anti-money laundering & counter terrorism financing: gaps in the intricate woodwork

ANTI-MONEY LAUNDERING & COUNTER TERRORISM FINANCING 1

Anti-Money Laundering & Counter Terrorism Financing:

Gaps In the Intricate Woodwork.

Richard J. Campbell

2 May, 2015

Copyright 2015 by Richard J. Campbell All Rights Reserved. This article or any portion thereof

may not be reproduced in any manner whatsoever without the expressed written consent of the author,

except for brief cited quotes. This includes written content, diagrams, graphs, and pictures which are the

intellectual proprietary property of the author.




The following is an analysis of a recent conference held by the Association of Certified Anti-

Money Laundering Specialists in Hong Kong. Five educational aspects of the conference were

scrutinized; i.e. the speakers and panelists, or instructors; the types and amount of information

presented; the attendees or students; how information was presented; and the spillover between

the four previously mentioned areas and the teaching learning environment. The main deficiency

was the lack of a definitive conceptualization for terrorism and counter terrorism financing. As a

result the curriculum had gaps of knowledge that generated teaching and learning flaws.

Institutionalization of a valid conceptualization would help to negate the observed flaws.

Keywords: terrorism, threat financing, counter terrorism financing, financial information and

intelligence, fusion, and synthesis.

Disclaimer: The opinions, recommendations, and conclusions in this article are those of the author and

the authors alone unless stated, referenced, or cited otherwise.




Recently the Association of Certified Anti-Money Laundering Specialists (ACAMS) held its

Seventh Annual Anti-Money Laundering (AML) and Financial Crime conference in Hong Kong.

ACAMS provides educational products to individuals that work in private and public sector

banks and financial institutions as AML and counter terrorism financing (CTF) specialists.

Individuals who complete ACAMS courseware are systematically trained, evaluated, and

certified in the detection and prevention of money laundering and terrorism financing. ACAMS

has almost 30,000 members worldwide with active members in 175 countries. The Asian Pacific

branch is by far the largest and most diverse with ACAMS members in more than 20 countries in

the APEC region. The job of an AML/CTF specialist is basically a technical specialty within a

specialty. The job requires AML/CTF specialists to keep up on the latest regulations, best

practices, sanctions, regional trends, and lessons learned, hence the conference. ACAMS

certified individuals are the first, second, and third lines of defense against AML and CTF. If

trained and managed properly, ACAMS specialists can also be the best offense. The conference

was a two day event and attendees earned educational credits for attending.

The guest speakers and panelists at the conference were portrayed as AML/CTF experts

from the Asian Pacific region (APAC). Some of the speakers were more notable than others

because of past or current positions they held, or because of their past experiences. For example,

attendees at the conference heard from Stewart McGlynn who was Head of AML and Financial

Crime Risk with the Hong Kong Monetary Authority. Mr. McGlynn discussed regulatory

insights and talked in-depth about regional and international expectations. The keynote speaker


was Annie Choi who worked at the Office of the Commissioner of Insurance in Hong Kong.

Another speaker was Eric S. Medoff from the United States (U.S.) Department of State, Office

of Sanctions Policy and Implementation. Mr. Medoff talked about ongoing U.S. and international

sanctions and mentioned North Korea and Iran (ACAMS Conference Schedule, 2015; ACAMS

Conference Presentations, 2015).

As far as levels of expertise, U.S. Government (USG) contracting agencies have definitions

and median-based pay scales for various career branches. These lists contain hourly pay rates for

subject matters expert (SME). Typically an SME has more than 15-years of experience in a

particular filed, has a graduate degree or doctorate, and has published technical or professional

documents within the field of study or applied field; thus demonstrating his or her expertise in a

number of measurable ways. As far as the USG is concerned, SMEs have to earn the title and

SME pay. Throughout the ACAMS conference introductions were provided for each of the guest

speakers and panelists, but their official levels of expertise were not published or mentioned, so

whether a particular keynote speaker, speaker, or panelists was an actual SME or not was not

known. However, from a cursory review of credentials a Mr. Aub Chapman with Chapman

Consulting may have been an SME. Mr. Chapman was able to comment intelligently and ask

logical questions about many of the topics that were discussed. All-in-all his remarks displayed

insight and a wide range of experiences and credibility.

During the conference a number of primary topics and subtopics were addressed and

somewhat debated. Some of the leading discussions were about the record breaking fines that

have been imposed, product de-risking, cross-border and internet crime, virtual currencies, and

risk assessment and risk management. Throughout the conference there were also a number of

reoccurring themes that came up during many of the discussions. For instance, knowing your


customer (KYC), senior level managers being involved in AML/CTF programs, up-to-date

cutting edge training, and although it wasnt concisely labeled or accurately defined the fusion

and synthesis of complex information was revisited many times. The accumulated topics and

subtopics that were presented or taught and discussed were indeed timely and relevant. Overall

the introduction, flow, and linkage of information was staged well and managed nicely.

Generally speaking, the guest speakers, topics, and literature supported the overall themes of the

conference. Content was also presented in more or less a logical sequence. However it should be

noted that CTF content was missing. This was based on the observation that about 90 percent of

the information and discussions were about AML. Unfortunately, CTF content was rarely

introduced. During the two day conference there were several remarks related to CTF and at the

end of the second day there was a very brief presentation about CTF. But the limited CTF

content was embedded in a presentation about trends in financial crime. The CTF content was a

brief review of characteristics, or typology.

Teaching and learning approaches for the conference were minimal. For instance, the

content that was offered was presented by-way of lecture, discussion, debate, question and

answer, over-head-projector, and printed literature. A speaker would introduce and discuss his or

her topic and then panelists would add information or debate certain points about that particular

topic or other related subjects. Attendees were encouraged to ask questions during panel

discussions. No reading assignments were incorporated into the program to enhance learning and

no written assignments were used to gauge or measure learning. At the end of each topic specific

session take-a-ways from the segment were addressed as a review. The printed literature that was

available at the conference was provided by ACAMS and different service providers such as

Lexis Nexis, Dow Jones, Wolters Kluwer Financial Services, and SWIFT, as well as other


financial service providers. One of the most interesting documents was a one page informational

sheet that presented the results of a 2015 Dow Jones Survey of 1,100 AML professionals.

According to the survey 49 percent of those surveyed said insufficiently trained AML staff was

one of the most common challenges they faced. Another 40 percent of those surveyed said

insufficient staffing in AML departments was another common challenge. Furthermore, 70

percent of those surveyed said their organizations have revamped client on-boarding processes or

are planning to do so in the near future to meet regulations (Dow Jones, 2015).

Attendees at the conference represented a rather broad segment of the AML/CTF

community. There were compliance, diligence, law enforcement, risk assessment, and risk

management personnel, government regulators, and financial auditors. Plus, consulting,

insurance, and money service representatives, and members of the gaming and securities

community from the APEC region. Therefore the wide swath of topics that were addressed was

appropriate for the mix of job positions and variety of duties and responsibilities. The diversity

of job specialties reinforced the multidimensional aspects of AML/CTF. But as already

mentioned there was limited CTF content, so attempts at framing or modeling financial

intelligence at the conference would have been hindered. The lack of a clear conceptualization

for CTF negatively impacted collaboration and coordination efforts between the different

AML/CTF functional areas. Perhaps that is why modeling was not attempted.

First, the characteristics of the speakers and panelists at the conference were addressed.

Second, the types and amount of content that was presented by the speakers were reviewed.

Third, the characteristics of the attendees or students at the conference were explored. Fourth,

how the content was presented or not presented at the conference was covered. This is known as

the teaching and learning approach. The last aspect of the conference that will be reviewed will


be the spillover between any of the four areas already discussed and the teaching learning

environment. Together these five distinct areas of concern provide a multidimensional review of

the ACAMS conference. Observations pertaining to the spillover are next.

As already noted CTF content was marginal. An example of this was the lack of a valid

conceptualization for terrorism, threat financing, and CTF. The author of this critique is in the

process of certifying as an AML/CTF specialist and to date has yet to discover an official

ACAMS conceptualization for terrorism, threat financing, and CTF. None was presented at the

conference either. This deficiency produced a lack of differentiation between AML and CTF.

Inappropriately AML and CTF were regarded as one. ACAMS literature does say that ACAMS

training assists AML specialists to identify and monitor activity related to non-traditional

criminal groups (ACAMS Complete Guide, 2015). The statement suggests that non-traditional

criminal groups are different from traditional criminal groups. So what are non-traditional

criminal groups? How are they different? Why are they important to AML/CTF specialists? And

what do AML/CTF specialists need to know about non-traditional criminal groups? These

questions are being asked since ACAMS literature does not adequately address non-traditional

crime, or asymmetric, or hybrid activities. The lack of a succinct conceptualization for CTF and

contextualization for that matter, within ACAMS literature also generated the perception that

measures and countermeasures for AML and CTF are the same. Academic publications and

scholarly journal articles about AML typically discuss a law and order approach. So lumping

AML and CTF together is therefore misleading.

As compared, certain USG publications define threat financing and terrorist financing as an

irregular threat and clearly illustrate the link between crime, corruption, transnational organized

crime, instability, terrorism, and insurgency. Threat financing, terrorism, instability, insurgency,


transnational organized crimes are also conceptualized as being comorbid; that is they occur at

the same time or simultaneously (USAF, 3-2, 2013; JFC & USSOCOM, 2010). Anti-money

laundering and CTF are indirect activities and are used to mitigate irregular threats, as compared

to direct or kinetic activities. The reason why is that indirect activities work better and last

longer. Information and intelligence are the first lines of defense and offense against irregular

activities. However, the right type and amount of information and intelligence have to be

collected, shared, and then fused. Or at a more complicated level analyzed and synthesized. From

an educational stance, explaining what irregular threats are, or conceptualizing them is the first

step. Describing their asymmetric and hybrid characteristics and exploring where irregular

threats are located within specific regions are follow-on steps. Asia is a good example of

regionally specific instability, in that 12 of the 25 longest conflicts in history have occurred or

are still occurring in the APEC region. Four more of the longest conflicts in history border the

APEC region. These facts should alarm individuals that work in public, private, and government

financial sectors in the APEC region. Other reported problems in the area are the flow of illicit

funds (Dev Kar & Le Blanc, 2014) and corruption. The next step would be showing how

irregular threats are directly or indirectly supported by auxiliaries and underground networks

which include criminal gangs and transnational organized crime. In a logical manner this leads

into a discussion about money laundering and terrorist financing. Because of the complexities

involved a cognitive-behavioral or scaffolding approach works well for AML/CTF.

Another shortfall that was observed at the ACAMS conference was the over reliance and

support of anecdotal information, as compared to empirically substantiated information. The

problem with anecdotal information is that it can be subjective or objective and conclusions and

recommendations based on anecdotal information may work fine in one situation, but not work


in other situations. Anecdotal information can be idiosyncratic and context specific and

consequently is unsuitable for all circumstances across-the-board. Anecdotal information is not

comprehensive. Scientifically based findings and data pertaining to AML/CTF would greatly

improve the applied field and would have improved the conference. One of the most important

aspects of a financial intelligence unit and the organization that utilizes a financial intelligence

unit is the ability of the people within the organization and the intelligence unit itself to share

information. But shared information and intelligence has to be reliable. If the information and

intelligence that is being shared is unreliable then analytical errors will occur. Anecdotal

information causes adverse problems that spillover over into each of the educational areas

already mentioned. Empirical information on the other hand would support each of those areas.

One more problem was the lack of a standardized writing style for AML/CTF documents.

As a result, published information was somewhat questionable, but this time it was due to lack of

quality control, quality assurance, and standardization. AML/CTF specialists are supposed to

have a master degree, so the American Psychological Association (APA, 2011) publication style

would be the most logical and most beneficial choice to fill this gap. Because of its utility and

versatility the APA style has already been adopted by many other professions, so it would

integrate well with other disciplines. When we discuss money laundering and terrorist financing

we are talking about people and organizations that do these illicit activities. So a publication

style that covered writing, teaching, and the reporting of social and behavioral processes would

be a good fit. The APA Publication Manual is updated regularly and covers almost every type of

report and publication that an AML/CTF specialist would produce or read. ACAMS should

consider APA style.


In summary, five aspects of the Seventh Annual ACAMS conference that was recently held

in Hong Kong were analyzed from an educational perspective. The areas that were evaluated

were; i.e. the speakers and panelists or instructors; the type and amount of information that was

presented or taught; the characteristics of the attendees or students; how information was

presented or taught; and the spillover that one area had on other areas during the conference.

Although several deficiencies were noticed, the primary deficiency was the lack of a

succinct conceptualization for terrorism, terrorist financing, and CTF. This deficit spilled over

into each of the other areas. Other deficiencies or gaps of knowledge were the expertise levels of

the speakers and panelists; incomplete information and insights about CTF; limited teaching and

learning approaches; an over reliance on anecdotal information; and the absence of an approved

professional writing style for AML/CTF literature. Each of the noted deficiencies, including the

lack of a clear conceptualization, can be corrected with additional research and development, and

advanced courseware development and integration.

Future Prospectus

Terrorism and terrorist activities have been a worldwide problem for several years now.

ACAMS has been providing AML/CTF training for some time now. ACAMS training seems to

have plateaued at a certain level without further advancement. A conservative extrapolation

pertaining to established trends and organizational actions could infer that ACAMS training will

remain the same unless pressure from outside the organization is applied to motivate change.

Students that received AML/CTF training, financial organizations that hired AML/CTF

professionals and perhaps the U.S. Congress will have to advocate for that change. A long-term

prediction or force synthesis/analysis would require much more detailed information.


References

American Psychological Association (2011). The Publication Manual of the American

Psychological Association (6th ed.). Washington, D.C.: American Psychological

Association.

Association of Certified Money Laundering Specialists (2015). ACAMS Conference Schedule.

Miami FL: U.S. Headquarters ACAMS.

Association of Certified Money Laundering Specialists (2015). ACAMS your complete guide to

financial crime prevention networking, training, education and career development. Miami

FL: U.S. Headquarters ACAMS.

Dev Kar and LeBlanc (2014). Illicit Financial Flows to and from the Philippines: A Study in

Dynamic Simulation, 1960-2011. Global Financial Integrity.

Joint Forces Command & U.S. Special Operations Command (2010). Irregular Warfare:

Countering Irregular Threats Joint Operating Concept. Version 2.0. Washington D.C.:

Department of Defense.

LeMay Center for Doctrine Development and Education (2013). Irregular Warfare Air Force

Doctrine Document 3-2. Washington D.C.: United States Air Force.

United States Joint Forces Command (2010). Integrated Financial Operations Commanders

Handbook. A Joint Force Guide to Financial Operations. Department of Defense, Joint

Warfighting Center, Suffolk, Virginia: Department of Defense, Joint Concept Development

and Experimentation.

United States Joint Chiefs of Staff (2011). Commanders Handbook for Counter Threat Finance.

UNCLASSIFIED//FOR OFFICIAL USE ONLY. Suffolk, Virginia: Department of

Defense, Deputy Director, J-7 Joint Staff.

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