for their actions are this that, what if I'm wrong? What if this? What if that? So? I, is there anything that you would say like, let's say, somebody came to you while you were with the City of London police, and they, they were apprehensive about saying something? What would you say to that person to at least alleviate some of their anxiety, or at least make them feel like you can say something and be wrong, that that's okay. But I think it's exactly that point, you can say something to be wrong. And I think, you know, would you rather do go to bed knowing that you said something? Actually, it turned out to be right. I think ultimate extremes is I don't have any sort of morbid here. But you could say someone's life. Okay, if you report something, and you were right, you could say someone's life, you know, I, that's the bottom line. Or, or the other extreme is, you know, if you say something, and you stop that drug dealer, who's terrorizing your neighborhood, you know, being really violent, you know, creating mayhem and Carnage for that for your neighborhood. If you get dropped off the street, then no, it will help the community as a whole. And people might be scared to do that. But there is ways and means to do that. And there's things law enforcement can do to protect people who report crimes and report incidents. You can do it anonymously, anonymously as well. So there is hotlines where you can report anonymously, but ultimately, look at it is law enforcement's like building a puzzle. Okay, sometimes these puzzles are complex 1000 piece puzzles, you know, 10,000 piece puzzles, right. And there's little bits of information you get, and you build up has, every every bit of information is a puzzle piece, right? In order to take someone down and to prosecute them for money laundering, or, you know, and or drug dealing, or whatever they're doing to create that money in the first place. You need, you need that complete puzzle picture. And the information that somebody has, might be that one puzzle piece that you cannot get your hands on that you don't know the information, okay? And it could be the difference between prosecuting them and sending them to prison for the rest of their life, or let them carry on with what they're doing. It's, you know, it's as simple as that. Ultimately, you know, you might hold the key to lock this person up and stopping their crimes. So that's something I really want to echo for those listening. It's the way Adam put this is brilliant. I mean, imagine trying to do a puzzle piece 1000 pieces. Oh, and by the way, all the pieces are upside down. And they're mixed with 1000 other puzzles at the same time. So. So the takeaway from that is definitely if you if you see something, say something, and financial crime is no different, just because you think it might necessarily be benign. Or it's victimless clearly, as this discussion has, has shown. It's not it's definitely not victimless, it actually has an impact on you, your life, your community, your country. So one thing I kind of want to circle back to is this idea of, oh, by the way, actually, just a quick note, one of the things that when when I worked at FINRA, which is a financial regulator in the US, one of the things I noticed is, when you go after some of these criminals, you're not necessarily getting them on the crime that they're committing. So if they are engaging, like if they are forcing women into prostitution, or they're selling drugs or whatnot, those types of crimes to prove in a court of law, forget on the financial side, are insanely difficult. But proving money laundering proven financial crime, is I'm not gonna say it's not as difficult. But it's different. You need different evidence you need different you pursue that case, very, very differently than you would, let's say, a violent crime. So I'm an example that I would actually give from years ago, Al Capone was one of the most vicious mobsters The United States has ever seen. And what ultimately took him down was tax evasion. A financial crime. So, you know, Adam, your points well taken, people need to speak up if they see something. And so then, let's, let's pivot a little bit, what should they be looking for? I know, I know, money laundering, finances a number of things. Terrorism is one of the number one money laundering is one of the number one areas that terrorism is finance. So what do people know how to look for like what did these tellers know how to look for when someone comes in looking suspicious? Like I think it's it's good question. There's someone who looks outside, often what you'd expect the norm to be. Okay, so going back to this human trafficking thing, this slave, right, is your neighbor, do they always have a window shop? Right? Do you ever see someone pulling out the windows? You know, with with skirting slightly ajar? Do you ever see, you know, do people ever go in and out the house excessively? I'm not saying that means that they're, you know, if you've got neighbors who've got lots of visitors, you know, that, you know, by default gonna have trafficking people inside, okay, you know, not during COVID. But, you know, but just unusual things. And, you know, there's a couple examples where I've had it before, in those, those were neighbors, three or four neighbors in a particular Street, saw that there's this one person who, who was in the house all the time, I never saw this person leave the house, okay, while the room says the curtains were always drawn, and this person, you know, just, it just looked odd. They that's how they described, it looks like they couldn't work out why, but this person is house never leaving, looking quite gone, just didn't quite marry with the road in the street. I reported and it turned out this person was, was a slave, a domestic slave, who had been brought over from another country that was basically kept in servitude, for about eight months, nine months for getting rescued. Okay, they report it, they said, This just doesn't match what we would expect to see here. And, you know, the thing is, is, you know, if you see somebody offering, you know, you know, things that don't, don't look normal for them, you know, maybe sort of like ivory or, you know, skins for animals, which, you know, are endangered animals report it, you know, they may not be the head honcho, they, they're probably not the crime group head. But you know, you need to start slowly to get intelligence to build up as to who's controlling these people, their drug drug dealers, were drug dealers, you know, try dealing, you know, what times a day, this intelligence is really useful for both workforce and because you can then work up the chain from the street level guy, and start working up to the head honcho, who's controlling these guys. So I think this goes back to my point, any little information that you can provide, will help put a chink in the armor of these criminals and start allowing law enforcement to start focusing their efforts. Because Ethiopia for us is Ethiopia, the UK is we can't have officers on every single street corner on every inch of the country, it's impossible, we have to focus our efforts, we have to focus our resources, the only way we can focus on resources is having the right intelligence and the right information as to where to focus. And that comes from people on the ground, you know, people in neighborhoods in the people in the streets, that information is so valuable for us to start focusing our efforts in the areas that matter. So it's interesting, and I had a friend of mine who ended up getting helping bring down a drug dealer, because he was a car salesman. And a gentleman came in, dressed very, very nicely, picked out a car, wrote everything up, and then handed him a suitcase in cash paid for it. And now obviously, paying for a car in cash is not necessarily illegal in and of itself. But it struck him that this man was walking around with$60,000 worth of cash in a briefcase, and just decided to purchase a car. So you know, one thing led to another and similar to your example, the officers took his story very seriously. And they they managed to find out what was actually happening and then connected it to a particularly large drug deal. Look, drug ring. So the A lot of what we tried to focus on in this show, and those of you listening, have heard me do this time and time again. It's what does this mean to you? Why should you be aware of it? And what can you do about it? And it sounds to me like what what Adam is saying is the major takeaway here is keep your eyes open. And if it doesn't smell right, and this is something that we in financial crime say often, we say it internally as well, when we're training investigators. You can smell when something's wrong. When we walk in to do an audit or an examination in the financial world, if the culture is wrong, if something doesn't fit, you walk in that door and you just feel it, you smell it, you can't quite put your finger on it. But your instincts tell you that there's something that you need to continue looking at here. That's kind of what you're looking for. That's that type of uneasiness or something like that, then that is going to help somebody like him, turn over another one of those pieces and try to put that puzzle together. So Adam, I kind of want to end this conversation with One last discussion on this. This idea that we're not particularly we're not great at this. Right? As you said before, it's there is. There's a lot going on out there. And although I mean, I think the numbers that you said was 200 million from 18 to 19, that the UK was able to seize that he's Yep, that's correct. Yeah. Now, to those people who are being affected by that, I'm sure that that makes a huge difference. And when when you're fighting this stuff, I would imagine that the only thing in the back of your mind is this, this 100 times more out there that I'm not getting and how do I get it? One of the things that I'm kind of curious about is how are How are police departments? How are governments? How are lawmakers? What are they doing to try to rise to this challenge? Because they keep putting these rules in place? Right? Don't do this, do that don't do this, you have to report things a certain way. But it's still happening. And we're still not catching enough of it. So how were they looking at this moving forward? And how should they be looking at this? If they're not looking at it properly? In your opinion? Of course, no? Sure. So I think the tide is turning. And what, what I started is happening is everyone's worked in silos. So you have law enforcement working in their own way, you have regulators working their own way. The banks in the financial sector will file reports law enforcement, and never get any feedback. So they don't know whether what the reporting is good information or bad inflation, they just they just don't know. And the banks don't work together, either. So the banks work in isolation, not talk to each other. And just look at their little piece of that puzzle. Without looking at bigger picture. Crooks don't work that way. You know, if you look at drug dealers from from Central and South America, right, they all work together, they create cartels, okay. You know, they're all individual groups of gangs, but they work together for the greater good of their organizations, which is to move their goods and move money back into their country so they can spend their money. Okay, they don't care about jurisdictional borders, they don't care about rules or regulations, okay, they don't have to follow anything, they just do what they need to do to make their money. Okay. And this is what the we need to do, as a sector, you know, law enforcement, the financial institutions, we need to work together, and where as much as possible, not worry about borders. And so regulations are starting to change are starting to talk about information sharing a lot more, there's public private partnerships that have been set up, and they're springing up all over the globe, where law enforcement and private sector are getting together actually sharing information between each other. I think we're gonna see more of that moving forward over the next few years, it's really going to be a key driver, to fighting this. But also technology, technology plays a big part in it, you know, that, you know, new technologies that come into the market now can do things 10,000 a million times quicker than any human being can ever do. So it can it can draw patterns, identify behaviors, it can even spot bad behavior a lot quicker. So, it people show information, like working together. And using technology, I think will really change the tide, and help us capture more of that elicit wealth. That's really encouraging. Yeah, the technology changes I, I'd read somewhere where your cell phone is something like 100 or 200 times more powerful than the space shuttle that put people on the moon. And that's not, that's not a particularly long period of time to see that kind of change. So hopefully, we'll be able to get law enforcement, get banks and get individuals, truthfully, the tools that they need in order to really effectively fight this, not just now but but into the future. So Adam McLaughlin, is the Global Head of financial crime strategy and anti money laundering at nice ACTA Mize. Adam, this has been a fascinating conversation. Maybe just one quick parting word. I know there's a lot to be done. And I know there's a lot to move forward. But I also don't want to scare people into shutting their doors and peering out the windows because you know what, then someone might call the police on them. So, um, is there You said that you think that the tide is changing? And it seemed to me like, like you felt very encouraged is where do you see this in, let's say the next 10 or 20 years in terms of either cooperation or Fighting money laundering or being able to put a bigger dent into truly something that is a global problem, Tony, so I think I think we'll be in a lot of different ways in 10 years time, I think cooperation will be the norm. I think technology will join up between different banks. So rather than each bank looking at their own little piece of the puzzle, there'll be a way for the bank to look at all pieces of the puzzle along with law enforcement. So you'll be able to build a picture in a single technology solution. And I think people will be talking to each other a lot more. And I also think the other thing in 10 years time, the public will be a lot more aware of the impact of financial crime, but a lot of stuff we talked about, I think at the moment, there's not the understanding that maybe I'd like there to be. I think once there's more understanding, and people realize that it is close to time, and I think, I think there'll be a lot more intelligence and information coming into law enforcement. So that alongside the technology and working together, I think 10 years time, we will be in a very different place, and the criminals won't be able to hide in the shadows anymore. I'd say that's pretty encouraging. And you know, if there's any takeaway from that, it seems to be that there's a theme that's emerged from our conversation. It's really just information gathering and communication, not just communication between players in the financial industry, but communication between the average person and their financial institutions, their law enforcement, keep your eyes open, you can be part of the solution for a lot of the various different types of financial crime that we speak about. And this is definitely an area where, as Adam said, you could save someone's life. So thanks again for listening. Please don't forget to subscribe. If you have an idea for a show or if you're interested in being a guest, we'd love to hear from you. So drop us a line at podcast at nice, atomized calm. Don't forget we have bonus content for every episode available at atomized dot nice comm forward slash podcast. I want to thank Adam again for being with us. This was fantastic. We are going to take a short break before Season Two begins. But we're going to be back in May with all new amazing guests and all new episodes of let's talk fame.