20170808 Nigel's August 2017 Newsletter

Hello,

It's been a long while since I did a personal newsletter to my 20,000 plus contacts. A lot's been happening that isn't work related and one of the things that got shoved aside has been this monthly note.

Let's get started...

It's what the UK media calls "The Silly Season." It got its name because it's that part of summer where nothing meaningful happens to fill the newspapers and so they resort to "man bites dog" and "small earthquake in Venezuala, no one hurt" style stories to fill their pages.

But in today's globalised news environment, where stories are available around the world, around the clock, there is no obvious silly season. Courts no longer take a long vacation in which only emergency business is done and cases are heard almost every day. And, of course, because financial crime, especially money laundering and fraud, are all day, every day offences, there is no time for a break. Worse, there is a particular brand of terrorist that takes pride in attacking the innocents at play, where and when they least expect it.

Even more, governments and regulators seem to take a perverse delight in issuing new stuff at times when staffing levels are depleted: summer holidays in the northern hemisphere are mirrored with winter holidays in the south; around the tropics, mid-year holidays are common as those who can escape the worst of the mid-year heat and humidity.

The case of Commonwealth Bank has peaked in the middle of the silly season, as as the rather bad news that New Zealand has passed, almost unamended, its latest law to combat money laundering and terrorist financing. Why is it bad news? It's because it's a really, really badly phrased piece of legislation, contorted and complex and difficult to follow and implement. Laws should be unequivocal, leave nothing to interpretation and should be simple to bring into effect within organisations. That is true everywhere but especially so in a minute financial services industry such as is present in New Zealand, where costs of compliance are disproportionate to those in countries with much larger financial institutions where costs can be spread over many times more customers.

There is a danger that in small countries, financial institutions trying to come to terms with compliance and risk management costs, already stretched because of small numbers of customers spread over large geographical and complex topographical areas, will be driven into being taken over by larger, foreign, institutions. Worse, what happens if a bank in a small country has a major shareholder, and administrative cooperation with, a foreign bank that finds itself subject to major investigation? We probably don't have long to wait before we find out something about that risk.

We have a couple of stories close to home. Some people I know well have recently been conned in internet scams. One involving a supposedly reputable dealer in classic watches in New York involving major banks and one involving a sale on a mainland Chinese website where payments were made via leading mobile payments providers, and no one is willing to help. We'll name the parties in the stories when we publish them at World Money Laundering Report. (www.worldmoneylaunderingreport.com)

But we work to live, not live to work, right? It's a lesson I impress on everyone, using myself and my decades of being a workaholic to prove why they should not emulate me. Belatedly, I've started turning down things that are just drudgery and having a lot more fun outside work.

I've recently published a new book. It's a short satire called "Enjoy!! The Time Travellers' Guide to Eating Out. Repeatedly." Details are here: http://www.countermoneylaundering.com/PUBLIC/content/enjoy-time-travelle... and it's available in e-book and paperback. Here's something disturbing: it's already sold more copies this month than any of my serious books about money laundering, terrorism, suspicion or litigation, etc. Gosh.

Actually, that's almost gratifying. The BBC published a list of what it said were the ten books that made essential reading for summer holidays. Every one was serious, most seem depressing. Forget that: read "Enjoy!!..." and have a giggle. You know you deserve it.

I'm not the only one who finds an outlet outside work: in Hong Kong, old pal Jeremy Platts, the doyen of counter-money laundering experts on that barren rock with nary a drop to drink (I'm paraphrasing from, I think, Palmerston - he said "nary a house on it") has a band, Last Orders. They play lots of covers of fun stuff : they've got a new website at www.lastordershk.com . Ask them nicely, and throw money at them, and they'll play at your corporate gigs, or just pop down to The Wanch or one of their other regular places. The Wanch is celebrating 30 years of live gigs this year, incidentally.

Talking of entertainment, my son, James, plays a character in the DBS Bank advertising series, Sparks. There are several stories revealed as episodes, with a constant theme of a small team within DBS. Episode 7 was released recently: you can start at the beginning of the series here: https://www.youtube.com/watch?v=IWjYgE09GqQ. James (billed as James Yang, one of several names his former record company tried out for him to find one that everyone could say!) plays Jasper Wu. I'm constantly amazed how often I hear, in cars, as ringtones, on the radio, his three year old song Long Time No See (https://www.youtube.com/watch?v=5gx4LiFCfUU). He'll be back in the studio, soon, recording an album of original songs.

I'm on YouTube, too. First, there are some criminals who are using YouTube to market, or appear to market, illegal copies of my books. I've told YouTube to remove them but they take the view that they are part of Google and they can do as they like. That, to my mind, means they are facilitating criminal conduct, and, depending on exactly what the proceeds of that crime is used for, arguably, potentially, providing material support for terrorists. But I'm also on YouTube intentionally.

There's a video, produced by Thompson Reuters, about why we need to focus on developing skills of the people in organisations, not to prescribe detailed systems and not to rely on technology - https://www.youtube.com/watch?v=0994KY9NvTg .

And that brings us back to the silly season: the big story this week is the failings at Commonwealth Bank. When the story first broke, we at BankingInsuranceSecurities.com said we had very little information but we expected that it would ultimately be found that there was too much reliance on technology that wasn't up to the job. Several days later, that's effectively what the bank has said. It's called it "coding errors" which means one thing: someone decided to delegate identification and reporting to an automated system that was not properly designed. This is the big risk with all automated systems: they are designed by techies, not by risk managers; they are built to a cost, not aimed at perfection - it's as if good is good enough and, clearly, it is not.

That's exactly why, after years of research, I wrote "Understanding Suspicion in Financial Crime." It's a long treatise that brings in dozens of concepts and arguments and sets out why people do not identify suspicion when they should and why, if they do, they often do not report it. There are details of the book at countermoneylaundering.com . This year, I'm touring a series of seminars based on the book: next stop is Hong Kong in September, then Sydney and Melbourne in October. Details and booking are at www.financialcrimeforum.com.

I hope your mid-year is silly - in a good way.

Nigel Morris-Cotterill