The FinCrime Files – Q&A with Andrew Jackson, Head of Financial Crime Compliance at Alpha Bank

In our continuing series of the FinCrime Files, we caught up with Andrew Jackson, Head of Financial Crime Compliance at Alpha Bank.

Hi Andrew, could you tell us a little about yourself and your current role at Alpha Bank?

I have had a long and varied career in financial crime compliance, both as a risk and compliance consultant and also as a senior compliance officer at a number of different banks. So I’ve experienced most aspects of financial crime compliance both in terms of delivery of compliance frameworks and in-depth forensic investigations.

I joined Alpha Bank (ABL) in 2019 assisting the Head of Compliance taking many of the burning issues off their desk. Primarily financial crime related project work, so everything from policy procedure creation and implementation, training design and delivery to re-engineering financial crime compliance processes. I was fortunate enough to be appointed the SMF17 Money Laundering Reporting Officer at the beginning of this year and I currently head the financial crime compliance team.

What do you consider to be the current top 3 challenges today in fighting financial crime?

The first one is financial sanctions compliance. The nature of sanctions regimes is changing. We’re seeing increasing complexity, sectoral sanctions, more focus on types of transaction, and increasingly jurisdictions that are almost competing with one another. When sanctions were first introduced it was very much by international cooperation, so sanctions were issued by the UN, the EU and OFAC in the USA. But now what we’re seeing is individual jurisdictions addressing specific issues that concern them by issuing sanctions regimes. I think that then puts financial institutions in the middle of all of that and it’s becoming increasingly complex. Therefore, the approach of simply screening against sanctions lists may no longer be an effective approach.

The second one is automated transaction monitoring. What we’ve seen is an increasing number of money laundering typologies and a broad range of financial crimes and emerging issues. One of those is “Green Crime”; the illegal wildlife trade, illegal mining and logging, illegal or unpermitted fishing are just a few examples.  That means that the kind of tried and tested approach of applying rules, thresholds and parameters using automated transaction monitoring becomes less effective and operationally inefficient. I think the way forward is through intelligence-led monitoring and link analysis.

Finally, I think cyber-crime and cyber-enabled money laundering remains a priority both certainly for the regulators and for the industry. The challenge is identifying the interfaces between the traditional financial systems and cryptocurrency exchanges and that can be very difficult. Also, identifying which clients might be drawn into that type of activity.

What are the most frustrating things you find yourself dealing with, in relation to your current role? (e.g. manually searching, processing unstructured data, paper trails, too many false positives etc).

All of those to a greater or lesser degree are a constant challenge. The one that’s in the forefront of my mind at the current time are paper-based processes and paper-based trails. Currently all our new client onboarding is reviewed by my compliance team, and prior to the pandemic crisis and the move to working from home, it was entirely on paper-based records.

Our financial crime project that we delivered last year and into the early part of this year, made a deliberate decision not to change the existing approach to new client onboarding, given that we had other priorities and because it was considered that the compliance review of new clients was an effective control process. But we recognise that technology improvements are needed in the longer term. However, inevitably working from home has meant we’ve had to rethink that particular area. Whilst new client onboarding volumes are lower, for example than our periodic and event driven review work, the types of new clients varies considerably. Everything from relatively straightforward clients, introduced us from other parts of AB group, to large corporate real estate financing based here in the UK. So, we’ve adopted the measures based on the recent FCA guidance and are accepting digital versions of new client documentation, providing that it’s authenticated and securely delivered.

Once the crisis is finally over, whether many of us remain working from home or return to the office, it makes little sense to revert to the old paper-based onboarding process. So we are actively considering to what extent the learnings that we’ve gathered from improving the periodic review process could be adapted for new client onboarding, and looking at the possibility of leveraging technology which exists elsewhere within the AB group. Also, we’re looking at a tactical electronic ID identification verification solution.

What are your thoughts on the UBO registers that have been slowly released across Europe. Do they provide a useful resource or do you have other opinions on them?

It’s a step forward in the fight against financial crime. However, the information contained on the registers isn’t corroborated and that to my mind reduces its value. The reporting of discrepancies requirement that came into the UK that was introduced in the money laundering regulations amendments, attempts to address this issue but it throws the onus on the banks to report which I’m personally not convinced is the correct approach.

How has the current COVID-19 pandemic situation affected your day-to-day role?

Across the whole of ABL, working from home has changed the way that we operate and in a positive way. The question is whether positive changes will continue when the crisis is over. One example is that we have adopted the MS Team’s collaboration software, and that was early on in the transition

from working from home. It’s been used to keep communication channels open within the business so we can hold meetings, internal documents are shared and worked on, and my team constantly uses the chat function to keep in touch. I’m sure the use of this system will actually continue when everything returns to normal.

In my financial crime compliance team, we’ve been aware of the revolution in RegTech for some time and understand the benefits that this can bring in terms of the effectiveness of systems and controls. However, I think until now, a combination of the kind of “security blanket of tried and tested approaches” and, to be fair, budget constraints, has delayed our adoption of some of the more revolutionary new thinking. COVID-19 and working from home has completely changed that situation.

We’ve been forced to change. The work that we completed in 2019 to improve some of our processes has clearly paid off and I’m so thankful that we did that work, not knowing that COVID-19 and working from home was around the corner and I cannot imagine what kind of challenges we would have faced if we hadn’t made those changes.

I think the new ways of collaborating has made us more responsive and provided us with space to think and plan in a much more strategic way as a team. I now see my team resolving real financial crime issues and assisting colleagues across ABL to manage financial crime risk effectively. This is very different from times not so long ago when we were drowning under a mountain of out-of-date reviews, struggling with backlogs of compliance monitoring activity. So, it’s almost like now we’ve seen the future, there’s no going back for us. 

Do you think technology now plays an irreplaceable part in fighting financial crime, and do you see automation and machine learning as something that will, ultimately, save you time and make your work easier?

The short answer is yes it will. My experience has proved over the last 12 months and it’s made me more and more convinced about this. As we’ve already discussed, the work that we completed at ABL last year to automate some of the paper-based processes has made that transition to working from home so much easier. Whilst we don’t currently employ the latest machine learning or artificial intelligence, we have leveraged existing systems and technology capability in order to facilitate future moves to a more automated environment. Clearly there are both efficiency gains and control environment improvements that can be achieved.

Which key influencers/podcasts/blogs/books do you recommend keeping up-to-date with the latest developments in AML and financial crime? Or, where do you find inspiration in general?

I love reading when I’ve got time to do it. The books that are on the top of my agenda at the moment; and some of them have been around for a little while and which I come back to, are for example Moneyland by Oliver Bullough, which looks at the context of the more recent financial crime scandals. Another one is Criminal Capital by Stephen Platt who runs KYC360, I worked in Jersey for a little while and at the time when Stephen was a Jersey Advocate operating in the anti-money laundering space.  For me, he’s very focused, very forthright and his writing particularly in Criminal Capital which challenges the existing orthodoxies around anti-money laundering.

Another one is Treasure Islands by Nicholas Shaxson. This book has been around for a while, but I think it’s been recently updated and he focuses on an area that’s part of my background – the offshore situation and how that has been exploited by various criminals and bad actors.

Finally, Keynes and the Market by Justyn Walsh. It’s a biography of John Maynard Keynes and I think fascinating and sometimes refreshing approach to the current economic orthodoxies

In terms of blogs, I also follow the Royal United Services Institute, the Centre for Financial Crime studies. Tom Keatinge is a very well respected, very approachable and personable communicator and I think they’re leading some of the thinking about what they label as “financial crime compliance mark II”.

Also, Bright Line Law, Jonathan Fisher QC. Jonathan brings courtroom drama to the sometimes very dry subject matter of financial crime compliance and during the COVID-19 crisis some of their money laundering webinars have been particularly useful.

In terms of influencers, my former colleague at FTI Consulting, Jeannette Lichner who’s now a non-executive director at the FCA, senior advisor and executive coach. Jeannette has had a very varied career, very astute, very personable and she’s been posting quite frequently on Linkedin with articles about how you treat colleagues. If you work as part of a senior management team, and on those days when things haven’t gone so well, I read some of Jeanette’s LinkedIn content, that gives me a lift.

And finally, David Hicks the Global Head of Forensics at KPMG. I worked with David when I was at KPMG and he is a person who’s got an absolute breadth and in-depth knowledge of financial services. A really effective communicator, he really understands clients and their requirements and how you communicate and present. He’s just such a refreshing character to talk to.