“…Lies, Damned Lies and US Treasury Statements…”

Daniel Glaser is a deputy assistant secretary of the United States Treasury for terrorist financing and financial crimes. He also heads up the US delegation to the Financial Action Task Force.

On 28^th February 2008, Complinet reported the latest finding of the FATF regarding Iran. Complinet has reported how the new finding has not altered the world advisory situation with regard to Iran from the previous finding in October 2007. International banks are still encouraged to apply enhanced due diligence when dealing with Iranian institutions.

Nevertheless, the FATF went to great pains to acknowledge that;

“…Since its October 2007 Plenary meeting, the FATF has engaged with Iran and welcomes the commitment made by Iran to improve its AML/CFT regime… Iran is encouraged to continue its engagement with the FATF and the international community to address, on an urgent basis, its AML/CFT deficiencies...”

The finding reflects the fact that the Iranians have taken significant steps to cooperate with the FATF, they have attended a meeting in Paris in January 2008 when they presented their AML programme to the representatives of the FATF, and answered a wide range of questions; that they have subsequently passed their first law dealing with AML issues, and that they have continued to liaise with the FATF, as requested.

The stated finding of the FATF is clear, unequivocal, and makes an open statement of their deliberations.

So, it is legitimate to ask why it is that Daniel Glaser, one of the delegates to the FATF, when asked to comment upon the latest findings of the FATF Committee, of which he was a constituent member, did not report the findings in an equally clear, unequivocal and open manner.

In responding to a question posed by the New York Sun, Mr Glaser is reported as having given answers that put a wholly different slant to the story. The Sun writer states;

“…American officials saw the FATF's statement as a victory in their financial war against Iran. "It was a great result," America's chief envoy to the task force, Daniel Glaser, said in a phone interview from Paris. "What this action does is call upon all countries in the world to inform their financial institutions of the significant anti-money-laundering financial risk Iran represents. As a result of this action, financial authorities around the world will be requiring their financial institutions to conduct enhanced scrutiny on Iran-related transactions."

Mr. Glaser, who is a deputy assistant secretary of the Treasury for terrorist financing and financial crimes, said the FATF's action was more robust than a warning…”

Daniel Glaser has made no secret of his support for the policies of his US Treasury boss, Stuart Levey, whose openly-stated ambitions are to cripple the Iranian economy and to bring the Iranian nation to its knees by fomenting a popular revolution in that country. Mr Glaser’s telephone conversation with the New York newspaper clearly enabled it to observe;

“…In a move that could cripple Iran's banking sector, the world's premier anti-money-laundering body warned its 34 member states yesterday to advise their banks of the risks of doing business with Iranian banks, citing worries about the Islamic nation's financing of terrorism…while the Paris-based Financial Action Task Force suggests only a warning, the seriousness with which the world's banks will respond to its official statement has the potential to starve Iran of much of its legitimate capital…”

An FATF official who has asked not to be named has confirmed that It is a convention of the FATF that all members of any committee are jointly bound by the agreed statements which are published in their name.

It is not considered to be a proper course of action to make any other statement which might give a different interpretation of what is reported in their name. Individual members are expected to report findings fairly, giving full status to the reported communiques issued by the FATF.

In light of this statement, it is legitimate to ask why Daniel Glaser has found it necessary to be so outspoken, indeed, so triumphalist in his comments. Why did he deliberately choose to ignore any of the positive comments made by the FATF, why has he continued to seek to damage Iran by his comments? He is a co-chair of the committee which is sitting in judgement on Iran and it may be thought that it is entirely improper for him to behave in this way.

His actions could have a significant impact upon the due process within which the FATF itself is seeking to engage. It could conceivably lead the Iranian delegation to legitimately ask whether they are likely to receive a fair hearing, when the co-chairman behaves in this manner, a situation which would paint the FATF in a very bad light indeed.

It is also legitimate to ask which masters Mr Glaser is seeking to serve by behaving in this egregious manner. His actions can not serve the long-term interests of the US, after all, the Bush administration has literally only months left to run. The US Presidential hopeful, Barack Obama has already said that if elected, he will engage in diplomatic discussions with Iran.

It is beginning to look as if Mr Glaser realizes that time is running out for his poisonous policies towards Iran, and those who command his real loyalties, and that his actions betray his true allegiances. It may also be felt, more importantly, that such a realization could bring the FATF itself into disrepute, if it became more widely perceived that influential committee members were intent on serving their own agenda, and not the agreed agenda of the Financial Action Task Force, to which end they have been appointed.

Even more disinformation from the US Treasury

The FATF announced today (28^th February 2008) that it does not intend to take any further AML/CTF interventionist action against Iran, following the publication of its earlier notice in October 2007.

The FATF notice states;

“…Since its October 2007 Plenary meeting, the FATF has engaged with Iran and welcomes the commitment made by Iran to improve its AML/CFT regime. Consistent with its Statement on Iran, dated 11 October 2007, the FATF confirms its call to its members and urges all jurisdictions to advise their financial institutions to take the risk arising from the deficiencies in Iran’s AML/CFT regime into account for enhanced due diligence. Iran is encouraged to continue its engagement with the FATF and the international community to address, on an urgent basis, its AML/CFT deficiencies...”

The FATF specifically recognizes therefore the commitment made by Iran to improve its AML regime and encourages it to continue the same. The FATF had the power to impose other sanctions against Iran, but because of its open and transparent cooperation with the FATF, it has chosen not to alter the existing situation, and will continue to work with Iran to remedy all deficiencies.

However, this has not satisfied those officials in the US Government whose ambitions are to harm Iran at every possible opportunity.

Complinet has published a number of articles recently dealing with the impact of US Treasury behaviour on the Iranian banking community, both in the UK and elsewhere.

To recap, the US is deliberately engaged in actions designed to bring significant pressure on other banks and financial institutions, to encourage them to cease any form of financial activity with or for Iranian banks, anywhere in the world.

The source for this policy decision emanates from an office within the US Treasury called the Division of Terrorism and Intelligence, which is headed by Under Secretary Stuart Levey.

Levey has made no secret of his ambitions to bring Iran to its knees, financially and to destabilise its internal economy to such an extent that it will force a popular revolution to overthrow the present government in Iran. A recent quote from the Kansas City Star states;

‘…Washington has boasted that the US and existing UN sanctions, have taken a significant toll on Iran’s economy, particularly on its unemployment and inflation rates and raised pressure on the Government…’

To facilitate his ambitions, Levey and his satraps are always willing to spin news stories and put false and misleading interpretations on any reports which thus enable Iran to be cast in a bad light.

Complinet last reported on the way in which the meeting between the FATF and an Iranian delegation in Paris, in January of this year, was reported in the world media, as the result of a deliberately misleading story issued by the US Treasury.

Now, Levey has issued his own interpretation of the FATF announcement of 28^th February 2008. Ignoring the fact that the latest FATF report means that nothing has changed with regard to the Iranian situation, speaking from Dubai where he is openly engaged in seeking to stir up anti-Iranian sentiments in the Gulf region, he deliberately fails to report the fact the FATF noted its recognition of its recent engagement with Iran, and the commitment shown by Iran to improving its AML/CTF position.

However, despite the increasingly bizarre attempts being made by Levey and his subordinates, including Daniel Glaser, to cast Iran in an unfavourable light, in the hope that by so doing, it will influence the UN to impose even further sanctions on Iran, the Iranians will continue to engage with the main body of the FATF in all attempts to ensure that their AML/CTF regime is fully in accordance with FATF requirements.

Daniel Glaser presently leads the US delegation to the FATF, and his name figured prominently in the previous misleading story which sought to undermine the real reason for the Iranian January meetings with the FATF in Paris. Like Levey, Glaser has been widely quoted as saying that his office is part of the engagement to deter foreign banks from doing business with Iran, and seeking to undermine the Iranian economy. In view of this obvious conflict of interests, Complinet has already questioned his suitability to be a co-chair of the FATF committee which sits in judgement on Iran’s compliance with the FATF requirements.

By adopting these measures of continually attacking Iran publicly, measures which are increasingly being disseminated in the Middle East, the US is painting itself into a corner and is being perceived in much the same light as the boy who cried ‘wolf’ once too often. It has become apparent that many will begin to think that they have protested too much!

More disinformation from the US Treasury

On Saturday 16^th February 2008, the International Press Agencies all began carrying reports of a ‘secret’ meeting held between US and Iranian officals in Paris earlier in January.

Depending upon which agency you read determined what story you received, but suffice it to say that the majority of the articles carried by the US agencies all placed a major US ‘spin’ on the piece.

Take this as a typical example from the Kansas City Star;

“US secretly met Iran banking officials”

‘…A US official met secretly with Iranian banking officials and senior government aides who oppose punishing the Islamic nation for not doing enough to stop money laundering and terrorism funding…

The United States was represented by Daniel Glaser, the Treasury Department’s deputy assistant secretary for terrorist financing and financial crimes…The meeting was part of the Bush administratiuon’s attempts to ramp up international pressure on Iran to halt atomic activities that could lead to the development of nuclear weapons…’

The way this story is reported places a wholly inaccurate interpretation on the events, and attempts to portray the US’s part in these events in a fictitious light. It is yet another example of the way that the US Treasury continues to disseminate a stream of disinformation about Iranian affairs, particularly Iranian banking and financial affairs, as part of a deliberate US policy to destabilise the Iranian state and its internal economic policies. As the Kansas City Star states quite openly;

‘…Wsahington has boasted that the US and existing UN sanctions, have taken a significant toll on Iran’s economy, particularly on its unemployment and inflation rates and raised pressure on the Government…’

For the record and in the interests of fairness and accuracy, the meeting which took place in Paris at the HQ of the Financial Action Task Force, did so as the result of a specific request from the FATF, in a notice it published in October 2007, in which it expressed its concern over the apparent absence of Iranian laws dealing with anti-money laundering and in which it invited Iran to engage with the FATF, advising that ‘…The FATF looks forward to engaging with Iran to address these deficiencies...’

As a result of this notice, the Iranian Government accepted the FATF request and agreed to attend the meeting in Paris in January to discuss a whole range of issues regarding the state of the development of laws and regulations within Iran for the interdiction of money laundering and terrorist financing.

The meeting was co-chaired by the Italian representative and the US representative, Daniel Glaser. Quite why the US representative was chosen to chair this delicate meeting is not clear, but in light of recent events it may be thought more prudent that he will be replaced at future meetings.

The meeting was reported to be cordial, focused and covered a wide range of issues. The Americans it is reported, played no particularly significant part over any other participant, nor was the meeting anything to do with any policy initiatives on their part, either in Paris or elsewhere. They were merely present at the meeting in the same way as the other FATF representatives, all of whom would have expected the meetings to be kept confidential.

Complinet has recently reported some of the activities being undertaken by agents of the US Treasury in seeking to bring significant economic pressure on the Iranian banking community by threatening other banks and international businesses who have business with Iran that the US will seek to impose draconian penalties on those entities if they continue to do business with Iran.

Complinet has previously identified how the pressure for these unlawful activities has been directed from and by agents of the office of Stuart Levey, US Under Secretary for Terrorism and Financial Intelligence. By focusing on the tactics of pressurizing foreign companies who trade or deal with Iran to drop their business activities, Levey and his team engage in a wide range of activities designed to bring financial and commercial pressure on Iran. The aim is to bring about a revolution from within Iran by so destabilizing the economy of the country that regime change will be effected through a popular revolution.

In view of the proximity of Mr Glaser to Mr Levey, it may be thought reasonable to assert that Mr Glaser is guilty of a significant conflict of interests, and that the Iranians might not unreasonably feel that their own transparent deliberations with the FATF are being undermined by Mr Glaser’s position as co-chair of the meetings, as he is a direct satrap of the very official who is doing everything he can to unfairly undermine the Iranian economy.

It is surely no accident that having observed the willing acceptance by Iran of the FATF invitation to enter multilateral discussions, followed by an even more recent announcement of the passing of the Iranian law outlawing money laundering, that the Americans could easily see that their widely trumpeted allegations of Iranian regulatory non-compliance would now begin to ring a bit hollow.

Hence, the sudden outburst of articles all claiming US initiative for engaging in these recent meetings, and playing up their involvement.

The FATF are engaging in a perfectly proper exercise of their function in encouraging Iran to share with FATF full details of her legislation and other proposed initiatives to engage in a full AML and CTF regime of compliance. In her turn, Iran is complying with the legitimate requests from the FATF, and will be engaging in other meetings when invited in the future.

It would be attractive if the Americans would cease their deliberate attempts to subvert the due process which is taking place, and allow those better-placed to judge the bona-fides of the Iranian procedures, to get on with their work. No-one suggests that the US should not be a party to these deliberations, but in the present circumstances it would be better, and it would certainly look a whole lot fairer to other countries, if Mr Glaser took a back seat.

Deterring the US bullies

In December 2007, I published an article entitled;

‘…US authorities turn screw on Iranian banks in the UK…’

Since the publication of that article, I have continued to engage in discussions with a wide variety of UK-based businessmen, and the list of persons on the receiving end of US bullying does not stop at financial institutions. Brokerage houses and oil trading companies have also received their visits from the ‘men in the dark blue blazers’, as they were described to me.

The message was the same. Do business of any kind in any currency with Iran, clear their trading requirements, handle their brokerage, engage with their oil handling, open LCs for them, and you will feel the wrath of the US Treasury!

Unable to get any response at all from any official body in the UK, even finding someone who would even return my calls made me begin to realise that there was a lot more to this issue than at first met the eye. It began to resemble nothing so much as the ‘…strange case of the dog in the night-time…’, or the dog that did not bark.

The Sherlock Holmes mystery the "Silver Blaze" was about the theft of an expensive race horse from its stable. During the investigation, Inspector Gregory of Scotland Yard asked Holmes if there was any particular aspect of the crime calling for additional study. Holmes replied "Yes," and pointed to "the curious incident of the dog in the night-time." Inspector Gregory replied, "The dog did nothing in the night-time." Holmes said, "That was the curious incident." In this case, the failure of the dog to bark when the horse was stolen showed the dog knew the thief. This was an important material fact; it considerably reduced the number of suspects, and eventually solved the case.

Growing increasingly suspicious that the British Government might have been turning a deliberate ‘Nelsonian’ blind eye to the wholly unlawful activities of agents of another government, I began to research who these shadowy figures might be and whose interests they might possibly represent.

I have done this with the specific intention of identifying methods and techniques which I would advise British businesses to adopt if they become the recipients of such unlawful conduct in future, as a means of protecting their own commercial interests, and how to respond to these unlawful threats in the future.

Let us be really clear of our terms of reference here. No agent of a foreign government can come to the UK and dictate to any British business how or where that business will carry out its lawful activities. We operate in a highly rule-oriented business environment. The risk-based approach which now determines our every compliance move demands that we engage in a pattern of behaviour which can be scrutinised in the finest detail by our regulatory supervisors. Serious penalties exist for any perceived failure to comply with the new rules and regulations. What is called for is the highest degree of transparency and certainty in the way in which the regulatory environment is enforced.

Receiving unattributable threats of dire commercial consequences from agents of a foreign state, if British banks do not fall into line with their unlawful demands, is not an acceptable state of affairs. Our institutions have every right to expect that the Government will protect them, and once confronted with the evidence of such conduct, should make every move to ensure that the foreign state was appraised, in no uncertain terms, of the displeasure felt by Her Majesty’s Government at such conduct, coupled with stringent demands that such behaviour will cease forthwith.

And what did we get in response when such evidence was laid in front of the relevant Government official? Sadly, we got a predictable response from an aptly-named man, many of whose public outpourings in the money laundering debate leave much to be desired. (See Complinet - Regulus, August 1 2006). Ed Balls made it abundantly clear that he was going to do absolutely nothing about the allegations laid at his door, and, having washed his hands of any responsibility for protecting the British commercial interest, left them to the tender mercies of the American bullies!

So, who are these latter-day ‘new centurions’, these ‘born-again avenging angels of the wrath-to-come?’

Step forward a motley collection of what Sasan Fayazmanes, Chair of the Department of Economics at California State University, Fresno, has described as ‘…individuals who make US foreign policy, particularly the "neoconservatives," and who represent a privileged group of people with a unique and peculiar view of the world. To these "neoconservatives" waging wars against Palestine, Iraq, Lebanon, and possibly Iran and Syria, might appear to be in the "interest" of the US, even though in actuality such policies might be very harmful to the interest of ordinary citizens of the US, particularly in the long-run...’

In an article entitled ‘…The US, Israel and Iran: An Interview with Sasan Fayazmanesh…’, published on 19^th March 2007, Ms Fayazmanesh expands her arguments. She states;

‘…When the Bush Administration came to power, more radical members of the Washington Institute, such as Paul Wolfowitz and Richard Perle, took over the formulation and implementation of the White House Middle East policy. These "neoconservatives" were closely linked to the (Israeli) Likud party members, particularly Binyamin Netanyahu. As such, their idea of "containment" of Iran and Iraq went beyond the roundabout way of passing sanctions to ruin the economy of these countries, bringing about discontent, causing revolt and then overthrowing their governments; they advocated a more direct way for "regime change": using the military might of the US to attack these countries. Yet another such individual is Stuart Levey, the present Treasury Department's Under Secretary for Terrorism and Financial Intelligence. Levey has been working zealously to stop foreign banks from dealing with some Iranian banks. In 2005 Stuart Levey gave an address at AIPAC that began with: "It is a real pleasure to be speaking with you today. I have been an admirer of the great work this organization does since my days on the one-year program at Hebrew University in 1983 and 1984. I want to commend you for the important work that you are doing to promote strong ties between Israel and the United States and to advocate for a lasting peace in the Middle East." Then he goes on to talk about what his office does and how "[w]e levy economic sanctions to pressure obstructionist regimes, and we have the ability to freeze the assets of wrongdoers."

Yes, step forward Stuart Levey, Under Secretary for Terrorism and Financial Intelligence.

Mr Levey is the leading influence behind the brave boys who have been running around London issuing their threats against British banks. Mr Levey is proud of his actions and makes little attempt to hide his ambitions. He stated in a speech to the American Enterprise Institute for Public Policy Research on September 8, 2006;

‘…As our government took stock of all of its tools to combat terrorism and the Executive Branch was reorganized after September 11, President Bush, members of his Cabinet, and the Congress recognized that the Treasury Department had unique authorities that could contribute to the fight. This was the genesis of the office I oversee, the Office of Terrorism and Financial Intelligence...’

Mr Levey has learned some very important lessons while in the employ of the US government. He has learned how to position his ambitions and those of his office in such a way that to the uninitiated, they seem almost benign. He has learned how to apply soft words to re-interpret harsh deeds, and he has learned the same lesson that every con-man knows which is ‘if you are going to mislead someone, then do it in the biggest way possible. People will be much more likely to believe you and far less likely to disregard you.

When it comes to the way he interprets his role and that of his officers, he starts predictably, but watch how the message becomes more and more polarised as he gets into his stride;

‘…To maximize the effect, we try to apply these measures in concert with others. Whenever possible, we act with a partner or a group of allied countries. In some cases, we can designate a target at the United Nations. We also have important new regulatory authorities in the United States, such as Section 311 of the USA PATRIOT Act. Section 311 allows us to designate a foreign financial institution or jurisdiction to be of "primary money laundering concern." The impact of that particularly has been more powerful than many thought possible…targeted financial measures warn innocent people not to deal with the designated target. And those who might still be tempted to deal with targeted high risk actors get the message loud and clear: if they do so, they may be next… A second powerful lesson we've learned is that -- particularly in the context of "targeted" sanctions -- we share common interests and objectives with the financial community. Financial institutions want to identify and avoid dangerous or risky customers who could harm their reputations and business. And we want to tell them where those risks lie…’

‘…As I have travelled and met with bank officials abroad, I have learned that even those institutions that are not formally bound to follow U.S. law pay close attention to these targeted actions and often adjust their business activities accordingly. Why? There are two reasons: First, regardless of the underlying law in any particular country, most bankers truly want to avoid facilitating proliferation, terrorism, or crime. These are responsible corporate citizens. Second, avoiding government-identified risks is simply good business. Banks need to manage risk in order to preserve their corporate reputations. Keeping a few customers that we have identified as terrorists or proliferators is not worth the risk of facing public scrutiny or a regulatory action that may impact on their ability to do business with the United States or the responsible international financial community...’

The insouciance Mr Levey adopts is truly breathtaking. He is not telling us how to arrange our business affairs, we are merely ‘adjusting’ our own affairs willingly, even though, as he admits, we are not bound to follow US law. Why are we doing this? Well, apparently we don’t want to keep a few customers ‘…that may impact on our ability to do business with the United States or the responsible international financial community…’

You see, it’s all quite voluntary and absolutely normal because we are ‘…responsible corporate citizens...’

Well, if that’s the case, why do selected Americans deem it necessary to lie so bare-facedly about the present situation in Iran, about the nuclear issue as an example, even when their own intelligence agencies have categorically told them that Iran is not pursuing a nuclear weapon capability? Why do they not provide the asserted evidence of the movement of funds to Hizbollah, which Bank Saderat has repeatedly asked for, and upon which basis they subject Bank Saderat to worldwide calumny. Consider the following statement from Levey;

‘…Iran provides Hizballah with hundreds of millions of dollars each year, which is why I have said that Iran is the central banker of terror. It is remarkable that Iran has a nine-digit line item in its budget to support Hizballah, Hamas, and other terrorist organizations at the expense of investing in the future of its young people...’

‘…As we continue to deal with the challenge presented by Iran's pursuit of a nuclear weapons program, we must also confront its support for terrorism. We have taken several steps to do so this week…’

‘…We have cut off Bank Saderat, from the U.S. financial system. Here is why: This bank, which has approximately 3400 branch offices, is used by the Government of Iran to transfer money to terrorist organizations. For example, since 2001, a Hizballah-controlled organization received $50 million directly from Iran through Saderat. Hizballah uses Saderat to send money to other terrorist organizations as well. Hizballah has used Bank Saderat to transfer funds, sometimes in the millions of dollars, to support the activities of other terrorist organizations such as Hamas in Gaza. We will no longer allow a bank like Saderat to do business in the American financial system, even indirectly…’

George Bush was pushing this same old story this week in the Middle East. If he wants to be believed, why will his agent, Stuart Levey, not provide the evidence to Bank Saderat to back up his assertions? What has he got to hide from the truth being publicly seen. Or is it more likely that his political affiliations make it in their interests to keep up the pressure on Iran but without really telling the truth?

Levey again;

‘…Our actions this week are a sign of the costs that we will impose on the Iranian people if the leadership chooses to remain on its current path of defiance. The regime will end up isolating Iran from the world community, with reputable financial institutions becoming increasingly unwilling to handle Iran's business. The Iranian people deserve better than a government willing to sacrifice their economic well-being to pursue weapons they don't need and policies that result in the deaths of innocent civilians...’

Yet again, Levey knows, because his own intelligence agencies have told him, Iran is not seeking to build weapons, but why let the facts get in the way of a good foreign policy!

So, what can we do if Mr Levey’s blue knights come to our offices and start bullying us with their threats.

The first thing to do is to remember that it is a very serious criminal offence for anyone to make what is called ‘…an unwarranted demand with menaces…’

Under s21(1) of the Theft Act 1968, in English law, a person commits the offence:

If, with a view to gain for himself or another or with intent to cause loss to another, he makes any unwarranted demand with menaces; and for this purpose a demand with menaces is unwarranted unless the person making it does so in the belief:

(a) that he has reasonable grounds for making the demand; and

(b) that the use of the menaces is a proper means of reinforcing the demand.

The Act uses the word "menaces" which is considered wider in scope than "threat" and involves a warning of any consequences known to be considered unpleasant by the intended victim. This covers the spectrum from actual or threatened violence to the victim or others, through damage to property, to the disclosure of information.

It is manifestly clear that the US agents, in making their threats that the US Government will subject a British bank to hostile treatment if they continue to undertake lawful commercial business with Iranian entities, are guilty of such an offence, and the persons making such a threat can be imprisoned for up to 14 years. They cannot possibly have any reasonable grounds for making such a threat, they are acting completely illegally, and the use of the menaces is completely improper.

The loss to be caused does not need to be sustained by the recipient of the threat, it could just as easily be the Iranian counterparty who suffers.

So, at the first sign of any such threat, don’t rise to it or start to protest. It would be wise to just excuse yourself from the meeting, slip out of the room and make an immediate telephone call to your local police office and ask that police officers be sent immediately. State the fact that you are on the receiving end of a serious blackmail threat and that the suspects are still in your offices. You will find the police will get there quickly enough. Let our US friends try and talk their way out of their unlawful conduct to a couple of detectives, and see how far they get.

Alternatively, if the threats you have already sustained are causing you concern about what you can do lawfully or what you might want to do in future, then your institution should be considering undertaking preliminary legal action in the US. I have spoken to US lawyers and they are adamant that no US agency should be conducting themselves in this manner, and that if any such threats have been made, such persons can be called to account in the US courts, and they can be required to identify the evidence upon which they seek to rely to back their assertions of terrorism or criminality.

One New York lawyer of my close acquaintance said to me;

‘…It may have escaped your notice, but the USA is still a country with the rule of law. If these crazies want to threaten law-abiding people, they must not do so without the clearest proof of probable cause and they have to demonstrate the evidence they seek to rely on. They can be required to prove the veracity of that evidence, and in many cases we succeed in demonstrating that it is nothing but hot air…’

I suspect that the mere suggestion that your bank will seek to test the validity of these threats in the US courts will be enough to get these people out of your offices. But what the hell, call the cops first and let them spend a few hours in the cells at Wood Street nick, while their Embassy tries to determine whether they have diplomatic status!

Yankee go home!

British banks trading in London have received visits from US Treasury agents during which the Americans have spelt out very stern warnings over any dealings these banks may be having with Iran or Iranian-owned institutions, and threatening them with direct sanctions if they clear financial transactions for the Iranians.

The Americans have also contacted a whole range of international banks trading in and from London, giving them the same warnings.

These warnings do not simply accommodate US dollar-based transactions, but include any dealings of any kind, and in any currency. They are unequivocal; do business with Iran and risk US displeasure which can include denying you access to the US Bank Clearing System.

These warnings have had very serious implications for those Iranian banks which operate in London, some of which are in fact British institutions, and who having been in business here for many years, are regulated by the FSA.

Quite what right the Americans have to tell British banks who they may do business with is not clear, and to threaten them that if they clear British Sterling transactions for Iranian banks, that they will subject them to Patriot Act interdictions in the US, should be a matter of significant concern to the British Government, if for no other reason than it would seem to be a direct contradiction of the much-publicised ‘special relationship’ which we are supposed to enjoy with them.

And what has been the response from H.M Government to this news?

It can be best expressed as ‘studied indifference’!

It seems that the British Government under Tony Blair was not only willing to be George Bush’s tame poodle abroad, but was also quite content to stand by and do nothing while Bush’s agents swaggered around the City of London, threatening our banks with dire consequences if they continued with their lawful business.

Behind this scandalous scenario, lurks a hostile agenda, aimed directly at the commercial interests of Iran globally, and at their banking activities in the City of London more specifically.

For years, the US has designated Iran as a jurisdiction which is largely prohibited from doing business with US entities. Iranian banks have not been able to do business in the US since 1995. Settlement of US dollar transactions through New York was only permitted through the use of the so called “U-Turn” exemption. Iranian banks were able to settle US dollar payments by using non-US banks as clearing agents, who clear the payments through their US correspondent banks.

More recently, the US has sought to increase the pressure on the Iranian economy, using the excuse that Iran was seeking to further develop nuclear technology with the aim of developing a nuclear weapon, despite the absence of any meaningful evidence to prove the substance of this allegation.

The most immediate catalyst for this increased pressure adopted by the US was to allege that Iran, through its state-owned entity, Bank Saderat, Iran, and specifically its ‘London branch’, Bank Saderat plc, had been involved in making payments to agents of Hezbollah in Beirut. Again, this allegation has been made without any evidence being advanced to prove its veracity, and appears to be based entirely on the sole fact that Bank Saderat has branches in Beirut.

Bank Saderat plc is not a branch of the Iranian entity, but a wholly-owned subsidiary, an entirely British Bank which has been doing business in London since 1963. It was regulated by the Bank of England and now by the FSA. It is entitled to the same protection and support as any other High Street banking entity.

The USA deems the whole of the Hezbollah organisation to be a terrorist entity, as do the Netherlands, Israel and Canada. The UK and Australia include only the Hezbollah external security organisation within their terrorist definition. No other country in the world, including the European Union define Hezbollah as a terrorist entity, although some individual member states have categorised various actions as being reprehensible. Hezbollah is defined by many countries as being a freedom fighting organisation.

Iran is a signatory to the Treaty on the Non-Proliferation of Nuclear Weapons (hereinafter, NPT), and it has not sought to disguise the fact that it is engaged in the process of seeking to find ways of enriching Uranium. These activities have attracted certain focused sanctions from the UN, while the Iranian government has continuously asserted that this enrichment program is part of its civilian nuclear energy program, which it is permitted under Article IV of the NPT.

When the real facts are examined however, what is known and can be independently confirmed is that the most recent examination by the IAEA has demonstrated that Iran is generally in compliance with their internal requirements, and more importantly, that the December 2007 National Intelligence Estimate judged, with "high confidence,” that Iran had halted its nuclear weapons program in 2003. CIA

This most recent announcement however has not stopped some United States agencies from continuing to assert that Iran poses a generally vague threat to the West. This is not altogether surprising. Remember, these so-called intelligence people are the same ones who continued to insist that Iraq had weapons of mass destruction, long after the real truth was in the public domain.!

Whatever the realities of these different situations, why should these issues be considered sufficient to permit America to dictate to British banking institutions how and where on the globe they should be allowed to exercise their right to do business, and why does H.M.Government remain silent?

In 2007, the United Nations issued a short and limited sanctions list aimed at specific entities and individuals in relation to the provision of arms and related ‘materiel’. In the same notice, it continued to assert the rights of Iran to develop nuclear energy for peaceful purposes in conformity with its obligations under the NPT, and in this context reaffirmed their support for the development by Iran of a civil nuclear energy programme.

The Bank of England has issued its own very short list of proscribed persons and entities against whom they determine that trading sanctions exist. Subject to these provisions, British Banks are free to do business with whomsoever they decide.

When the Americans first alleged that Bank Saderat’s London entity was responsible for moving money to Hezbollah in Beirut, the bank’s management wrote first to the US Office of Foreign Assets Control (OFAC), completely refuting the allegations in their entirety but asking for any evidence of such payments to be shared with them so that the bank could check the veracity of their compliance requirements.

At the same time, the Bank instructed a leading British Accounting Consulting firm to undertake a complete review of all payments they had made to their Beirut branches to ascertain the truth or otherwise of the allegations.

Bank Saderat plc did everything they could to determine the truth or falsity of these allegations made by the Americans, but despite all their enquiries and investigations, they were unable to identify any payments at all which were not made to established payment accounts in their Beirut offices.

Their urgent requests for corroborative evidence to OFAC, fell on deaf ears. The Americans have to this date produced no evidence of any wrong-doing whatsoever. They have not even responded to the correspondence, yet they continue to skulk around the City’s streets issuing highly damaging threats to any bank which might contemplate conducting business with Iran.

This can be construed as nothing more than a unilateral campaign of economic sabotage and criminal disinformation, aimed at causing the highest level of financial damage to the Iranian economy with the ambition of bringing significant pressure on the Iranian people. Very sadly, these efforts have been working, and a large number of banks have acted in response to these threats. Clearly, they have taken the US threats of retaliatory action seriously, no bank wants to voluntarily cut itself off from good business sources, but they have decided that their US dollar-clearing requirements outweigh their commercial relations with Iran.

Why should the Americans do this? Because, believe it or not, they really believe that this economic pressure will lead to a policy of regime change in Iran?

Last week, while in Kuwait I spoke to a US Customs agent who in a series of dismissive asides, stated that it was the determined policy of the present US Administration to put such economic pressure on the Iranian people so that it would encourage a popular uprising among the people, with the ambition that they would overthrow the present Iranian government.

After its efforts to ascertain any evidence which could point at a failure within its own compliance procedures, Bank Saderat sought the support of the BBA who subsequently wrote to the UK Treasury, setting out a series of concerns they had identified which were having direct impacts upon Iranian banks in London. Their correspondence pointed out that non-US institutions had started to cease dealings in any currencies with Iranian owned banks, wherever incorporated and regulated, even though they had not broken any local or US laws.

They gave examples identifying how a number of leading international banks conducting business in London had withdrawn US$ clearing arrangements at very little notice;

· How a leading British institution had withdrawn Sterling clearance arrangements from at least one Iranian-owned bank;

· How a major Swiss bank would not accept transactions in any currency either on its own account or for third party accounts;

· How a major UK bank would not accept any transfer to third-party accounts in any currency if they originated from Iran or from Iranian-owned banks in the UK;

The BBA’s letter identified the egregious nature of what it called the ‘informal’ actions of US Treasury Officials, striking at the heart of what London offers as a place of business.

The BBA called for evidence, if it existed, to be produced by the USA, and called upon HM Government to provide more pro-active expressions of support for Iranian banks and to move from a stance which both the FSA and the Bank of England appeared to be adopting, of what was described as ‘studied neutrality’.

The BBA called for a meeting with officials to discuss these concerns!

And the response from H.M.Treasury?

An arrogant and dismissive 3-paragraph letter from Ed Balls who was Economic Secretary to the Treasury at the time, which wholly ignored all the points in the requests being made by the BBA for discussions.

The first paragraph contained a series of worthless platitudes about the Government and the banking sector working together to protect the City from illicit money flows, an issue which had not been addressed by the BBA because it was not germane; a paragraph which made an wholly irrelevant referral to the UN Resolution 1737, which again, was not part of the issues raised by BBA, because again, it was not germane; and finishing with a patronizing comment about the need for banks to make their own commercial judgements about whom they do business with.

Clearly, Balls, and those who advised him, thought that unlawful US threats to British banks and their commercial interests were not worthy of comment, and merely fell among the ordinary and relevant information which financial institutions should take into account when deciding with whom they could do business!

The British Government has so effectively sold the pass to the Bush Administration, that they can no longer be bothered to protect those commercial interests, nationally valued rights which once would have guaranteed a very stern riposte indeed. The New Labour Government has poodled so effectively that they will now stand, idly by, wagging their tail, while Bush’s Treasury attack dogs force their will on the international banking sector with impunity.

The true measure of a genuine friendship is that one friend can tell the other when they are behaving wrongly or in an improper way, without the information causing a rift in the relationship. It is about time that H.M.Government started to stand up to their US counterparts and started to tell them some home truths. Inviting them to go home and parade their particular brand of bank regulation inside their own jurisdiction would be a good place to start.

Another Financial Collapse

Northern Rock

The fall-out from the Northern Rock episode contains some signal lessons for both the Treasury and the FSA. Whether they will be heeded, of course, is a matter of mere conjecture, so should they need spelling out, I shall do my best to elucidate.

The first lesson is that whatever losses are caused to the financial sector by financial crime and money laundering, even when counted together, they are as mere pin-pricks, when compared to the losses which can be caused, even by one institution, if it decides to go and play in markets and with financial products it doesn’t really understand.

The second lesson is that focussing ones’ regulatory attention for too long on an unproven risk, takes one’s attention away from the real threats. Lead by a Government whose slavish adherence to US-inspired fantasies of global criminal conspiracies has left it wallowing in a form of quasi-religious zeal in its reported determination to go after the Napoleons of Crime and the terrorist godfathers, we have been forced to focus on the perceived dangers to the financial sector from an unquantifiable number of the dangerous class, and we have taken our eye off the antics of the usual suspects in the financial sector, the market practitioners themselves.

Despite the absence of any meaningful statistics or empirical evidence to back up their wild assertions, repeated Treasury and Home Office Ministers have lamely trotted out the old law enforcement shibboleths of the risks from criminals, and have connived in a wholesale reconstruction of our laws, and the withdrawal of whole areas of civil liberties, all in the name of combating a phantom army of crooks, terrorists and wise-guys, whose number or activities no one can determine .

And all the time, the activities of the regulated sector pose, as they have always posed, the biggest risk to the financial stability of the entire British financial services arena.

It is really rather simple actually.

I have lived through an era when it was very hard to get a mortgage, and if you wanted one, you had to have a track record of prudent savings in one of the old Building Societies, savings which would enable you to demonstrate that you were the right sort of investor that the lenders wanted to lend to.

If you wanted a loan, you had to have a very good reason, and you had to have collateral with which to back your request. Banks and financial institutions did not advance money to every Tom, Dick and Harry, because it was perceived to be too risky, and might place too great a strain on the capital adequacy of the institution.

Then interest rates began to decline, and as they fell lower and lower, it became much harder for lending institutions to make any money from simple interest alone, because it was at a very low number, and in any event, there were beginning to be lots of other competitors out there waiting to offer services, if the traditional institutions declined.

Banks had also learned a very interesting fact, which made the relaxation of their lending policies even easier. Some clever statisticians worked out that in the UK at least 88% of people always paid back their debts! It seems that the thought of being made bankrupt still possessed a real stigma for a great number of citizens, and ensured that they would repay their debts in full.

Suddenly, a whole new vista of lending possibilities opened up. Instead of worrying whether individuals were worth lending to, it now made sense to get them into as much debt as possible, as quickly as possible. You see another thing that the statisticians discovered was that a large number of people tended to stay with the first banking institution they started with, no matter how badly or inconsiderately the bank treated them. Moving an account was just too much trouble, and the vast majority of people would put up with bad treatment as long as they could get some form of banking service.

So the banks began to engineer all sorts of new lending possibilities. Credit cards for students, no problems. Loans, why not? Guaranteed overdraft facilities, of course! Interest repayment holidays, certainly! Anything to get clients into debt, debts that incurred higher rates of interest, secure in the knowledge that over the long term, those debts would be paid in 88% of cases, and at enhanced rates of interest.

In fact, it got so lucrative a business that the banks soon started to look round for other sectors to lend to. The possibilities were endless, and the banks pushed their lending teams hard to get the cash out onto the street. Unpaid debts, not to worry! County Court judgements, let’s see how we can help! maxed-out credit cards, let us lend you even more money just to pay them off! They were now lending vast sums of money to people you wouldn’t trust to take your dog for a walk, in the hope that he would be brought home again in one piece!

Then another wise-guy came up with a clever idea. When lending money to punters (sorry, valued clients), why not encourage them to think long-term. Why not interest them in a single premium insurance policy which if they were ever to suddenly experience a set-back, their debts would still be paid by the insurance policies?

This one was really clever, because the banks then loaned the money to pay for the single premium as well, while ensuring that the terms and conditions of the insurance were so carefully constructed that the likelihood of ever successfully utilising the policy was almost illusory! The banks then leveraged those insurance policies with another insurer!

If the punter then did default on the loan, the bank would be able to claim on the policy. It all seemed like money for old rope!

Finally the really clever derivatives chaps came back again with another idea. Why not take all these debts, which will be repaid at some date in the future, but parcel them all together, and then sell those debts in a securitised form to other investors. In this way, the bank can make another turn on its investment and minimise its risk on the debts.

Suddenly the market in credit derivatives became the only game in town. Packages of debts were re-packaged, sliced, diced, cut laterally, split lengthways, re-packaged, re-sold, and re-packaged again. The ability to calculate the financial return on these debts, which by now had become something akin to a form of bond, lay in the hands of the clever boys and girls with the Ph.Ds in astrophysics and quantum mathematics. The rest of the wise-guys merely sold them, again, and again and again, and cleaned up on the commissions and made their bonuses, and kept their sales-managers happy!

The problem was that by now, no-body knew where the risky debts, the more risky debts, or even where the debts defined as ‘toxic waste’ were, and even more important, when and how these debts would be repaid? Just as long as the market sentiment in the worth of these products remained strong, all well and good, but when the market started to look at these products through jaundiced eyes, then the whole edifice began to tremble, then to shake and finally, to wobble.

The problem is that no-one now really knows where or how much of the financial market may be exposed to these risks. We do know that a very large number of institutions have been engaged in what had been a very lucrative market, we know this because informed commentators have been warning about the lack of transparency involved in the credit derivatives markets, for a long time, and for just as long a time, the Regulators, who should have really been minding the shop, have been making vague noises about their concerns about the perceived risks involved.

It was all like playing a global game of pass the parcel, and just hoping and praying that you weren’t the one left holding the package when the music stopped!

Well, the music stopped in the US, when the realities of the level of speculative lending to the sub-prime market became too obvious to ignore any more. This has had a direct knock-on effect in the UK, and those who had followed the various commercial lending and borrowing practices engaged in by Northern Rock, pointed the finger at the institution as a prime target for concern.

The rest is all too awful to contemplate.

The realities of the outcome are to be measured in the length of the queues lining up outside Northern Rock offices demanding their money back. Even after the Bank of England, (rather rashly) guaranteed their continued existence, and even when the Government stepped in to assure investors that Northern Rock was secure, no-one among the investors was really listening.

The lessons to be learned from the fall-out of this event are salutary.

First of all, it demonstrated beyond peradventure that the good reputation of a financial institution is an insubstantial thing once the clients become worried about the security of their deposits.

Clients no longer have any loyalty for any financial institution because they have been treated so badly and with such total disregard for their interests in recent years. The banks have ridden roughshod over their client’s concerns and now they must pay the price when the going gets tough.

Clients are used to seeing their local branches close; never being able to speak to someone who can answer their questions; having to discuss their financial affairs with someone in Mumbai; being badgered to take out a myriad number of insurance products every time they put their head round a branch doorframe; and being ripped and gouged by their bank in costs, hidden charges and grotesque penalty fees.

When a client no longer has any loyalty to the institution with whom he banks, he will not hesitate to get his money out when the fickle finger of fate points in his bank’s direction.

Secondly, it should have proved to Gordon Brown and his financial whizz-kids in the Treasury that the greatest number of people no longer believe a word the Government says about anything. When the Bank of England put its support behind Northern Rock, it suddenly became the safest institution in the country. This has not stopped people from getting their savings out, and selling their shares.

Statements of government support became a meaningless echo, as a vast number rushed to divest themselves of their exposure to Northern Rock’s sinking reputation. The Government was not managing the crisis.

Any government whose word is worth as little as Gordon Brown’s has clearly proven to be, is a government with a credibility crisis, but then, as with the financial institutions, the ordinary man and woman in the UK has watched and listened while this Government has lied and twisted and squirmed and spun and lied again about so many issues, that no-one of any ordinary common sense believes a word they say!

So, let us hope that important lessons will be learned from this mess.

Traditional financial crime, money laundering and terrorism will never cause the same level of threat to a financial market that the abuse of one misplaced derivative product will achieve!

Regulators need to re-learn the lessons of previous times, and spend more time watching the activities of those who have most to gain from the propagation of these exotic products as a means of driving the debt/dependency culture; and act more decisively with regard for better and greater transparency in their application.

Both Government and the financial sector need to act swiftly and decisively to start re-building investor trust and confidence in the sector which we are told is so important to the future well-being of this country. Saving, thrift and self-reliance need to be encouraged; promoting debt and financial dependency is to be discouraged. Savers and investors have been screwed shamelessly by Threadneedle Street and Whitehall both for too long, and this is where the real financial crime has occurred

Thought for today

I have realised that I should be using my blog for more than just posting articles.

The hip is getting much better, although I did something to it the other day which resulted in 3 days of extreme discomfort. However, I hope that we now have got it under control.

I am getting used to running my own consultancy again, although the work ebbs and flows, I had forgotten.

I keep getting lots of requests from former colleagues at the old company about becoming linked in with them on 'Linked-In'. I suppose I should be flattered, but where were they I wonder when we were having all the problems last year?

I still feel terribly traumatised by the way I was treated. The Human Resources division proved themselves to be the usual bunch of hire and fire merchants, and sided with IM while he was pulling all his dirty stunts. I now realise that it was he who undermined all the work I was trying to do in the Fraud delivery area, snivelling around AC and telling him that our people would start asking questions out of turn. Spineless git!

Anyway, have now proved him to be the useless manager I argued that he was at the time. Northland is going from strength to strength and has recently been lauded for their major win at Bradford and Bingley. They now effectively 'own' the British Building Society Industry sector and they should be capable of cleaning up the smaller players who are really desperate for good Transaction Monitoring solutions.

It is such a shame that the old company could not have seen the wisdom of what I was seeking to do, but it is ever thus, or so I have learned, that when you have someone with the overweening arrogance of IM but who at the same time is so intellectually under-resourced, there will always be difficulties.

The next move is to consolidate on this year's work and to help Northland drive the business forward next year. It is always so gratifying when you are able to see your ideas and concepts really coming to fruition.

Do we need an MBA in Criminology?

‘…One of the reasons we fail to understand business crime is because we put crime into a category that is separate from normal business. Much crime does not fit into a separate category. It is primarily a business activity...’

William Chambliss.

As someone who has spent all his adult life dealing with the phenomenon of white collar crime, I never cease to be amazed at just how little willingness is shown by the financial services industry in encouraging strategically-positioned practitioners to gain higher academic qualifications in an understanding and interpretation of the issue.

Financial crime now costs UK plc billions of pounds annually, money which is deducted directly from the bottom line of the balance sheet. The problem is so acute that the FSA now makes it a primary requirement of good governance that all regulated member institutions must adopt a risk-based approach towards the prevention and interdiction of financial crime, as part of their compliance strategies.

The responsibility for ensuring the successful implementation of this policy lies at senior board level, but when such individuals are questioned as to their domain knowledge of the causes, the practices, the activities, the phenomenology of the problem they are required to prevent, the level of practical expertise is a resounding zero.

Work down the food-chain within the corporation, and try and find anyone who has any understanding of the way in which the criminal mind works, and you will find an almost complete void. Occasionally you may be lucky and you will discover a former detective or seasoned former police officer in post in some dark corner of a financial institution, but their role and position is rarely a senior one, and they have a very limited input on policy-making decisions.

But why stop with the regulated sector, examine the regulatory agencies. How many experienced former detectives with the knowledge or expertise to be able to understand the criminal mentality are there holding down senior policy-informing roles within the various regulatory agencies? Who in their various financial crime teams has really worked in the arena of financial crime and who has had any experience of really dealing with professional financial criminals. This is not to belittle any of the efforts made by these good people, it merely asks the question, what is the basis of their experience or knowledge which befits them for this role?

I recall meeting a woman at a conference not so long ago who asked me a series of questions on my presentation about criminal trends and criminological tendencies. It turned out that she had been seconded to one of the regulators and was responsible for determining a financial crime policy initiative. When asked what experience she possessed, the answer was that she had absolutely none at all, but she did have a Ph.D in finance and as her employing bank had no work for her at that time, she had been sent on a sabbatical to the regulatory agency to fill in the time until the market conditions improved. The regulator obviously had no room for her in any of the financial policy divisions, so they tucked her away in the financial crime office and told her to find something to do. She was reduced to doing the rounds of the conferences, trying to dredge up enough background information to enable her to make a contribution to the internal debate for which she had been employed.

It is instances like this that make the wider white collar crime debate risible, and illustrate just how little anyone, government or industry really care about domain knowledge and expertise in the field of white collar crime.

Perhaps this goes some way to explain why the volume of financial crime is rising exponentially, and why Government is repeatedly demonstrating its powerlessness to deal with the phenomenon.

Recent Government initiatives have either just dwindled away to nothing, (taking yobboes to cashpoints to draw out cash to pay their on the spot fines); and some like the Asset Recovery Agency, (ARA) which have been forced to close down because of their incredible inefficiency. When she was appointed to the role of head of the ARA, Jane Earl was interviewed by reporter Nick Cochan for the Observer. He wrote;

‘…A new crime fighter is gearing up to take on the heaviest of Britain's organised criminals gangs. But the new sheriff in town is not a gun-toting cop or even a hot-shot lawyer. Jane Earl is a cool administrator from the Home Counties whose experience in law enforcement goes no further than managing committees in local councils - she has just quit as chief executive of Wokingham Council - and keeping order in the Parent-Teacher Association of her children's school. Now this sober lady from Reading will be fighting the most vicious type of organised criminal, including Colombian, Irish and Islamic terrorists and the Russian mafia. But she is determined not to change her life as efficient mother and school governor. Despite security concerns expressed by her staff, she continues to cycle to her local station…’

Ms Earl came to her role with no qualifications, domain knowledge or life experience of dealing with the very people whom she was going to be expected to confront on a daily basis. It’s not her fault that she was appointed by some apparatchik who almost inevitably shared her complete lack of criminological experience, but who believed her when she declared her ‘passion’ for finding new ways of dealing with crime. This was ‘Blair-speak’ with knobs on and people who talk the language of New Labour get the jobs under New Labour!

Some of the applicants for the head of the ARA were deeply experienced practitioners who had already proved their mettle in asset recovery operations against major criminals and Irish terrorists, and who would have brought significant experience to the role. However, skills, knowledge, expertise, a few hardened battle scars, none of these count for anything as long as you can talk the talk of the new regime of Major-Generals appointed by Lord Protector Blair to rule the UK’s public policies.

Jane Earl herself expresses disappointment at the failure of her agency to deliver results. She talks in a surprised voice of the tactics adopted by her targets and their lawyers in using the civil court procedure to fight back against ARA actions. She appears distracted by the fact that those with the most to lose, financially, do not appear to have any qualm about taking every point to obfuscate the issue and to deflect the Court’s direction, and make the ARA prove its case to the ultimate degree.

What did she expect? It was not her fault that she had no experience of dealing with professional law breakers, who would and should be expected to fight back with every last resource against having their assets confiscated. The fault should lie with the bureaucrat who failed to understand the problem either, and who, instead, unblinkingly obeyed Tony Blair when he said that taking the profits of crime from criminals would teach them not to do it again, and would prove to be a major disincentive to crime.

Let me let you into a little secret known only to former detectives. All you do when you take assets from a thief is to guarantee another series of thefts!

The point of my concern is that there is frankly no agenda, either within Government or within the industry it seeks to regulate, to provide any level of real academic expertise designed to enable the acquirer to truly understand the nature of the criminal mentality and criminogenic behaviour.

Why should this be? Is it that those who administer these environments have merely overlooked the importance of these subjects; or is it more sinister, reflecting a deeply submerged realization, as the quotation at the start of this essay pointed out, that so many of the practices which are commonplace in the financial sector, and which are openly encouraged by those with money to make, are little more than thinly-disguised criminal activities in themselves, and that those who engage in them are indeed nothing more than financial criminals, in nice suits?

Could it be that those with the most to lose from a truly transparent evaluation of so many of the business customs and practices prevalent in the market, deliberately discourage any wish to study or become proficient in the understanding of the problem, for fear that this new-found knowledge might become antithetical to the continued ambitions of those with the most to gain from an unfettered continuation of the status-quo.

Now before someone from a training company suffers a sudden rush of blood to the head, let my stress that I am not talking about training! There are more training companies out there than you can shake a stick at, some are very good, some are not quite so good, and some are downright useless!

Training is vital for a well-regulated industry, and is legally mandatory, but with respect, a training course is designed for entirely different purposes. It is there to enable staff to be aware of their role and responsibilities within the regulated sector, and to give them a very basic but workmanlike knowledge of the jobs they have to perform.

It simply does not and can provide the level of academic input, nor demands the depth of intellectual rigour which a higher degree requires, and it is this level of academic excellence of which I speak. Training merely looks at the status quo and provides responses in suitable circumstances. Education looks at the status quo and asks ‘Why?’ and ‘How?’ and ‘What If?’ and ‘How does this inform me?’ and ‘What if this were to happen again in other circumstances?’ and ‘How would I react if I saw this conduct but in very different circumstances?’ Training gives people a series of possible answers. Education teaches people to ask further questions.

All too often I have addressed these issues with practitioners, only to be told, and with apologies to Pink Floyd, ‘we don’t need no education’. Academic study, so it seems, is not required, merely a minimally-necessary level of training to satisfy the regulators. Universities have serious difficulty in attracting students to study for higher degrees in white collar criminology or financial crime management. I have approached a major Business School and suggested that as part of their MBA topics which dealt with issues supplementary to business, they should include a series of lectures on financial criminology. The proposal was turned down out of hand.

Yet this is such a short-sighted policy. What lies behind the adamant refusal to admit the need for more academic knowledge, research and study in appropriate circumstances?

The study of white-collar criminology teaches us a significant amount about the human condition, and helps to interpret the attitudes which are so often expressed by practitioners.

The work of the American criminologist, Austin Turk on ‘Conflict and Criminality’ provides an illuminating insight into the work attitudes of financial services compliance officers, and explains a great deal about their discomfiture about being perceived to be performing a ‘policing’ function within a financial environment. The fact that the original research dealt with township kids in South Africa and their relationships with the white Afrikaaner police who patrolled their squatter camps is irrelevant, the parallels with the financial sector regulators were exact and very informing.

White collar criminology also assists in our understanding of why City people behave in the way they do and why they so often get their institutions into difficulty. Nick Leeson was an accident waiting to happen. Had one of his managers read and understood Christopher Stanley’s research on the legitimation of deviancy and the Anomie of Affluence, they would have identified the risk Leeson posed.

In his article, 'Mavericks at the Casino: Legal and Ethical Indeterminancy in the Financial Markets', Stanley identified the development of a new phenomenon within the previously ordered environment of the City of London. He observed;

'…The New City reflected the ideological aspirations of a system of political administrations which disrupted the post-war consensus of relations between polity and economy. It also reflected the Casino or Disorganisation of Capitalism: 'an international financial system in which gamblers in the casino have got out of hand'…Thus settled norms of conduct were open to disruption'.

I suspect that deep at the root of the problem of the institutionalised intransigence to accept that criminology can help understand the white collar fraud and financial crime phenomenon, lie attitudes and preconceptions about class. It is almost as if the final recognition that the wrong-doing of the middle and educated classes can be identified in exactly the same way as the behaviour of more easily recognizable members of the criminal underclass, is something which those who engage in this kind of conduct, do not wish to accept.

The professional and chattering classes do not want to be confronted by the fact that their behaviour is no different from the class they profess to despise, and with whom they would never, ever admit any degree of similarity. In the case of politicians, this sense of social differentiation is even more pronounced, but because they do not understand the criminological implications of their behaviour, they inadvertently make themselves even more ridiculous.

Take, as an example, the recent spat between No.10 and the police investigating the ‘Cash for Honours’ scandal.

Detectives, and particularly those who deal with the crimes of the powerful know, as a given, that when police investigations begin to get close to the source of the problem, the suspects can rely on friends and commercial colleagues to begin to mount a vociferous defence of their interests. It is a well recognized criminological phenomenon within this class type. Those who can still remember the Guinness and Blue Arrow investigations will recall the tidal wave of sneering press stories and adverse publicity that sought to rubbish the validity of the police and SFO investigations. The aim of course, was to seek to influence the political will to continue the investigations and to undermine the possibility of prosecutions.

Detectives ignore these interventions, treating them as nothing more than a mild irritant, because they know that the louder the rubbishing, and the more elevated the status of the rubbisher, the closer they are getting to the truth.

The detectives who arrested the No 10 aide, Ruth Turner, will not have been fazed in the least by the interventions of the likes of David Blunkett, a man who can be relied upon to provide a ‘rent-a-quote’ service at the slightest opportunity, Tessa Jowell or Lord Puttnam. On the contrary, they will have been reassured by these uninformed but clearly coordinated outbursts, because they will know that they are really on the right track, and their investigations are now really ‘shaking the tree’ in the right places.

When people like Blunkett, or Jowell, both of whom have been members of a Cabinet which has introduced some of the most draconian measures to deal with the criminal class in recent history, begin to voice concern at the use of perfectly ordinary police powers against one of their own protected species, what they are really doing is seeking to engage in special pleading on behalf of someone who comes from their politically-elite environment. They don’t mind such powers being used against criminals suspected of burglary or theft or illegal immigrants, because they of course, are different; but when it comes to someone from their milieu, then a whole different range of attitudes is expressed. The fact that Ruth Turner is now suspected of having committed an extremely serious offence of attempting to pervert the course of justice, is irrelevant. She, so they claim, should have been treated differently!

The police know better. They know that when any person is faced with the possibility of going to prison, possibly for a long time, for allegedly committing a serious offence, they will behave in exactly the same way as their brothers and sisters under the skin, and try and cover up their actions, destroy evidence or otherwise seek to impede the police investigation. They know that it doesn’t matter what class you come from, when the chips are down then we all revert to type, and they respond accordingly!

Blunkett, Jowell and Puttnam do not understand the criminological implications of their contributions, they are merely responding in a predictable political class-based fashion, but their words are doing nothing to help Ruth Turner, or anyone else for that matter. They would do their so-called friends a lot more good if they just shut up! However, the arrogance of power and high office is a dangerous combination, and it is to be doubted whether they will see the wisdom of this course of action.

Senior management needs to completely reconsider its attitudes towards providing selected personnel with the academic education necessary to understand the white collar crime phenomenon. Young ambitious graduates, looking to further their careers in business, finance and management, think nothing of signing up for very expensive MBA courses. The MBA has almost become the sine qua non of the level of qualification required for entry to the highest levels of management.

If business provides such recognition of the MBA, then why does it refuse to contemplate the opportunity offered by the provision of the highest level of crime preventative and loss forestalling understanding and expertise offered by a Master’s degree in white collar criminology. Such degrees do exist, but unless they are recognized for being the sources of inspired business awareness and best practice facilitators which they are, the courses will be closed down, and the costs of fraud and losses to business will continue to follow their exponential growth curve.

Information Technology and the madness of crowds

Information Technology and the madness of crowds

‘…Every age has its peculiar folly: some scheme, project, or fantasy into which it plunges, spurred on by love of gain, the necessity of excitement, or the mere love of imitation…’

In 1841, a Scots writer Charles Mackay, LL.D, published a book, which would become a huge influence in the lives and minds of those, like me, who marvel at the many manifestations of human folly.

Entitled ‘Extraordinary Popular Delusions and the Madness of Crowds’, Mackay described in splendid detail, a whole series of events which had, in their own individual ways, caught the attention of a group of people, who had, as a result, allowed all reason and logic to desert them, and had become caught up in a spiral of what could only, in hindsight, be diagnosed as a form of temporary madness or mania.

Among other topics covered by this man’s research were the so-called ‘Mississippi Scheme’, a plan hatched by an 18^th century mathematical adventurer called John Law, by which he proposed to manage France’s internal debt; or the more infamous ‘South Sea Bubble’, an 18^th century stock ramping pump and dump scheme of such brazen insolence, that any contemporary con-man trying to pull it off today would blush for shame.

The beauty of Mackay’s book, and it is still in print, even today, is that it proves that nothing has changed, and as the book of Ecclesiastes advises us ‘…there is nothing new under the sun…’

How right, and we are still being caught up by the promoters of various schemes which are designed to encourage us to spend significant amounts of money in the belief that without this significant outlay, we could easily render ourselves at risk of regulatory intervention, with all the downside that such an action brings with it in its wake!

How many readers remember the last few years prior to the Millennium moment, those scant ticks when the second hand on our clocks turned 1999 into the year 2000?

Did the earth stop turning; did airliners fall from the sky, or trains run on uncontrollably? Did the ATM machines dry up so that we were left with no cash to spend on January 1^st?

Remember the years of Y2K, and the prognostications of the firms of consultants and the IT companies, who managed to persuade an otherwise generally sane and sensible business constituency, to spend obscene sums of money on ensuring their IT systems would survive the seminal moment when the clocks changed!

Consulting firms made fortunes so large that their start-up partners were able to retire. IT companies, wallowing in a cash-flow of such tsunami-like proportions, began to re-write their profit projections for years to come.

I know because I worked for one such company at that time, and I recall the glee in the voice of the international chairman as he glibly informed the entire assembled staff of this global company, all linked by satellite communications, that on the basis of the profits that the company had made in 1999, (based almost entirely on the income from Y2K consulting), that he could confidently predict that we would become the world’s leading IT software provider within 12 months. The new slogan (or battle cry as he called it) was to be ‘Number one in 001’ and we were to proudly use this phrase at every opportunity.

I watched, appalled, as so-called sane men and women, danced on table tops waving spilling champagne glasses, screaming this fatuous nonsense at the tops of their voices. This way madness lies!

If only Y2K was the only example. Who now also recalls the heady days of ‘…CRM…’, or ‘…Bank in a box…’! Anti-money laundering enjoyed a small frisson for a while, but that has quickly become smothered by a greater emphasis on ‘…Financial Crime…’ ‘…Basle II…’ became a catchword trotted out by the armies of slick young men and women in slightly shiny suits, all clutching their laptop bags. ‘…Enterprise Risk Management…’ had its day and became popular for a while. What all these issues had in common was that the big consulting companies and the IT firms which school round them like pilot fish around a Great White shark, smelt blood in the water. More importantly it was your blood, and that of your employers, and like their cartilaginous cousins, they honed in on the source with unerring accuracy!

Now, the new source of consultant bait or ‘chum’ is being tipped into the water, and the sharks are gathering for another predator’s ball.

In Europe, MIFID is the latest acronym, the newest mouthful of initials on the block, and the consultants are moving out in their droves to drive up the fear factor and sell more and more of their expensive time to the unsuspecting and the gullible.

MiFID – the Markets in Financial Instruments Directive – comes into effect on 1 November 2007, when it will replace the existing Investment Services Directive (ISD). MiFID introduces new and more extensive requirements that firms will have to adapt to, in particular for their conduct of business and internal organisation. It applies to all investment banks who do securities business in Europe, and that includes many of the major foreign players who do business in London.

MiFID makes significant changes to the regulatory framework to reflect developments in financial services and markets. It widens the range of ‘core’ investment services and activities that firms can passport. It upgrades advice that involves a personal recommendation to a core investment service that can be passported on a stand-alone basis. It introduces operating a multilateral trading facility (MTF) as a new core investment service covered by the passport; and extends the scope of the passport to cover commodity derivatives, credit derivatives and financial contracts for differences for the first time.

As the timing of the MIFID issue gathers pace, the time remaining to implement the necessary and relevant changes is shortening, but this was ever so. Even after the money laundering regulations were introduced, very few banks really met the requisite compliance dates with any accuracy.

However, MIFID possesses all the necessary characteristics for a new, consultantancy-led attack plan. It contains a mouthful of frankly ugly initials which few people really understand. It comes from Brussels so it is almost entirely incomprehensible; and it has a direct impact upon the financial services market (the lowest of all the hanging fruit in the market), and it is rapidly becoming the new ‘delusion’, the latest mania, and the consultants and IT companies are gearing up to enhance the fear factor so as to sell you new products.

The important thing is to recognise the facts and the realities and keep them firmly identified in your minds, so that the snake-oil salesmen cannot fob you off with more expensive and unnecessary additions to your already over-burdened IT systems.

MIFID is an important issue, but it has to be seen in the context in which it appears. Too many IT companies are trying to make the suggestion that the MIFID function sits most realistically within the Risk Management profile (which to a small extent is true), and that as a result, its IT model and profile can be seen in the same context as that of the AML and financial crime management environment, (which to a huge extent is not true at all). This fact will not stop the IT firms from trying to ‘shoe-horn’ you into their particular product portfolios, after all why let the facts get in the way of a slick sell? How about this example from a major software provider;

‘…Other functional areas impacted by MiFID such as know-your-customer (KYC), behavioural analysis, operational risk management, anti-money laundering, anti-fraud and abuse measures, and compliance reporting are addressed within the company’s overall performance management environment..’.

The weasel word here is ‘impacted’, but it permits them to get in a mention of the initials MIFID, thus allowing them to create a tenuous link, thereby enabling them to gain a free entry into mentioning a wider area of their product portfolio, much of which is of a legacy standard, and has no direct relationship with a MIFID requirement.

There will be significant changes to be made to your IT function, and a lot of success is going to depend upon the working relationship that firms can generate with their IT providers. The information flows which enable all the market participants to trade, whether on the buy or sell side will have to be properly configured. Transaction reporting will change a great deal for all European participants and this feature will require a lot of development for the operations function. IT providers need to be involved at the earliest stage if a lot of infrastructural change is required, and cooperation between practitioners will pay dividends by helping to reduce costs.

The point is that MIFID is not introducing a significantly new piece of legal change, unlike the rules regarding anti-money laundering. MIFID is an amending structure, changing existing and traditional methods of trading, and laying down the foundations of a completely new way of dealing in traded instruments. The immediate changes could well be the first phase of a series of on-going developments which may well take a few years to come to fruition, and which may well see even further additional changes being introduced. No-one should assume that the present phase will be the be-all and the end-all.

MIFID does have implications for a number of internal departments, not just IT. One problem is that at the moment, the kind of changes which will be introduced may not be wholly transparent, and it will be difficult for too rigid a degree of adherence to any defined compliance regime to be anticipated in the early stages. A lot of time and effort will need to be spent observing how the changes will develop and what impact they will have on the market as a whole. This will have immediate impacts on the Business sector. Compliance will also need to be monitoring these changes to ensure they are engaging with the new trading environment ‘best practice’ regime.

The point of these commentaries is to identify most clearly the range of differences which the MIFID requirements will impose, in contrast to the wholly new regime of legal, philosophical and technological change introduced by the AML legislation.

Frankly, Financial Crime, including AML and MIFID are entirely different creatures, and should not be seen in the same IT context. Seeking to use existing AML systems and methodologies to create a complementary MIFID ‘best practice’ environment is a pointless exercise, and will only lead to confusion, and increased problems on both sides of the requirement.

Trading in securities and derivative instruments is a recognised money laundering methodology. It can also engage with elements of market abuse, insider trading and other forms of trading malpractice. The proceeds from such activity can be laundered. Monitoring the transactions of an individual client’s account in order to determine whether his business conduct is suspicious, is a primary requirement for the purposes of an AML ‘best practice’ regime, and many software solutions are available to help meet those demands. What is monitored, is the financial outcome of the trading, or indeed, any other form of commercial enterprise, it is not the trading itself which is examined, as in an AML transaction monitoring environment, because that would tell an investigator very little at all.

The requirements imposed by MIFID are wholly different and deal with the needs of the successful creation of a unified European market in traded financial instruments.

Any IT or Management Consultant who tries to obfuscate the distinction between the two issues by trying to propose a unified solution should be treated with great caution. Too many of these people have merely taken their existing Basle II or their CRM teams, and re-named them as their MIFID teams. In consulting, it was ever thus.

The big problem is that today, too many banks and financial institutions are unwilling to make informed decisions about their businesses without the input from these teams of so-called experts. The reasons almost always lie with the non-executive directors who are simply unwilling to face the possibility of a new concept which could conceivably cost them money and reputation if it is wrongly applied or improperly executed, and who are not willing to back their own judgement. How often have I heard the phrase, ‘…let us employ X,Y & Z Consulting so that if they get it wrong, at least we can sue them…’

Whatever else financial institutions do, they must not take their eye off the requirements to maintain a ‘best practice’ provision in their Financial Crime and AML compliance profile. They must also implement and manage their MIFID responsibilities. Mixing up these messages, thus getting them both wrong would be a recipe for disaster. Don’t let it happen to you!

Financial Crime - Staring failure in the face.

December has been a busy month for Financial Crime conferences.

No sooner has one event finished, than another is clamouring for your attention. Events you ‘…have to…’ attend, programmes you ‘…must not miss…’, workshops where you will learn ‘…how to protect yourself…’

And the lists of speakers. Chairman of this august body, President of so and so Corporation, Secretary General of that policy-making institution, Director of yet another Government Agency.

They are all there, with their speeches carefully crafted by their staff; their fulsome platitudes carefully honed to reflect the latest edition of Government policy; their timid, middle-of-the-road, ‘…on the one hand this but on the other hand that…’ response to the present statistics of fraud and financial crime; their smug acceptance that despite their almost universal lack of domain knowledge or expertise in dealing with real crime, and with one eye, carefully on the look-out for the next advisory panel post or Quango appointment, that their words will be taken as gospel;.

Please don’t misunderstand me, I am not an opponent of the conference circuit. On the contrary, I believe that sometimes, just sometimes it is possible to hear a speaker of real experience, and domain knowledge, who truly manages to make a difference and raise the level of the debate. You can usually tell these individuals because they are most often someone, man or woman, not sponsored by any government or quasi-government agency, they don’t work for the Big 4 Consultancies, they most often run their own successful businesses, have excellent websites and they don’t need to advertise. They can clearly be seen to ‘walk the talk’, and they let their experience and their knowledge do the talking.

Others, most often Government ministers or senor civil servants, clearly demonstrate their paucity of knowledge and lack of experience by their incomprehensible statements, and their criminologically-illiterate policy initiatives.

But when it comes to dealing with fraud, financial crime and money laundering, the talk circuit has become the place to be, Vance Packard was right after all, the medium has truly become the message!

Twenty years ago, I published my first book entitled ‘Fraud In The City – Too Good To Be True’.

The book set out to examine the causes of fraud and financial crime within the financial investment environment, and attempted to take a look at what ought to happen, once the UK Government’s policies for regulatory change, then grouped together under the generic title of ‘The Big Bang’, had begun to take effect.

As a fraud detective at New Scotland Yard, I had witnessed at first hand the dramatic changes that had been engineered inside the financial investment network, following the polices of the then Thatcher Government, and the drive towards financial de-regulation.

My colleagues and I had watched, helplessly, as a tidal wave of fraudsters, con-men, financial snake-oil salesmen, and assorted ne’er do wells, all masquerading under the title of ‘financial advisors’, washed up on the shores of the City of London.

They brought with them a wide range of tactics and techniques, some clever, some not so clever, some downright dumb, but all designed to part the unwitting investor from his cash as quickly, and as efficiently as possible.

We monitored them while they routinely trooped in and out of a small group of solicitor’s offices, on their way to a few chosen accounting practices, stopping off on the way to buy a collection of carefully prepared, off the shelf companies, provided by a select team of company formation agents, who could also help them with access to prestige address, fully serviced offices in the City of London or the West End.

Get off the plane at Heathrow at 10.00am and you could be in business at 3.00pm, and many were, complete with letter-heads, invoices, telephone and fax communications and a sweet-voiced girl answering a bank of phones with your own company’s number!

In the 1980’s London became the fraud capital of Europe!

We told our management about them, but most of them were men who had spent their early police careers dealing with an altogether different kind of fraud, (long-firm fraud, carbon-paper fraud, telephone directory fraud, etc, etc, almost entirely unheard of today), and who didn’t really want to understand that the financial and political environment had changed. To do so would have meant getting out of a comfort zone which didn’t really require very much effort to get through the working day, and would have meant learning a whole range of new tricks.

No, far safer to stick to tried and trusted methods of inertia and bad practice, and report the matter to the Department of Trade and Industry, who might, if they could be bothered, get round to investigating the company some day, for the offence of fraudulent trading. So bad did the reputation of the Investigations Branch of the DTI become that they became universally known as the Department of Timidity and Incompetence.

We did have meetings with the DTI, to see if we could engineer change and introduce some motivation within their midst, but we were told that there was really little they could do, and anyway, the new regime of financial regulation would pave the way for a brand new, bright tomorrow, in which such criminal actors would receive their just deserts.

All the time, German, Swiss, Italian, Dutch, American and British con-men, cemented their hold over the OTC share-traded market, and the British investor lost his shirt, along with foreign investors who had been inveigled to put money into Britain’s booming new investment environment.

We begged the Director of Public Prosecutions for help. We urged him to give us the right to arrest and charge for theft and false accounting in carefully selected cases. To one DPP’s perpetual shame, he responded, ‘…Why should the British tax-payer be concerned if a load of Germans are ripping off another load of Germans, is it really our business…’ When we pointed out that these criminals were successfully sending a series of hugely damaging messages about the British market, he shrugged his shoulders, and said it really wasn’t his problem.

So, we went out and arrested them anyway. We didn’t ask for permission from our management, because we knew it wouldn’t be forthcoming. We didn’t ask for permission from the DTI because we knew we would never get a response. We didn’t ask the DPP before charging those we nicked, we just did our job in the same way as if we had chanced upon a gang of bank robbers or lorry hi-jackers.

When we interviewed them, they glibly told us that the reason they came to London to run their rip-off companies was because they knew that the British prosecutors would not go after them. This time the DPP was shamed into charging them, and eventually, after a long trial they were convicted and imprisoned, the trial judge expressing his great concern that such cases could be going unpunished in the London market.

But it was a Phyrric victory, because after that case, we were forbidden to act in the same way again, and instructed that all such cases should be referred to the DTI and the DPP in future before any action was taken.

Later, we watched impotently as the findings of the Roskill Commission on Fraud Trials were re-engineered by the lawyers and civil servants in the Attorney General’s Office and other Government law departments, and emerged as the Serious Fraud Office (SFO), which proceeded successfully to downgrade the role of the detectives and promote the role of the civilians, so that now, fraud investigations and trials were run by people with no knowledge of criminal behaviour whatsoever, while the detectives were kept in a separate part of the building, and not allowed to undertake their traditional roles in the management of fraud investigations.

Perhaps not surprisingly, the conviction figures plummeted and the public rapidly lost confidence in the Government’s ability to manage the problem.

The Financial Services Act introduced a regime of regulatory overkill, which put more and more powers into the hands of a wide range of untried and untested civilians, and loaded the financial sector with rule books and regulatory dictat, but failed to truly provide the atmosphere necessary to enable entrepreneurial financial business to flourish, while really keeping the bad guys out of the business. Scandal followed scandal, and the poor old investor continued to lose money.

So bad did the problem become that when the Government was finally forced to throw in the towel and admit that the private occupational pensions market had become a scandal of overwhelming proportions, they had to find a new phrase to define the problem. Wary of calling it institutionalized fraud, which is what it was, they chose to call it ‘mis-selling’, a phrase which carried no stigma for the government’s inability to protect investors, and introduced a hitherto-unheard of concept to British criminal jurisprudence.

Money laundering became the next big shibboleth, and we were told that by adopting a dubious US concept of ‘following the money’, we would finally strike at the heart of the criminal enterprise. Directives, regulations, and proposals for legislation poured from the inexhaustible source of the EU Commission. More and more rule books were written and introduced.

A small number of advisory practices emerged, desperately trying to bring some judgement and order into the madness, trying to share wisdom and sense in what was rapidly becoming a regulatory free-for-all. To them, we must be eternally grateful, because they stood like small beams of light in a very dark world indeed. But still the regulatory monster grew and grew, and more and more unqualified people emerged from the shadows to hold down posts of significant importance. The conference circuit boomed, the talk shops proliferated. If you needed to find a senior policeman urgently, it was pointless ringing Scotland Yard or Wood Street. They were all busily talking to PowerPoint slides in smart London hotels!

Major new agencies were headed up by those who had never before investigated so much as a shoplifting case, and those who knew better, but who had the temerity to say so, stood by, while others, who talked the arcane language of the New Labour regime, were preferred, in place of men and women of real, hands on, practical experience.

The market for Fraud and Financial crime is alive and well, and making a great deal of money. Every year the problem gets bigger and bigger, and the big consultancies charge bigger and bigger fees to tell inexperienced management what they ought to know, if they were any good at their jobs.

Last week, a senior manager at a major Big 4 firm told me that his firm would not look at any consulting project unless there was a minimum of ₤1 million in fees on the table. They wanted to hire a financial crime expert, but when asked to define his role I was told that all they really wanted was someone who had just been in a financial crime role in a major bank, and could tell them what policy his former employer was intending to undertake to meet the requirements of the risk-based approach to financial crime management. This information, I was told was priceless, because it would enable the consultancy to re-package the product and sell it again and again to the other major banks, who, in the race to the bottom to minimize their outlay on even more regulatory spending, do not want to spend a penny more or a penny less than their competitors.

It could be said that the market which surrounds the financial crime issue has now become too big to permit an answer to the financial crime conundrum, to be advanced. Too many peripheral businesses depend upon the crime figures growing in a nice exponential curve, simply to justify their continued existence.

There are ways in which these problems can be dealt with. There are solutions, and there are some answers. It will need a very brave financial crime manager to address these responses head on, because a lot of the answers are in reality, very mundane, and rather simple, but they work.

Sprinkling pixie dust on the lap-tops is not going to produce a new generation of IT-driven financial crime solutions. Spending millions of pounds on change-management procedures will not provide an answer.

In order to begin to provide answers, you need to provide education and training for staff so that they really do begin to understand the problem. To achieve this, you need to talk to people who understand how the criminals’ minds work, and how they will behave in all the circumstances. You need to talk to men and women who have spent their careers dealing with professional criminals, and who know what motivates them and what does not.

We have to be willing to stand up to ministers and their juvenile advisers, with their promises of a new Jerusalem, and show them that their latest initiatives for tackling crime, while very headline grabbing, are just not going to work. We have to make them see that sometimes, blue-sky thinking, is just that, standing and looking at an empty horizon.

When Sir Charles Rowan and Sir Richard Mayne first developed the Metroplitan police on the instructions of Sir Robert Peel, they defined the concept which became the bedrock of policing policy in any country which subscribes to the theory of policing by consent. They understood that the biggest disincentive to crime is the likelihood of getting caught. That was as true in 1829 as it is today, nothing has changed. We won’t prevent any more crime by taking the proceeds away from criminals, we will just guarantee more crimes being committed. Think about it!

Rowans-blog

Rowans-blog

Rowans-blog

Rowans-blog