Compliance Interview Series
with Rozy Setia
Rozy Setia, CAMS, ICA Financial Crime Consultant at Ernst & Young
1. Could you explain the concept of money laundering in simple terms?
Imagine you went to the bank to deposit money; you gave money to the teller for depositing into your account. Teller asks you about the source of the funds, and suddenly your hands start trembling, and you picture yourself behind the bars if in case the bank gets to know about the true origin of your funds; hence, you cover up the dirty money with clean justification supporting it with the false evidence. This process of covering up ill-gotten money and an attempt to make it look clean is known as money laundering.
2. What is the biggest challenge in this sector?
Technology is evolving continuously; digital currency, FinTech, regulators, and banks are growing at an enormous speed. On the other hand, criminals are always one step ahead of us in circumventing our systems and controls. Keeping yourself updated and having a 360-degree view is challenging at times.
3. How can AML or KYC or KYB benefit from the blockchain technology?
According to UNDOC, the estimated amount of money laundered globally in one year is 2-5 % of global GDP, or $ 800 Billion to $ 2 Trillion in the current dollar, which makes it is difficult for a human eye to identify the illegitimate activities between billions and trillions of legitimate transactions.
Those processes that are typically slow and manual oriented, such as transaction monitoring which can be undertaken using blockchain, which has the capabilities of scanning enormous quantities of data faster than human beings.
4. How can governments stop money laundering? What do you think, can they?
Cooperation with law enforcement nationally and internationally would help the government to fight against money laundering and terrorist financing.
FATF (Financial Action Task Force) has brought significant changes to the ways that banks and businesses around the world conduct their affairs. It also has brought about changes in laws and in governmental operations.
FATF recommendations on AML guidance to governmental bodies around the globe can be adopted by countries for combating money laundering, terrorist financing, and other related threats to the integrity of the international financial system.
5. If everything went to digital money and cash was no longer accepted, how will change the AML process?
In September 2013, the US Department of Justice unsealed a criminal complaint charging the alleged owner and operator of Silk Road, a dark market website created in 2011 to enable its users to buy and sell illegal drugs, weapons, stolen identity information, and other unlawful goods and services anonymously and beyond the reach of law enforcement, with narcotics trafficking, computer hacking, and money laundering conspiracies.class
Silk Road operated as a global black-market cyber bazaar that brokered anonymous criminal transactions and was used by several thousand drug dealers and other unlawful vendors to distribute unlawful goods and services to over a hundred thousand buyers. In May 2015, Ross Ulbricht was sentenced in Manhattan federal court to life in prison in connection with his operation and ownership of the site. Bitcoin was the sole accepted currency on the Silk Road.
Criminals and terrorist networks have become more sophisticated in their attempts to foil AML controls, hence, even if one day cash is no longer acceptable these criminals will be able to find loops holes in the system, we would heavy rely on technology to circumvent these criminals like usage of AI, Machine Learning and Big Data.
6. Why is money laundering bad for the economy? What is the worst effect?
Money Laundering may impact the loss of control or mistakes in decisions regarding Economic Policy due to the large amounts of money involved in the money laundering process, in some emerging market countries, these illicit proceeds may dwarf government budgets.
Moreover, it has significant social costs and risks associated with money laundering, it is integral to maintaining the profitability of crime. It also enables drug traffickers, smugglers, and other criminals to expand their operations. This drives up the cost of government expenses and budgets due to the need for increased law enforcement and other expenditures (for example, increased healthcare costs for treating drug addicts) to combat the serious consequences that result.
7. What are the best books to read to learn about Anti Money Laundering? Have you any recommendations?
I would recommend FIU's (Financial Intelligence Unit) in action: 100 cases from the Egmont Group. It is insightful and gives you successes and learning moments contributions from Egmont Members (Egmont Group of Financial Intelligence Units) in the fight against money laundering.
8. What are the risks and benefits of cryptocurrency in the AML?
A virtual currency or digital currency in the form of Cryptocurrency or Bitcoin can be converted into either a fiat (e.g., a government-issued currency) or it can be a substitute for real currency. Virtual currencies allow value to be able to be transmitted anywhere in the world without the requirement of a centralized bank or institutional authority.
The anonymity of Cryptocurrency and its non-regulated is the risk that makes it vulnerable to money laundering and terrorist financing activity.
9. What is the craziest money laundering scheme you've encountered?
There are some interesting money laundering investigations. One of the most complex was a money launderer who was laundering funds through the New York Mercantile Exchange (thinking like Eddie Murphy and Dan Akroid in Trading Places movies, wherein the final scene of winning all that money on orange juice) the launderer was trading quickly using copper futures, overnight between two computers that were in close proximity.
10. What is the essential qualification of an anti-money laundering officer?
There is no specific qualification to an Anti-Money Laundering Officer, however, extensive knowledge of the financial crime regulatory landscape gained through activities such as policy review and implementation, risk assessment, and control framework design and testing would be an advantage. Expertise in this domain comes with experience and exposure for a compliance officer.
11. How has anti-money laundering changed over the time?
In the last two decades, money laundering and terrorism have emerged has a huge unnatural disaster that has affected the entire world, speed of technology has its own challenge, and money launderers have evolved themself to use the technology for their own benefit.
12. How can a transaction be called money laundering?
Every time you are not able to establish a legitimate relationship between transaction or pattern of the transactions, which potentially raise a red flag about something underlying and possibly an attempt for placement or layering.
13. Have you any recommendations to fintech startups about the AML process?
Following would be recommendations for Fintech Startups:
. Fast adaptation against changes
. Fintech solutions must be easy to access
. Fintech companies must provide tailor-based solutions which helps financial institutions in combating Financial Crimes
. Fintech companies should understand the core financial fundamentals and regulatory requirements to succeed in this field
14. If you trade with bitcoins, how do you manage to "explain" anti-laundering authorities the money-in & money-out?
The risks are that the transactions can be done peer-to-peer without financial intermediaries to enforce AML legislation. The fact is that the transactions done on a public ledger are potentially beneficial for the enforcement of AML.
15. How did you get CAMS certificate, how did you prepare?
CAMS is a Global Gold Standard certification in the AML domain, and the key to achieving the certification is preparation with a structured approach and discipline. You can refer to available case studies and mock tests for your preparation. I would also recommend the LinkedIn CAMS study groups for preparation.