April 15, 2025 • 56 mins
When most walk into a bank, they deal with the public-facing staff. Bank tellers. Maybe a loan officer. But what many don’t realize is that there is a whole group of personnel behind the scenes, yet they are on the front line against financial crime. They are the anti-money laundering compliance staff. You don’t interact with them directly, but they’re the ones looking for signs of suspicious financial activity. Sara Beth Felix is an anti-money laundering expert and consultant who helps banks get their compliance act together. Designated host Yaya Jata Fanusie recently spoke to Sarah Beth Felix about how good AML experts are wired differently and need to be active and perceptive in identifying suspicious transactions within their institutions.
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Illicit Edge: Breaking News for Financial Crime Yaya Jata Fanusie, a former CIA analyst with years of experience in counterterrorism and financial crime investigations, will go behind the scenes with the professionals working to safeguard the global financial system from illicit acts.
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Episode Transcript
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Speaker 1 (00:04):
Thomson Reuter's risk and fraud solutions empower financial institutions to
safely on board and continuously evaluate customers, members and vendors,
and to increase new business securely through automated technology. Visit
tr dot com slash clear to learn more. Designated is
(00:25):
proudly supported by a Hummingbird. Hummingbird is a modern compliance
platform designed to make financial crime investigations smarter, faster, and
more effective because today's financial criminals are sophisticated, savvy, and agile,
meaning the tools used to fight them should be two.
Learn more at hummingbird dot Co. I'm Yaya Jata FINUSSI.
(00:56):
When most of us walk into a bank, or even
call a bank, we deal with the public facing staff,
the teller, a customer service specialist, or maybe even a
loan officer. But what most people don't realize is there
is a whole group of personnel at the bank who
work behind the scenes, yet they are on the front
line against financial crime. They are the anti money laundering
(01:18):
compliance staff. You don't interact with them directly, but they're
the ones looking for signs of suspicious financial activity. Sarah
Beth Felix is an anti money laundering expert and consultant
who helps banks get their compliance act together. She spoke
to me about how good AML experts are wired differently
(01:39):
than other banking staff. It's time to get designated with
Sarah Beth Felix. Sarah Beth, can you tell us your
origin story?
Speaker 2 (01:50):
All right? Well, I'm a beach girl at heart.
Speaker 3 (01:53):
I was born and raised in Tampa, fourth generation in Tampa,
which is quite unusual, and was raised on a little
beach just west of Tampa that my great grandmother also
lived on. And I've lived all over. I was married
to military for a few years, and so I got
(02:15):
to move to the South Pacific and lived on the
island of Guam for a few years, but I had
to commute back and forth to Chicago.
Speaker 4 (02:23):
So how does a Florida beach girl end up working
in finance and dealing with illicit finance and AML?
Speaker 2 (02:34):
Yeah? So out of college.
Speaker 3 (02:37):
You know, my field wasn't really a field that a
lot of people knew about. In fact, I don't think
any college courses in the nineties and the late nineties
had anything to do with financial crime. And you know,
I just thought, well, I wanted to be a businesswoman.
Speaker 2 (02:54):
That's what I grew up with.
Speaker 3 (02:55):
My dad was a technology executive for most of my life,
and I just remember being like, I want to be
a businesswoman.
Speaker 2 (03:01):
I had no clue what that looked like.
Speaker 3 (03:03):
And and then I really got into the stock market,
and you know, got a business degree and a few miners,
lived in Costa Rica for my Spanish minor, and I
had a finance minor and a you know, international business degree,
and then I decided to get.
Speaker 2 (03:21):
Licensed.
Speaker 3 (03:21):
So I took my Series seven right around the time
of September eleventh, and yeah, and then that and that,
and then one the one September eleventh happened that really
changed the course of my career. And I started uh
dabbling in fraud and risk management for the world's largest
check processor at the time.
Speaker 2 (03:41):
And then.
Speaker 3 (03:44):
That got me my first taste of money laundering because
we had multi million dollar check fraud rings that would
sit out in the parking lot and cash counterfeit checks.
And I got to work with federal la enforcement agencies
that were going after them because they would generate all
these illicit funds and then they had to go get
them into the financial and go get them into the
financial system.
Speaker 2 (04:05):
And yeah, so that was kind of my first dabble
of money laundering, and I just never looked back.
Speaker 4 (04:12):
So you got into this world of at the time,
check fraud that was the you know, this sounds like
it's you know, the early two thousands, you know, nineties,
early two thousands. And you know, how did you make
the I guess transition to focus more on on helping banks?
Did you see things were going wrong?
Speaker 2 (04:36):
Yeah?
Speaker 3 (04:36):
I think I think my first big remediation, my first
kind of turnaround, was two thousand and five and I
was living up in Alaska and this institution had just
gotten an order at the time that was not public
to comply with the first of.
Speaker 2 (05:00):
The exam manual.
Speaker 3 (05:01):
So this is twenty years ago, and the first aml
AT manual had come out in two thousand and five,
and it basically was like four hundred or I guess
at the time the first version was like three hundred
and eighty six pages or something it was, but I
mean it was quite quite large, and it was like
the first time that financial institutions had to start operationalizing
(05:23):
all of what came out of the Patriot Act and
you know, further pushing that ball down the field so
we don't have another September eleventh, right, and and yeah,
I mean it was it was one of those things
where I'm a speed operationalizer. That was one of the
things that paid off for me as a chronic a procrastinator,
(05:45):
especially during college, was I would you know, kind of
delay delay, delay, and then the last minute, I would
like cram and I speed read and I you know,
and I could distill takeaways. And that is something that
paid off very early on my career, and especially in
the turnaround world, where you're working under deadlines. You know,
you have ninety days to fix this massive issue that
(06:08):
has a lot of details to it, a lot of
other departments, involved a lot of people, you know, a
lot of data, a lot of disparate data, you know,
and you have ninety days. So I was like, oh,
this is like under the Gun, which I really liked.
Speaker 4 (06:23):
And so this was one bank and so you were
part of the process, I guess of it sounds like
you were helping them to get their compliance program straight.
Speaker 2 (06:34):
Yeah.
Speaker 3 (06:34):
Yeah, and then I you know, it like that kind
of turnaround view really kind of led into other similar positions.
And then you know, once you do that a couple
of times, you find out what you're really good at
You're good at reading in between the lines, helping banks
try to translate what the examiner is saying to them,
(06:59):
because a lot of times in the formal reports and
in the consent orders right that we see that are public,
it's not crystal clear, right, they will have a general
statement about their dissatisfaction with whatever this bank is doing,
but they don't say and then here are some recommendations
(07:19):
on how to fix it. And so that was something
that I think a lot of people who are in
the remediation business. Once you do that a few times,
it really becomes something that's a valuable skill that pays
off in every single bank or credit union or fintech
that you're in, and you're looking for those gaps and
you're able to think very quickly about the most efficient
(07:43):
and effective way for them to remediate those gaps.
Speaker 1 (07:47):
Well, let's talk about those gaps or a gap, because
I mean, you've become someone who is you know, it
seems like you know, banks and financial institutions have on
speed dial when it comes to coming and improving their
compliance programs. You know, tell us about a specific issue
or incident with the bank. What was a bank doing
(08:09):
wrong that you had to come and correct.
Speaker 3 (08:12):
Yeah, so I'll probably use an example that I've found
in many banks, just because I don't want a bank
to listen to this and go, hey, she's talking about me.
So probably probably a common one that I see that
almost always has the same fix that actually is kind
of a foundational deficiency that we find is linked to
(08:37):
a whole bunch of other regulatory issues would be the
lack of a risk assessment, which I know people will
probably like not want to talk about this because risk
assessments are not sexy or fun or any anything. But
I have a different view of risk assessments and I
(08:57):
feel like when they're done correctly, they really should be
done with a threat focused first, which I know you know,
especially with the government, as you're familiar with threat and
that term threat is used a lot. Is use the
military space, it's use the intelligence, it's used law using
the law enforcement space, but the private sector really doesn't
incorporate the term threat very well. Now we've started to
(09:21):
see where different bank regulators are starting to use the
word threats and risks and vulnerabilities, but really the private
sector has yet to start using that term and operationalizing
that term. And so I think one of the biggest
things I see, whether or not it ends up in
a formal consent order, is the lack of a you know,
(09:45):
threat focused risk assessment. I think a lot of times
are private sector folks we and I was also guilty
of this twenty years ago, where you jump right into well, I,
you know, well, we don't have risk in this area
because and then it's basically a whole bunch of feelings
sprinkled with some facts, and the threat focus really makes
(10:08):
you go and look at it from a different angle
where you go, Okay, if I was an a listed
actor and I wanted to move my funds through my
community bank, or through my credit union or through my fintech,
this is how I would do it. I would take
this product or this service, or I'd be in this
geographic location, or I would you know, set up this
(10:31):
type of business, and I would run the funds this
way or that way in order to avoid monitoring. And
I think that's the type of threat focused approach that
needs to happen. And a lot of times what we
get our risk assessments that are feelings with a little
bit of facts and then basically it's a static document
(10:52):
that sits there, and so I think that's probably I
would say a major, probably not symptom, it's probably a
root cause of a lot of the symptoms that we see. So,
you know, because then the end result of not having
a proper risk assessment is that you don't have enough people,
(11:12):
you don't have the right technology, You've said yes to
a group of higher risk customers when you should have
said no. There's all these things that kind of stem
from from an improperly performed risk assessment. And that's and
that's something I see across whether it's you know, a
thirty billion dollar bank or you know, a five hundred
(11:34):
million dollar bank, that that lack of a threat focused
risk assessment really seems to be a vital key.
Speaker 4 (11:40):
We well, those risk assessments are written by the personnel,
the written by people. Is there a certain mindset that
a person needs to have to be sort of threat focused?
Speaker 1 (11:53):
What have you noticed?
Speaker 2 (11:54):
Oh?
Speaker 3 (11:55):
Yeah, yeah, so this is something that you know, I
started kind of collecting data and not in a formal sense,
just you know notes. I like, I love to write
in a notebook, So I just have like a closet
full of you know, doodles and thoughts and stuff that
I've kept over the years, and I just started to notice,
(12:19):
I don't know, probably a decade ago, that there seemed
to have been this kind of theme when we had
a boom in our industry, right when the AML and
sanctions industry really took off, which you know was twenty
plus years ago, but really when I think it started
to become a household name in terms of money laundering,
(12:40):
right it was like front page news all the time.
That was probably ten or fifteen years ago, and so
we saw kind of a hiring boom, and I started
to see a trend of people in the industry, and
I know, this is a tough pill to swallow, so
I'll try to be delicate. People in the industry who
take a certification, they have years of experience, but they're
(13:04):
missing what we call a hyper suspicious mind. And it
really plagues every bank, from the largest banks that have
gotten in trouble down to the smallest banks. And it
is something that can lead to massive issues because you know,
most consent orders, most penalties that we see for banks,
(13:25):
almost all of them, like ninety eight percent of them
are based off of that financial institution, missing suspicious activity,
failing to report suspicious activity. Right, we aren't seeing massive
penalties because they missed ten ctrs or they transpose the
date of birth on a CTR multiple times. That's not
(13:46):
why banks get in trouble. Banks get in trouble because
they did not report a suspicious activity in a timely
or in an accurate manner to our federal LA enforcement partners,
full stop. And when you roll that back, it comes
down to an individual, a low level analyst who is
dispositioning alerts on the daily, you know, hundreds of alerts
(14:07):
throughout the week where they're having to research and say, yes,
this is suspicious, No, it's not suspicious. And because we
have such inefficiencies in our technology, a lot of these
analysts are taught to just get to the end of
your day, clear your alerts, and so then they start
to overtime kind of tamper down this hyper suspicious mind.
(14:30):
And then when that happens, you know, that's just kind
of a snow like a snowball effect where suspicious activity
that should have been at least escalated for someone else
to look at does not get that extra set of eyeballs.
So yeah, it's It's been a pretty interesting because twenty
(14:53):
I mean, just to give you a little more back background
on this, about twenty years ago, when I had to
do my first big of remediate, I was told that
the majority of my hires had to come internally, like
I was not able to hire outside, and I had
to build a team of eighteen people and I had
I think six at the.
Speaker 2 (15:12):
Time, and I was like, crap, I got.
Speaker 3 (15:15):
Twelve people that I have to take from inside, which
means I'm not going to be able to get people
to have a criminal justice degree or even know what
money laundering is.
Speaker 2 (15:26):
Right, this is twenty years ago.
Speaker 3 (15:28):
And so what I started to do was, of course
I didn't know that at the time, but I know
it now looking back at my notes. I started trying
to come up with sample scenarios of unusual or even
suspicious monetary movement and customer descriptions and give it to
the people that I was interviewing. And of course, little
(15:50):
did they know, I was actually timing them to see
how quickly I could gauge that they had a gut
instinct that something was off. Not that something is going
to be are worthy, that's too far down there, but
something is off, and it's usually a gut instinct that
men and women have when they have that hyper suspicious mind.
And I was very you know, in a very very
(16:13):
rudimentary way, trying to measure whether or not somebody could
play games with how they saw the activity in their head.
And it paid off.
Speaker 2 (16:26):
You know.
Speaker 3 (16:26):
I was able to hire people that had like an
art degree and like some other random degree that had
nothing to do with what we were doing, but they
had that good gut instinct that something was off in
the samples that I gave them. And then you know,
you kind of fast forward years and years later and
now we actually have tested requirements for it. Under one
(16:51):
of my other companies, hyper s Research. We have going
on six six years of data where we've started putting
together psychometric value cuations of individuals that are hyper suspicious.
So now like now, now like the science really speaks
for itself.
Speaker 1 (17:07):
So what's I mean?
Speaker 4 (17:09):
I don't know if the science tells you this or
just your experience. I mean, what is behind a hyper
sensitive mind or hyper sensitive mindset? Because you said, you
know there are people with criminal justice background, but you
also said an art major, So what ties it all
together for someone to have that mindset.
Speaker 3 (17:26):
Yeah, so what we found was, you know, I mean
what I was going for twenty twenty years ago was
somebody with a criminal justice degree that knew what the
term money laundering looked like. Today, though, what we've found
throughout our research is that a degree has nothing to
do you know, the type of degree, whether whether they
(17:46):
even have a degree, really has nothing to do with
the way in which we're hard we're hardwired right, the
way that we see data, the way that we see
the world. You know, our degree really has no bearing
on a lot of those traits. And while I can't
get into the specifics because that's kind of the secret
sauce of what we look for, I will say that
(18:06):
the majority of them are not learned behaviors. Meaning let's take,
you know, a generic one that we all know is
something that is vital to have in the financial crime world,
being curious. You can't take a grown human who's twenty
eight years old, who has no curiosity about the world
(18:29):
and teach them to be curious. I mean, that is
a long, uphill, hand holding, timely expensive battle to try
to take a grown human and have them be curious. So,
you know, so there are certain traits like that that
are hard that are hardwired that we can psychometrically evaluate
(18:51):
using gold standards that other clinical psychologists use for other
purposes besides the financial crime world.
Speaker 1 (19:00):
Well, Sarah Beth, I mean, you know, you know, I
know there are folks watching who you know, who aren't
compliance officers, who you know, hopefully through watching the show
they've been able to get a sense of kind of
what happens behind the scenes. But a lot of people
aren't familiar with the day to day. So I'm wondering
if you can give an example, But maybe even a
fake example doesn't matter. Obviously we don't want to, you know,
(19:22):
get into client issues or anything. But I mean an.
Speaker 4 (19:25):
Example of something happening coming across one's desk, or an
alert where maybe one person might ignore might ignore it,
and where the hyper sensitive individual that you mentioned would
key into, would key onto something. What can you give
us an example?
Speaker 2 (19:43):
Sure?
Speaker 3 (19:43):
So actually I can use one that's public, which is
the which I mean, I guess I don't have to
say their name. But there was a bank that banked
Jeff Epstein and they got in trouble and in their
public order from the state regulator, it noted that there
were analysts at this particular bank that received alerts on
(20:07):
the activity for Jeff Epstein, and they dispositioned the alerts
as he was just being a nice guy and facilitating
these young women to get through college. And you know,
while I don't know all the specifics that came across
that alert, the fact that at the time those alerts
(20:27):
were dispositioned, he was a known name in the financial
crime world. He had negative news on him. But these
individuals decided, oh, he was just being nice. And I
think a lot of times I see that in a
much more innocent manner, right, meaning we're not dealing with
you know, Jeff Epstein Junior or anything like that.
Speaker 2 (20:49):
But you know, we're dealing.
Speaker 3 (20:50):
With situations that are probably less severe, but could lead
to something more severe if it was looked at correctly.
Speaker 2 (21:03):
And that's where.
Speaker 3 (21:06):
A lot of times we put what we wouldn't do
on what we think someone else may or may not
be doing.
Speaker 2 (21:13):
Right.
Speaker 3 (21:13):
So, you know, most of us ninety nine point nine
percent of us are like, have no interest in the
trafficking of humans. Okay, So a lot of times they'll
look at data and go, oh, no, I'm sure he
or she didn't mean to do that, because who does that.
Speaker 2 (21:33):
I mean, I would never do that.
Speaker 3 (21:35):
And it's actually a projection, rights It's the projection of
the analyst's own goodness onto something that should have zero emotion,
zero projection placed upon it. And I think those are
the types of things that really can get a bank
into trouble, because even if we were to take it
(21:56):
down to something less severe, down to a situation where
a bank is consistently dispositioning an alert as not suspicious
and really it's got a whole bunch of cash. All
the cash deposits are between ninety seven hundred and ninety
nine hundred, but there are some days in which they
make a ninety nine hundred dollars deposit and a two
(22:18):
thousand dollars deposit. So there are ctrs that are filed.
I will say, I see this at every single bank
and credit union, there will be there will be an
alert disposition stating this customer must not mean to be structuring.
Speaker 2 (22:35):
Because he or.
Speaker 3 (22:36):
She has days in which they exceed ten thousand dollars
and a CTR is filed.
Speaker 2 (22:41):
And I'm like, that's not assume, all right, Yeah, So.
Speaker 4 (22:49):
Are you telling me that that you're looking for cynics
that there need to be cynics in compliance on climes.
Speaker 3 (22:57):
Yeah, there, Yeah, we've we've narrowed it down to I
think we have seventeen different measurable traits. So you know,
when we say somebody who's hyper suspicious, we're not. We're
not talking about somebody who thinks that everyone is bad
and the sky is falling all the time because in
that because then that leads to a lot of inefficiencies, right,
(23:18):
because then somebody can never dig out of that hole,
and we don't and we don't we don't want that.
So there's other compensatory traits that we find that are
very vital to being a good of financial crimes analyst.
But somebody who is cynical, who doesn't see the world
(23:40):
through rose colored glasses, really should be at the heart
of any financial crimes group, because the world needs rose
colored glass or you know, rose of colored glasses, and
the people who wear those road color rose color glasses,
but they don't belong in the financial crime function. They
(24:01):
belong at the branch right or on the phone with
a bank customer. They do not belong dispositioning alerts.
Speaker 4 (24:08):
Got it, Yeah, I can I can see that. Yeah,
sometimes it's reversed. Sometimes you get the person in customer
service and they seem like they're in the wrong place,
so maybe they've been reversed.
Speaker 1 (24:19):
Maybe that's been the issue a lot of time.
Speaker 3 (24:21):
Oh yeah, and that's and that's actually what we found
when we do a restrategy restrategizjasent, you know the word
I'm going for. Yeah, in a financial institution, we find
that we actually can assess how someone is hardwired in
(24:43):
a non financial crime group and do a one one
for one swap or you're like, hey, that person that's
over in customer service actually is wired exactly how you'd
want somebody wired. They should actually be in your group,
not over there he than customers.
Speaker 1 (25:01):
So wow. Yeah, Well, speaking of suspicion, I mean you
mentioned SARS Suspicious Activity Reports. That's sort of the hearts,
you know, the heart and soul of a lot of
what happens in AML compliance. Tell us about SARS, because
I mean, I think we should talk a bit about
this because in some circle stars are controversial, some people
(25:22):
just hate them, and within industry and outside of industry.
But what's your take on SARS, the good, the bad,
the ugly, so.
Speaker 2 (25:30):
Many things to say.
Speaker 3 (25:32):
I would say that sars serve an important role. You know,
I've trained federal law enforcement agencies, I've worked with them
over the years, and I have yet to meet one
agent who has said, oh, these stars are driving me crazy,
right like it is like.
Speaker 2 (25:54):
When they are.
Speaker 3 (25:56):
When I find that they express some type of frustration,
it's because they don't have enough bandwidth, enough time, the
right technology to efficiently search or manage the volume of
stars that are submitted. I think from the private sector,
(26:18):
I think a lot of the noise about well, I
guess a lot of the negative noise about star filings
come come from individuals who feel like they don't get
any feedback, which you know is a long standing problem.
And I know there's different agencies that are working hard
and trying to figure out a legal manner in which
(26:41):
they can share some type of thumbs up, you know,
neutral thumb thumbs thumbs down when it comes to different
stars and star types.
Speaker 2 (26:50):
I don't know if.
Speaker 3 (26:51):
That'll ever go through, but you know I would. I
would say that's the general frustration I get from all
the AML officers in the private sector. They kind of
feel like, I really wish that my stars. You know
that I like knew that somebody found value in that.
Then you know, there's a whole bunch of people, I
think on the fringe, from regulators to bank executive management
(27:15):
and board and people who are retired.
Speaker 2 (27:20):
Who like to.
Speaker 3 (27:22):
Say that, you know, the SAR process as a whole
needs to be revamped. I definitely think there's lots of
room for improvement for foreshore in lots of different areas. Right,
the fact that we don't even have a box on
the SAR form to designate crypto or digital assets huge problem.
(27:43):
You know, there's other types of typologies that the private
sector are charged with monitoring and filing on that there's
no box to check that on the STAR form. Right,
we can't say human trafficking, right, this is a typology
for human trafficking. So there's a different things like that
that I think would help both this submitter as well
as the user of STARS, which is our law law
(28:08):
enforcement folks. And I think I think having both sides
in one war room would help. But I think some
of the suggestions that we have kind of in the
space now to increase the dollar threshold don't I don't
agree with really.
Speaker 4 (28:30):
Why because people will say inflation that the requirement you know,
is decades old or so.
Speaker 3 (28:37):
Yeah, So the inflationary comments I hear, at least for
like the ctrs, which is like the ten thousand and up,
I think they're looking at the wrong thing, right, they're
looking and they're they're I don't know, they're a denominator
in their head is today's value of homes and milk
(29:01):
and cars and everything else, right, which is you know
where they pin inflation on. And I think really the
denominator should be what is reasonable? Like I have at
you know, at most anytime, one hundred bucks in my wallet,
and that's just because my babysitter only wants to be
paid in cash, right, But like if I didn't have that,
(29:25):
I would not have like I would probably have forty
bucks at any time in my wallet. So somebody having
ten thousand dollars or more in cash, does it mean
they're doing something wrong?
Speaker 2 (29:38):
No? Is it reasonable? No? Not?
Speaker 3 (29:43):
Not not today, not with how everything is so digital
and everything is debit cards. So you know, I think
I think people use the inflation argument for CTR specifically
because they want to figure out a way to reduce
all the reporting. I have a couple of different thoughts
on how to do that better in terms of stream
(30:05):
streamlining that of report. That kind of uh brings in
a little bit of what Australia does and a little
bit of what Canada does. But that's for another topic.
But I think from a STAR perspective, you know, the
threshold is five thousand or more, and I mean if
you know the person, you know, if you actually have
(30:25):
identified the suspect. And I I think I think given
the fact that we don't have different thresholds for different typologies,
the last thing I would want to do is increase
that dollar amount to you know, twenty thousand if you
(30:46):
have a suspect that's identified and have a nine to
eleven right where it was financed for less than five
thousand dollars. So that that that's where I don't I
don't don't really see a benefit in the SAR reporting.
I think a lot of times people when they talk
about moving the threshold up, it's on the CTR side.
(31:09):
I think the SAR threshold should stay the same. But
I think we need a lot of work, a lot
of refinement on both the government side, from the regulators
as well as the users and submitters.
Speaker 2 (31:21):
Of sars.
Speaker 4 (31:22):
So if someone is saying, well, five thousand dollars I'm doing,
I'm getting all these you know, I'm forced to file
a SAR when there may not be any issue there
and it's taking up taking me away from focusing on
the more riskier issues.
Speaker 1 (31:38):
What do you say?
Speaker 3 (31:39):
That's a tough one because for me to answer someone
who would say that to me, I guess I would
need to know what their threat assessment looks like, because
if they're you know, banks are not charged with finding
every single illicit actor and every single elicit dollar that
(32:00):
flows through their you know, flows on.
Speaker 2 (32:02):
Their rails essentially right in or out of the bank.
Speaker 3 (32:05):
That is not what the point of the SAR reporting
processes or even all the necessary steps leading up to
reporting a SAR.
Speaker 2 (32:15):
That is not what banks are supposed to be doing.
Speaker 3 (32:19):
They are supposed to be taking a threat focused approach,
which you know a lot of times they look at
it from a risk perspective and they go, oh, well,
we don't have the risk of appliferation financing, and so
they just kind of don't even look for that typology.
And it's like, well, well, your threats, your threats and
(32:41):
vulnerabilities have to come before your risks. Your threat customer
base is actually quite sizable because you US Community Bank
Bank a lot of manufacturers in the refrigeration space, and
they make all the little coils and all the little
attachments for all the little parts in a refrigerator.
Speaker 2 (33:00):
Sounds very benign, but we.
Speaker 3 (33:02):
Know dual use goods, and so a lot of times,
like my next question, when I hear that type of
feed that feedback where they're like, oh, I'm spending all
this time, you know for something that's fifty one hundred
dollars or whatever, you know, and I have to file
a star for that. Are you looking at it through
the correct threat lens and not not just that particular
(33:23):
one that's you know, right at the filing threshold, but
all of the activity. Are you going after your biggest
threats or are you just filing you know, for fraud
and for structuring, which I would say most community institutions,
you know, ninety eight percent of what they file is
not anything complex.
Speaker 2 (33:42):
Right.
Speaker 3 (33:42):
They aren't looking for prolofreation financing, they aren't looking for
labor trafficking, right, all these nuanced typologies they're filing on structuring,
and they're filing on fraud.
Speaker 1 (33:53):
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to stop it. Learn more at hummingbird dot co. That's
hummingbird dot co. Can you tell us about an experience
where things didn't go right? You know? I mean, because
I know you're very successful, but people often like to
(34:57):
hear about when things You know, how did you get
to that success? There? I had to be some road
bumps along the way. What can you share?
Speaker 2 (35:03):
Oh man?
Speaker 3 (35:05):
Yeah, I mean, I think I think I'm an acquired taste.
I pull no punches and so I had to learn
very early on, especially when I started my consulting business
fourteen years ago, that what I wanted to say and
(35:30):
what is helpful are two different things. And you know,
knowing your audience goes a long way. So, you know,
as as I got further into my consulting company, it
was it was critical that I take feedback from my clients,
(35:54):
who were mainly men right there. I mean, because it's,
you know, the banking world, and let's you know, there's
and there's nothing wrong with that. There's just a lot
of men in charge. And so I had to learn
very quickly, based on some feed some feedback I got
during a remediation project, that my messaging needed to be
(36:15):
more concise. And you know, it's it's it's never fun
to hear like I don't I don't you know, I
am tossing out everything you're telling us because I don't
like the way in which you presented it. And while
that's probably something where both sides have of responsibility, what
(36:36):
it taught me was when dealing with the opposite sex,
when they're hiring you to fix them, they don't need
to know all the details, right, they just want to
know at the end of the day that I'm going
to get them fixed. And I had to learn that.
(36:57):
It took a couple projects, but I feel like I've
nailed it, you know. I mean, I'm not perfect at it,
because you know, I'm a woman and I like to
describe things and talk and you know, all that kind
of stuff.
Speaker 2 (37:09):
But I try to be hyper aware of.
Speaker 3 (37:14):
The listener and read body language and cues so then
I can be an effective communicator.
Speaker 4 (37:24):
So you're you're telling us men don't like to be
criticized what you're saying, and you think you figured that
out when when you got the feedback from from these.
Speaker 1 (37:36):
Guys that uh uh, maybe we'll take your advice if
you down a little bit.
Speaker 2 (37:42):
Yeah, yeah, yeah.
Speaker 3 (37:43):
And I you know, I think I think there's a
lot to be said for the end goal keeping your
eye on the prize of like really wanting this bank,
you know, Credit Union, to be running like a well
oiled machine. And if that's really my goal and all
that I do, then I have no problem making sure
(38:05):
that my comments and my critiques and all of the
information I'm giving the other party is not offensive and
does not stand in the way of my ultimate goal,
which is to get this bank out of the regulator's
crosshairs and in into a position where they're finding truly
suspicious activity and reporting it timely.
Speaker 2 (38:27):
And so you know it.
Speaker 3 (38:29):
I mean, I don't. I don't think anyone likes to
be criticized. I mean I I certainly don't like it.
But I think when you're able to take it and
take it with a grain of salt, take the emotion
out of it, and go, Okay, these are their needs
that they're telling me, and this is how I'm going
(38:50):
to meet those needs and also get to my end
goal of making this bank better.
Speaker 4 (38:56):
So well, it sounds like you're able to sort of
keep your eyes on the prize, right, keep your eyes
on the goal for the client, for the bank, helping them,
you know, giving them what they you know, not just
what they want, but what they really need. So you know,
with your success, what has been the greatest lesson for
the past twenty years that you'd like to share that.
Speaker 3 (39:18):
I can't do it all, you know, I think there's
a lot of me that I like to fix stuff.
Somebody the other day call me fix it, Felix.
Speaker 2 (39:29):
I like that.
Speaker 3 (39:32):
So I like in my personal life, in my professional life.
I like to fix things, and I had to really
work on boundaries, which a lot of people always kind
of you know, you know, hear that word boundaries is
something that's only in relationships, you know, personal relationships. And
(39:53):
I think it's also professionally because if I try to
fix all these things and I tried to you know,
pitch in whether or not it's wanted or not, I
will get burnout and I will not have as much
focus as I need to to actually see things through.
And that's where I mean, while I'm still involved in
quite quite a bit with my consulting company and my
(40:15):
bank and my other startups, it's.
Speaker 2 (40:19):
Something where.
Speaker 3 (40:22):
I like, I had to learn very early on, when
you know, we had the Graham we had the gram
Leach Blily Act, we had the ID theft Prevention Program,
we had all these things in the early two thousands
that everyone was also trying to be experts on.
Speaker 2 (40:36):
And I had to pick a horse.
Speaker 3 (40:38):
And so my horse is sanctions an email, So I'm
not trying to be an expert in the alphabet, soup
regulations or basically anything else. And so that was my
one horse. But even after I chose that one horse,
I still had to make sure that I wasn't trying
to fix all these things right. I had to keep
as I tell my daughter, like, don't move your fan
(41:00):
into someone else's yard. And so when I find all
of these issues in our email and sanctions industry, I
want to go move my fence into that yard to
fix it.
Speaker 2 (41:16):
But if I continue to do.
Speaker 3 (41:17):
That, then I'll run out of the band like the
bandwidth to actually make an impact in other areas that
are within my yard.
Speaker 2 (41:25):
So does that make sense?
Speaker 1 (41:28):
It does.
Speaker 4 (41:29):
But you also just casually mentioned that you have a bank.
You started a bank. You know, I've seen honey, I've
bought a zoo. I've never seen, honey, I've started a bank.
So could you tell us about that?
Speaker 3 (41:42):
Yeah, So this was actually born out of the desire
to help the massy risking trend that we saw in
twenty fifteen and sixteen where foreign financial institutions I believe,
or as a whole, unfairly cut off from the US
(42:07):
financial system by a lot of the Tier one banks.
And you know, there's been Senate hearings and all of
this stuff that we've seen over the years where these
banks say, no, we didn't do you know, we didn't
just mass cut these people off. And the regulators are like,
oh no, we never told you know, Bank X to
(42:28):
exit their foreign a financial institution customer base. But you know,
so no one's taking any fault for this is basically
what that means. So twenty eighteen, I met Damon who
is one of my co founders. I was doing a
project for a bank. He was also at the bank
(42:48):
doing something completely different, and he was like, Hey, tell
me about what you're doing. What are your biggest pain
points in your industry? And I was like, oh, I'm like,
I'm playing matchmaker to banks and island nations and I'm
trying to one by one match them up with community
banks in the US that I believe have a strong
AML program and that would be a good bank partner
(43:09):
for them to clear their US dollars. And that was
not sustainable. And he was like, well, what do you
want to do? And I'm like, I want to start
a bank, and I want this bank to be so
narrow focused that the regulators aren't worried about us, because
we're not trying to do all these things that you know,
these large tier tier one banks do. And then they
have this little, tiny sliver that they bank for in
(43:31):
financial institutions. I'm like, I only want to bank foreign
financial institutions. So we kind of started on this process.
It was twenty eighteen we started working. We were in
a different state than we are now at the time,
and we were essentially told throughout our two years that
that wasn't going to happen, that they did not want
us banking foreign financial institutions because they wanted us to
(43:54):
have a super compliant compliance program and there was no
way for them to test it. So we decided to
bank US financial institutions first, so then our regulators federal
and state, can kick the tires. They can see what
a great sanctions and email program we have when we're
only banking domestic financial institutions in the US, And once
(44:17):
they get to kick the tires on that, then maybe
hopefully some day in five to eight years, the regulators
will let us bank foreign financial institutions. But we found
and what our goal is right now is to only
bank US financial institutions. Because as we started down this path,
(44:38):
we started to see where we really could use our
technology in a way that helps community banks credit unions
make money on something that they're already doing where they
make no money and they have a lot of compliance
risk that shifted to them and are a technology. We
have two patented pieces of technology and it fixes both
of those issues. I won't go into the details of it,
(45:00):
but during this process, like because me, I like to
fix things, like I said earlier, during this process, you know,
the thing I wanted to fix was banking foreign financial institutions,
but that's kind of off the table for right now.
Speaker 2 (45:14):
So what we.
Speaker 3 (45:16):
Found was domestic financial institutions could also use our help,
not just with making money, but also that rising tide
lifts all boats. Because we have super sophisticated technology that
we're deploying, and because we're solely focused on sanctions and
aml compliance right we're not making loans, we're not taking deposits,
so we don't have to deal.
Speaker 2 (45:35):
We aren't distracted.
Speaker 3 (45:37):
And because we're getting this area so right, we have
the opportunity to inform our client banks, so our US
community banks and credit unions that will bank with us,
we get to have that open pathway with them saying hey,
I'm not sure what you guys have found on John Doe,
but this is what we've found. Has your system found this,
(45:57):
and then that gives the opportunity for that community bank
to go, oh, no, crap, what are we missing? And
so it you know, it's that rising tide. And then
we help a community banks and credit unions get better
and better at sanctions at mL as well as you know,
helping them with our services that we offer.
Speaker 1 (46:15):
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Thompson Reuter's equips institutions to navigate complexities with confidence by
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clear to learn more. I wonder if you can explain
the purpose behind even your overarching goal, because I don't
(47:23):
think a lot of people, I mean a lot of
people don't understand how the banking system works and correspondent banking.
So tell us what's wrong with you what you've noticed
in terms of certain banks being cut off? And are
these mostly banks from certain types of countries? You know,
what's the problem there?
Speaker 3 (47:43):
Yeah, So, I mean this was about a decade ago
when this really started to kind of make the news.
I know, the world banks head panels, and the IMF
has head panels, and we've had lots of panels in
DC on this, and I would say as a whole,
most foreign financial institutions are cut off because the US
(48:05):
designates the country that they're in as higher risk. You know,
that's kind of the first step. Now, that doesn't mean
now I'm not talking about sanctioned countries, right, I'm not
talking about Russia. I'm talking about like, you know, island nations. Yeah,
I am talking about island nations, typically Central America, South America,
(48:26):
the South Pacific, where their aml frame framework at their
national level may look a little bit different than ours,
their enforcement is not going to be as broad as ours,
meaning no one has you know, what is it six
different federal law enforcement agencies that have access to stars
(48:50):
like we do, right, we have, you know, many many
different ways in which we can act on suspicious activity.
And not every country is designed like that or even
close to that. So I think, you know, there's lots
of different factors that kind of go into the US
taking a stance and saying, hey, this country in this
(49:10):
area of the world is higher risk. And as soon
as the US designates another country as higher risk, it
it makes the bank, the US bank partner that's banking them.
It forces them, in an informal manner, to then put
a whole bunch of people in technology and monitoring behind
(49:31):
that so they can justify to their regulator that they
aren't banking banking a bank that has illicit clients downstream
from this bank. And so I think I think that's
probably the first kind of blush on this. As soon
as you see a higher risk and I'm not talking
high I'm talking higher risk country, a lot of banks
(49:56):
just go oh yeah, nope, sorry, I'm not going to
do it. It's like wait, wait, wait, bute. If you
actually look at that country's framework, let's say island nations
down in the Caribbean, most of those countries have been
enforcing beneficial ownership requirements both at the collection level when
(50:17):
they go to a bank as well as the FIU.
Right they're a financial intelligence unit at their federal level
or at their national level. They've been collecting beneficial owners
on businesses for eight years, longer than the than the
US has right now. Granted that's only one tiny part,
but still like those that type of data needs to
(50:41):
be looked at, you know, in a like a very
sober manner, because what we do is we kind of
lump them all in because they may have a reputation
for offshore businesses.
Speaker 2 (50:55):
Yet the US has.
Speaker 3 (50:56):
The largest onshore offshore generation generating states for anonymous companies.
Yet that yet no one's you know, no one's going
to these banks saying hey, you Tier Tier one bank,
you shouldn't on onboard any businesses that were incorporated in Delaware.
Speaker 2 (51:17):
No one's doing that.
Speaker 3 (51:18):
But then we'll go and do the same thing for
a country that has way less corporate establishments and generally
higher risk view even though they are collecting beneficial owners.
Speaker 1 (51:32):
So yeah, well, I mean, no, it's it's great because
you're you're trying to, you know, bring fairness into into
the ecosystem and and I mean that's I think a
very noble goal and you're doing it in a practical way,
and you're starting, you know here with with with institutions
and building you know, building something that could be expanded upon.
(51:54):
So yeah, I commend you. I think that's great work.
And again, looking at your career, what you've done, your
sort of service to I would say to the greater
good is you know, it's it's it's something that I
think we need to acknowledge that people need to acknowledge.
You know, Sarah Beth, with all of your experience, I
know there are probably people here listening or watching compliance officers.
(52:20):
You know, is there any singular advice that you'd like
to give to those compliance officers that want to get
better and be excellent at AML and sanctions.
Speaker 2 (52:31):
That's a great question.
Speaker 3 (52:35):
I think probably to follow the boundary advice right to
pick pick the things that you can change and change
those right don't don't don't spend your time trying to
fix things that are completely out of your control. But
you know, because I said that earlier, but I think
I think the other one would be, don't be afraid
(52:55):
to like burn it down and start over. Meaning because
we've had the manual, this exam manual for twenty years now.
Happy twentieth anniversary, every AML officer. If you're in a
traditional financial institution, you know, bank or credit union, they
(53:19):
they don't want to strip everything down and rebuild because
they don't have enough people. But I think it's a
good exercise, right if you start from scratch and you
go If I had, if I had nothing to go
off of, right, I didn't have this legacy risk assessment
that's been handed down to me for the last ten
(53:40):
ten years, in which we edit you know, the numbers,
and we go in and add a little, you know,
a few lines about what we're doing. You know, if
I didn't have these procedures that we've had for twenty
years that we just keep adding to and taking from
depending on who audits us and gives us their advice,
if you had to burn it down and start all over,
or what would it look like, and I think that's
(54:02):
a great exercise. And again, I know when I say that,
people will hear this and go like time right, yeah,
but you know they don't like I mean most I
will say, unless a bank is under an order or
under some type of penalty, they are going to be
understaffed in this function. So I think it's hard for
(54:25):
me to say, oh, let's burn it down and then
you know it takes you weeks to build it back.
But I think doing it in a controlled burn, if
you will, you know, you know how they do controlled burn,
so then the fires don't overtake everything. And I think
that's kind of the mindset. You know, if you were
to look at your technology, look at your solutions and
go all right, if money wasn't an issue, if if
(54:48):
the technology wasn't you know, if if I hadn't signed
an eight year long deal, what would my daily alerts
look like?
Speaker 2 (54:56):
Would they be all structuring?
Speaker 3 (54:57):
Would they have you know, some of the higher typologies
that banks are charged with finding from all the finsend guidance.
Like those types of exercise, I think in like the
burn it down, it needs to be controlled, it needs
to be focused, and I think that has the opportunity
to really change an AML program, and you know that's
(55:20):
probably the advice that we give.
Speaker 1 (55:23):
We can learn quite a bit from Sarah Beth Felix.
She tells us how the anti money laundering ranks at
the banks need to be active and perceptive in identifying
suspicious transactions within their institutions. But Sarah Beth is not
just an identifier of illicit activity, but a problem solver
who is building her own bank to serve as a
(55:43):
model for how foreign banks from smaller nations can attain
the high AML standards necessary to gain access to the
US financial sector. Impressive work she helps to fight financial
crime around the world. I'm Yaya Jata Finussi and this
is designated on the Illicit Edge Network.
Thomson Reuter's risk and fraud solutions empower financial institutions to
safely on board and continuously evaluate customers, members and vendors,
and to increase new business securely through automated technology. Visit
tr dot com slash clear to learn more. Designated is
(00:25):
proudly supported by a Hummingbird. Hummingbird is a modern compliance
platform designed to make financial crime investigations smarter, faster, and
more effective because today's financial criminals are sophisticated, savvy, and agile,
meaning the tools used to fight them should be two.
Learn more at hummingbird dot Co. I'm Yaya Jata FINUSSI.
(00:56):
When most of us walk into a bank, or even
call a bank, we deal with the public facing staff,
the teller, a customer service specialist, or maybe even a
loan officer. But what most people don't realize is there
is a whole group of personnel at the bank who
work behind the scenes, yet they are on the front
line against financial crime. They are the anti money laundering
(01:18):
compliance staff. You don't interact with them directly, but they're
the ones looking for signs of suspicious financial activity. Sarah
Beth Felix is an anti money laundering expert and consultant
who helps banks get their compliance act together. She spoke
to me about how good AML experts are wired differently
(01:39):
than other banking staff. It's time to get designated with
Sarah Beth Felix. Sarah Beth, can you tell us your
origin story?
Speaker 2 (01:50):
All right? Well, I'm a beach girl at heart.
Speaker 3 (01:53):
I was born and raised in Tampa, fourth generation in Tampa,
which is quite unusual, and was raised on a little
beach just west of Tampa that my great grandmother also
lived on. And I've lived all over. I was married
to military for a few years, and so I got
(02:15):
to move to the South Pacific and lived on the
island of Guam for a few years, but I had
to commute back and forth to Chicago.
Speaker 4 (02:23):
So how does a Florida beach girl end up working
in finance and dealing with illicit finance and AML?
Speaker 2 (02:34):
Yeah? So out of college.
Speaker 3 (02:37):
You know, my field wasn't really a field that a
lot of people knew about. In fact, I don't think
any college courses in the nineties and the late nineties
had anything to do with financial crime. And you know,
I just thought, well, I wanted to be a businesswoman.
Speaker 2 (02:54):
That's what I grew up with.
Speaker 3 (02:55):
My dad was a technology executive for most of my life,
and I just remember being like, I want to be
a businesswoman.
Speaker 2 (03:01):
I had no clue what that looked like.
Speaker 3 (03:03):
And and then I really got into the stock market,
and you know, got a business degree and a few miners,
lived in Costa Rica for my Spanish minor, and I
had a finance minor and a you know, international business degree,
and then I decided to get.
Speaker 2 (03:21):
Licensed.
Speaker 3 (03:21):
So I took my Series seven right around the time
of September eleventh, and yeah, and then that and that,
and then one the one September eleventh happened that really
changed the course of my career. And I started uh
dabbling in fraud and risk management for the world's largest
check processor at the time.
Speaker 2 (03:41):
And then.
Speaker 3 (03:44):
That got me my first taste of money laundering because
we had multi million dollar check fraud rings that would
sit out in the parking lot and cash counterfeit checks.
And I got to work with federal la enforcement agencies
that were going after them because they would generate all
these illicit funds and then they had to go get
them into the financial and go get them into the
financial system.
Speaker 2 (04:05):
And yeah, so that was kind of my first dabble
of money laundering, and I just never looked back.
Speaker 4 (04:12):
So you got into this world of at the time,
check fraud that was the you know, this sounds like
it's you know, the early two thousands, you know, nineties,
early two thousands. And you know, how did you make
the I guess transition to focus more on on helping banks?
Did you see things were going wrong?
Speaker 2 (04:36):
Yeah?
Speaker 3 (04:36):
I think I think my first big remediation, my first
kind of turnaround, was two thousand and five and I
was living up in Alaska and this institution had just
gotten an order at the time that was not public
to comply with the first of.
Speaker 2 (05:00):
The exam manual.
Speaker 3 (05:01):
So this is twenty years ago, and the first aml
AT manual had come out in two thousand and five,
and it basically was like four hundred or I guess
at the time the first version was like three hundred
and eighty six pages or something it was, but I
mean it was quite quite large, and it was like
the first time that financial institutions had to start operationalizing
(05:23):
all of what came out of the Patriot Act and
you know, further pushing that ball down the field so
we don't have another September eleventh, right, and and yeah,
I mean it was it was one of those things
where I'm a speed operationalizer. That was one of the
things that paid off for me as a chronic a procrastinator,
(05:45):
especially during college, was I would you know, kind of
delay delay, delay, and then the last minute, I would
like cram and I speed read and I you know,
and I could distill takeaways. And that is something that
paid off very early on my career, and especially in
the turnaround world, where you're working under deadlines. You know,
you have ninety days to fix this massive issue that
(06:08):
has a lot of details to it, a lot of
other departments, involved a lot of people, you know, a
lot of data, a lot of disparate data, you know,
and you have ninety days. So I was like, oh,
this is like under the Gun, which I really liked.
Speaker 4 (06:23):
And so this was one bank and so you were
part of the process, I guess of it sounds like
you were helping them to get their compliance program straight.
Speaker 2 (06:34):
Yeah.
Speaker 3 (06:34):
Yeah, and then I you know, it like that kind
of turnaround view really kind of led into other similar positions.
And then you know, once you do that a couple
of times, you find out what you're really good at
You're good at reading in between the lines, helping banks
try to translate what the examiner is saying to them,
(06:59):
because a lot of times in the formal reports and
in the consent orders right that we see that are public,
it's not crystal clear, right, they will have a general
statement about their dissatisfaction with whatever this bank is doing,
but they don't say and then here are some recommendations
(07:19):
on how to fix it. And so that was something
that I think a lot of people who are in
the remediation business. Once you do that a few times,
it really becomes something that's a valuable skill that pays
off in every single bank or credit union or fintech
that you're in, and you're looking for those gaps and
you're able to think very quickly about the most efficient
(07:43):
and effective way for them to remediate those gaps.
Speaker 1 (07:47):
Well, let's talk about those gaps or a gap, because
I mean, you've become someone who is you know, it
seems like you know, banks and financial institutions have on
speed dial when it comes to coming and improving their
compliance programs. You know, tell us about a specific issue
or incident with the bank. What was a bank doing
(08:09):
wrong that you had to come and correct.
Speaker 3 (08:12):
Yeah, so I'll probably use an example that I've found
in many banks, just because I don't want a bank
to listen to this and go, hey, she's talking about me.
So probably probably a common one that I see that
almost always has the same fix that actually is kind
of a foundational deficiency that we find is linked to
(08:37):
a whole bunch of other regulatory issues would be the
lack of a risk assessment, which I know people will
probably like not want to talk about this because risk
assessments are not sexy or fun or any anything. But
I have a different view of risk assessments and I
(08:57):
feel like when they're done correctly, they really should be
done with a threat focused first, which I know you know,
especially with the government, as you're familiar with threat and
that term threat is used a lot. Is use the
military space, it's use the intelligence, it's used law using
the law enforcement space, but the private sector really doesn't
incorporate the term threat very well. Now we've started to
(09:21):
see where different bank regulators are starting to use the
word threats and risks and vulnerabilities, but really the private
sector has yet to start using that term and operationalizing
that term. And so I think one of the biggest
things I see, whether or not it ends up in
a formal consent order, is the lack of a you know,
(09:45):
threat focused risk assessment. I think a lot of times
are private sector folks we and I was also guilty
of this twenty years ago, where you jump right into well, I,
you know, well, we don't have risk in this area
because and then it's basically a whole bunch of feelings
sprinkled with some facts, and the threat focus really makes
(10:08):
you go and look at it from a different angle
where you go, Okay, if I was an a listed
actor and I wanted to move my funds through my
community bank, or through my credit union or through my fintech,
this is how I would do it. I would take
this product or this service, or I'd be in this
geographic location, or I would you know, set up this
(10:31):
type of business, and I would run the funds this
way or that way in order to avoid monitoring. And
I think that's the type of threat focused approach that
needs to happen. And a lot of times what we
get our risk assessments that are feelings with a little
bit of facts and then basically it's a static document
(10:52):
that sits there, and so I think that's probably I
would say a major, probably not symptom, it's probably a
root cause of a lot of the symptoms that we see. So,
you know, because then the end result of not having
a proper risk assessment is that you don't have enough people,
(11:12):
you don't have the right technology, You've said yes to
a group of higher risk customers when you should have
said no. There's all these things that kind of stem
from from an improperly performed risk assessment. And that's and
that's something I see across whether it's you know, a
thirty billion dollar bank or you know, a five hundred
(11:34):
million dollar bank, that that lack of a threat focused
risk assessment really seems to be a vital key.
Speaker 4 (11:40):
We well, those risk assessments are written by the personnel,
the written by people. Is there a certain mindset that
a person needs to have to be sort of threat focused?
Speaker 1 (11:53):
What have you noticed?
Speaker 2 (11:54):
Oh?
Speaker 3 (11:55):
Yeah, yeah, so this is something that you know, I
started kind of collecting data and not in a formal sense,
just you know notes. I like, I love to write
in a notebook, So I just have like a closet
full of you know, doodles and thoughts and stuff that
I've kept over the years, and I just started to notice,
(12:19):
I don't know, probably a decade ago, that there seemed
to have been this kind of theme when we had
a boom in our industry, right when the AML and
sanctions industry really took off, which you know was twenty
plus years ago, but really when I think it started
to become a household name in terms of money laundering,
(12:40):
right it was like front page news all the time.
That was probably ten or fifteen years ago, and so
we saw kind of a hiring boom, and I started
to see a trend of people in the industry, and
I know, this is a tough pill to swallow, so
I'll try to be delicate. People in the industry who
take a certification, they have years of experience, but they're
(13:04):
missing what we call a hyper suspicious mind. And it
really plagues every bank, from the largest banks that have
gotten in trouble down to the smallest banks. And it
is something that can lead to massive issues because you know,
most consent orders, most penalties that we see for banks,
(13:25):
almost all of them, like ninety eight percent of them
are based off of that financial institution, missing suspicious activity,
failing to report suspicious activity. Right, we aren't seeing massive
penalties because they missed ten ctrs or they transpose the
date of birth on a CTR multiple times. That's not
(13:46):
why banks get in trouble. Banks get in trouble because
they did not report a suspicious activity in a timely
or in an accurate manner to our federal LA enforcement partners,
full stop. And when you roll that back, it comes
down to an individual, a low level analyst who is
dispositioning alerts on the daily, you know, hundreds of alerts
(14:07):
throughout the week where they're having to research and say, yes,
this is suspicious, No, it's not suspicious. And because we
have such inefficiencies in our technology, a lot of these
analysts are taught to just get to the end of
your day, clear your alerts, and so then they start
to overtime kind of tamper down this hyper suspicious mind.
(14:30):
And then when that happens, you know, that's just kind
of a snow like a snowball effect where suspicious activity
that should have been at least escalated for someone else
to look at does not get that extra set of eyeballs.
So yeah, it's It's been a pretty interesting because twenty
(14:53):
I mean, just to give you a little more back background
on this, about twenty years ago, when I had to
do my first big of remediate, I was told that
the majority of my hires had to come internally, like
I was not able to hire outside, and I had
to build a team of eighteen people and I had
I think six at the.
Speaker 2 (15:12):
Time, and I was like, crap, I got.
Speaker 3 (15:15):
Twelve people that I have to take from inside, which
means I'm not going to be able to get people
to have a criminal justice degree or even know what
money laundering is.
Speaker 2 (15:26):
Right, this is twenty years ago.
Speaker 3 (15:28):
And so what I started to do was, of course
I didn't know that at the time, but I know
it now looking back at my notes. I started trying
to come up with sample scenarios of unusual or even
suspicious monetary movement and customer descriptions and give it to
the people that I was interviewing. And of course, little
(15:50):
did they know, I was actually timing them to see
how quickly I could gauge that they had a gut
instinct that something was off. Not that something is going
to be are worthy, that's too far down there, but
something is off, and it's usually a gut instinct that
men and women have when they have that hyper suspicious mind.
And I was very you know, in a very very
(16:13):
rudimentary way, trying to measure whether or not somebody could
play games with how they saw the activity in their head.
And it paid off.
Speaker 2 (16:26):
You know.
Speaker 3 (16:26):
I was able to hire people that had like an
art degree and like some other random degree that had
nothing to do with what we were doing, but they
had that good gut instinct that something was off in
the samples that I gave them. And then you know,
you kind of fast forward years and years later and
now we actually have tested requirements for it. Under one
(16:51):
of my other companies, hyper s Research. We have going
on six six years of data where we've started putting
together psychometric value cuations of individuals that are hyper suspicious.
So now like now, now like the science really speaks
for itself.
Speaker 1 (17:07):
So what's I mean?
Speaker 4 (17:09):
I don't know if the science tells you this or
just your experience. I mean, what is behind a hyper
sensitive mind or hyper sensitive mindset? Because you said, you
know there are people with criminal justice background, but you
also said an art major, So what ties it all
together for someone to have that mindset.
Speaker 3 (17:26):
Yeah, so what we found was, you know, I mean
what I was going for twenty twenty years ago was
somebody with a criminal justice degree that knew what the
term money laundering looked like. Today, though, what we've found
throughout our research is that a degree has nothing to
do you know, the type of degree, whether whether they
(17:46):
even have a degree, really has nothing to do with
the way in which we're hard we're hardwired right, the
way that we see data, the way that we see
the world. You know, our degree really has no bearing
on a lot of those traits. And while I can't
get into the specifics because that's kind of the secret
sauce of what we look for, I will say that
(18:06):
the majority of them are not learned behaviors. Meaning let's take,
you know, a generic one that we all know is
something that is vital to have in the financial crime world,
being curious. You can't take a grown human who's twenty
eight years old, who has no curiosity about the world
(18:29):
and teach them to be curious. I mean, that is
a long, uphill, hand holding, timely expensive battle to try
to take a grown human and have them be curious. So,
you know, so there are certain traits like that that
are hard that are hardwired that we can psychometrically evaluate
(18:51):
using gold standards that other clinical psychologists use for other
purposes besides the financial crime world.
Speaker 1 (19:00):
Well, Sarah Beth, I mean, you know, you know, I
know there are folks watching who you know, who aren't
compliance officers, who you know, hopefully through watching the show
they've been able to get a sense of kind of
what happens behind the scenes. But a lot of people
aren't familiar with the day to day. So I'm wondering
if you can give an example, But maybe even a
fake example doesn't matter. Obviously we don't want to, you know,
(19:22):
get into client issues or anything. But I mean an.
Speaker 4 (19:25):
Example of something happening coming across one's desk, or an
alert where maybe one person might ignore might ignore it,
and where the hyper sensitive individual that you mentioned would
key into, would key onto something. What can you give
us an example?
Speaker 2 (19:43):
Sure?
Speaker 3 (19:43):
So actually I can use one that's public, which is
the which I mean, I guess I don't have to
say their name. But there was a bank that banked
Jeff Epstein and they got in trouble and in their
public order from the state regulator, it noted that there
were analysts at this particular bank that received alerts on
(20:07):
the activity for Jeff Epstein, and they dispositioned the alerts
as he was just being a nice guy and facilitating
these young women to get through college. And you know,
while I don't know all the specifics that came across
that alert, the fact that at the time those alerts
(20:27):
were dispositioned, he was a known name in the financial
crime world. He had negative news on him. But these
individuals decided, oh, he was just being nice. And I
think a lot of times I see that in a
much more innocent manner, right, meaning we're not dealing with
you know, Jeff Epstein Junior or anything like that.
Speaker 2 (20:49):
But you know, we're dealing.
Speaker 3 (20:50):
With situations that are probably less severe, but could lead
to something more severe if it was looked at correctly.
Speaker 2 (21:03):
And that's where.
Speaker 3 (21:06):
A lot of times we put what we wouldn't do
on what we think someone else may or may not
be doing.
Speaker 2 (21:13):
Right.
Speaker 3 (21:13):
So, you know, most of us ninety nine point nine
percent of us are like, have no interest in the
trafficking of humans. Okay, So a lot of times they'll
look at data and go, oh, no, I'm sure he
or she didn't mean to do that, because who does that.
Speaker 2 (21:33):
I mean, I would never do that.
Speaker 3 (21:35):
And it's actually a projection, rights It's the projection of
the analyst's own goodness onto something that should have zero emotion,
zero projection placed upon it. And I think those are
the types of things that really can get a bank
into trouble, because even if we were to take it
(21:56):
down to something less severe, down to a situation where
a bank is consistently dispositioning an alert as not suspicious
and really it's got a whole bunch of cash. All
the cash deposits are between ninety seven hundred and ninety
nine hundred, but there are some days in which they
make a ninety nine hundred dollars deposit and a two
(22:18):
thousand dollars deposit. So there are ctrs that are filed.
I will say, I see this at every single bank
and credit union, there will be there will be an
alert disposition stating this customer must not mean to be structuring.
Speaker 2 (22:35):
Because he or.
Speaker 3 (22:36):
She has days in which they exceed ten thousand dollars
and a CTR is filed.
Speaker 2 (22:41):
And I'm like, that's not assume, all right, Yeah, So.
Speaker 4 (22:49):
Are you telling me that that you're looking for cynics
that there need to be cynics in compliance on climes.
Speaker 3 (22:57):
Yeah, there, Yeah, we've we've narrowed it down to I
think we have seventeen different measurable traits. So you know,
when we say somebody who's hyper suspicious, we're not. We're
not talking about somebody who thinks that everyone is bad
and the sky is falling all the time because in
that because then that leads to a lot of inefficiencies, right,
(23:18):
because then somebody can never dig out of that hole,
and we don't and we don't we don't want that.
So there's other compensatory traits that we find that are
very vital to being a good of financial crimes analyst.
But somebody who is cynical, who doesn't see the world
(23:40):
through rose colored glasses, really should be at the heart
of any financial crimes group, because the world needs rose
colored glass or you know, rose of colored glasses, and
the people who wear those road color rose color glasses,
but they don't belong in the financial crime function. They
(24:01):
belong at the branch right or on the phone with
a bank customer. They do not belong dispositioning alerts.
Speaker 4 (24:08):
Got it, Yeah, I can I can see that. Yeah,
sometimes it's reversed. Sometimes you get the person in customer
service and they seem like they're in the wrong place,
so maybe they've been reversed.
Speaker 1 (24:19):
Maybe that's been the issue a lot of time.
Speaker 3 (24:21):
Oh yeah, and that's and that's actually what we found
when we do a restrategy restrategizjasent, you know the word
I'm going for. Yeah, in a financial institution, we find
that we actually can assess how someone is hardwired in
(24:43):
a non financial crime group and do a one one
for one swap or you're like, hey, that person that's
over in customer service actually is wired exactly how you'd
want somebody wired. They should actually be in your group,
not over there he than customers.
Speaker 1 (25:01):
So wow. Yeah, Well, speaking of suspicion, I mean you
mentioned SARS Suspicious Activity Reports. That's sort of the hearts,
you know, the heart and soul of a lot of
what happens in AML compliance. Tell us about SARS, because
I mean, I think we should talk a bit about
this because in some circle stars are controversial, some people
(25:22):
just hate them, and within industry and outside of industry.
But what's your take on SARS, the good, the bad,
the ugly, so.
Speaker 2 (25:30):
Many things to say.
Speaker 3 (25:32):
I would say that sars serve an important role. You know,
I've trained federal law enforcement agencies, I've worked with them
over the years, and I have yet to meet one
agent who has said, oh, these stars are driving me crazy,
right like it is like.
Speaker 2 (25:54):
When they are.
Speaker 3 (25:56):
When I find that they express some type of frustration,
it's because they don't have enough bandwidth, enough time, the
right technology to efficiently search or manage the volume of
stars that are submitted. I think from the private sector,
(26:18):
I think a lot of the noise about well, I
guess a lot of the negative noise about star filings
come come from individuals who feel like they don't get
any feedback, which you know is a long standing problem.
And I know there's different agencies that are working hard
and trying to figure out a legal manner in which
(26:41):
they can share some type of thumbs up, you know,
neutral thumb thumbs thumbs down when it comes to different
stars and star types.
Speaker 2 (26:50):
I don't know if.
Speaker 3 (26:51):
That'll ever go through, but you know I would. I
would say that's the general frustration I get from all
the AML officers in the private sector. They kind of
feel like, I really wish that my stars. You know
that I like knew that somebody found value in that.
Then you know, there's a whole bunch of people, I
think on the fringe, from regulators to bank executive management
(27:15):
and board and people who are retired.
Speaker 2 (27:20):
Who like to.
Speaker 3 (27:22):
Say that, you know, the SAR process as a whole
needs to be revamped. I definitely think there's lots of
room for improvement for foreshore in lots of different areas. Right,
the fact that we don't even have a box on
the SAR form to designate crypto or digital assets huge problem.
(27:43):
You know, there's other types of typologies that the private
sector are charged with monitoring and filing on that there's
no box to check that on the STAR form. Right,
we can't say human trafficking, right, this is a typology
for human trafficking. So there's a different things like that
that I think would help both this submitter as well
as the user of STARS, which is our law law
(28:08):
enforcement folks. And I think I think having both sides
in one war room would help. But I think some
of the suggestions that we have kind of in the
space now to increase the dollar threshold don't I don't
agree with really.
Speaker 4 (28:30):
Why because people will say inflation that the requirement you know,
is decades old or so.
Speaker 3 (28:37):
Yeah, So the inflationary comments I hear, at least for
like the ctrs, which is like the ten thousand and up,
I think they're looking at the wrong thing, right, they're
looking and they're they're I don't know, they're a denominator
in their head is today's value of homes and milk
(29:01):
and cars and everything else, right, which is you know
where they pin inflation on. And I think really the
denominator should be what is reasonable? Like I have at
you know, at most anytime, one hundred bucks in my wallet,
and that's just because my babysitter only wants to be
paid in cash, right, But like if I didn't have that,
(29:25):
I would not have like I would probably have forty
bucks at any time in my wallet. So somebody having
ten thousand dollars or more in cash, does it mean
they're doing something wrong?
Speaker 2 (29:38):
No? Is it reasonable? No? Not?
Speaker 3 (29:43):
Not not today, not with how everything is so digital
and everything is debit cards. So you know, I think
I think people use the inflation argument for CTR specifically
because they want to figure out a way to reduce
all the reporting. I have a couple of different thoughts
on how to do that better in terms of stream
(30:05):
streamlining that of report. That kind of uh brings in
a little bit of what Australia does and a little
bit of what Canada does. But that's for another topic.
But I think from a STAR perspective, you know, the
threshold is five thousand or more, and I mean if
you know the person, you know, if you actually have
(30:25):
identified the suspect. And I I think I think given
the fact that we don't have different thresholds for different typologies,
the last thing I would want to do is increase
that dollar amount to you know, twenty thousand if you
(30:46):
have a suspect that's identified and have a nine to
eleven right where it was financed for less than five
thousand dollars. So that that that's where I don't I
don't don't really see a benefit in the SAR reporting.
I think a lot of times people when they talk
about moving the threshold up, it's on the CTR side.
(31:09):
I think the SAR threshold should stay the same. But
I think we need a lot of work, a lot
of refinement on both the government side, from the regulators
as well as the users and submitters.
Speaker 2 (31:21):
Of sars.
Speaker 4 (31:22):
So if someone is saying, well, five thousand dollars I'm doing,
I'm getting all these you know, I'm forced to file
a SAR when there may not be any issue there
and it's taking up taking me away from focusing on
the more riskier issues.
Speaker 1 (31:38):
What do you say?
Speaker 3 (31:39):
That's a tough one because for me to answer someone
who would say that to me, I guess I would
need to know what their threat assessment looks like, because
if they're you know, banks are not charged with finding
every single illicit actor and every single elicit dollar that
(32:00):
flows through their you know, flows on.
Speaker 2 (32:02):
Their rails essentially right in or out of the bank.
Speaker 3 (32:05):
That is not what the point of the SAR reporting
processes or even all the necessary steps leading up to
reporting a SAR.
Speaker 2 (32:15):
That is not what banks are supposed to be doing.
Speaker 3 (32:19):
They are supposed to be taking a threat focused approach,
which you know a lot of times they look at
it from a risk perspective and they go, oh, well,
we don't have the risk of appliferation financing, and so
they just kind of don't even look for that typology.
And it's like, well, well, your threats, your threats and
(32:41):
vulnerabilities have to come before your risks. Your threat customer
base is actually quite sizable because you US Community Bank
Bank a lot of manufacturers in the refrigeration space, and
they make all the little coils and all the little
attachments for all the little parts in a refrigerator.
Speaker 2 (33:00):
Sounds very benign, but we.
Speaker 3 (33:02):
Know dual use goods, and so a lot of times,
like my next question, when I hear that type of
feed that feedback where they're like, oh, I'm spending all
this time, you know for something that's fifty one hundred
dollars or whatever, you know, and I have to file
a star for that. Are you looking at it through
the correct threat lens and not not just that particular
(33:23):
one that's you know, right at the filing threshold, but
all of the activity. Are you going after your biggest
threats or are you just filing you know, for fraud
and for structuring, which I would say most community institutions,
you know, ninety eight percent of what they file is
not anything complex.
Speaker 2 (33:42):
Right.
Speaker 3 (33:42):
They aren't looking for prolofreation financing, they aren't looking for
labor trafficking, right, all these nuanced typologies they're filing on structuring,
and they're filing on fraud.
Speaker 1 (33:53):
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(34:36):
to stop it. Learn more at hummingbird dot co. That's
hummingbird dot co. Can you tell us about an experience
where things didn't go right? You know? I mean, because
I know you're very successful, but people often like to
(34:57):
hear about when things You know, how did you get
to that success? There? I had to be some road
bumps along the way. What can you share?
Speaker 2 (35:03):
Oh man?
Speaker 3 (35:05):
Yeah, I mean, I think I think I'm an acquired taste.
I pull no punches and so I had to learn
very early on, especially when I started my consulting business
fourteen years ago, that what I wanted to say and
(35:30):
what is helpful are two different things. And you know,
knowing your audience goes a long way. So, you know,
as as I got further into my consulting company, it
was it was critical that I take feedback from my clients,
(35:54):
who were mainly men right there. I mean, because it's,
you know, the banking world, and let's you know, there's
and there's nothing wrong with that. There's just a lot
of men in charge. And so I had to learn
very quickly, based on some feed some feedback I got
during a remediation project, that my messaging needed to be
(36:15):
more concise. And you know, it's it's it's never fun
to hear like I don't I don't you know, I
am tossing out everything you're telling us because I don't
like the way in which you presented it. And while
that's probably something where both sides have of responsibility, what
(36:36):
it taught me was when dealing with the opposite sex,
when they're hiring you to fix them, they don't need
to know all the details, right, they just want to
know at the end of the day that I'm going
to get them fixed. And I had to learn that.
(36:57):
It took a couple projects, but I feel like I've
nailed it, you know. I mean, I'm not perfect at it,
because you know, I'm a woman and I like to
describe things and talk and you know, all that kind
of stuff.
Speaker 2 (37:09):
But I try to be hyper aware of.
Speaker 3 (37:14):
The listener and read body language and cues so then
I can be an effective communicator.
Speaker 4 (37:24):
So you're you're telling us men don't like to be
criticized what you're saying, and you think you figured that
out when when you got the feedback from from these.
Speaker 1 (37:36):
Guys that uh uh, maybe we'll take your advice if
you down a little bit.
Speaker 2 (37:42):
Yeah, yeah, yeah.
Speaker 3 (37:43):
And I you know, I think I think there's a
lot to be said for the end goal keeping your
eye on the prize of like really wanting this bank,
you know, Credit Union, to be running like a well
oiled machine. And if that's really my goal and all
that I do, then I have no problem making sure
(38:05):
that my comments and my critiques and all of the
information I'm giving the other party is not offensive and
does not stand in the way of my ultimate goal,
which is to get this bank out of the regulator's
crosshairs and in into a position where they're finding truly
suspicious activity and reporting it timely.
Speaker 2 (38:27):
And so you know it.
Speaker 3 (38:29):
I mean, I don't. I don't think anyone likes to
be criticized. I mean I I certainly don't like it.
But I think when you're able to take it and
take it with a grain of salt, take the emotion
out of it, and go, Okay, these are their needs
that they're telling me, and this is how I'm going
(38:50):
to meet those needs and also get to my end
goal of making this bank better.
Speaker 4 (38:56):
So well, it sounds like you're able to sort of
keep your eyes on the prize, right, keep your eyes
on the goal for the client, for the bank, helping them,
you know, giving them what they you know, not just
what they want, but what they really need. So you know,
with your success, what has been the greatest lesson for
the past twenty years that you'd like to share that.
Speaker 3 (39:18):
I can't do it all, you know, I think there's
a lot of me that I like to fix stuff.
Somebody the other day call me fix it, Felix.
Speaker 2 (39:29):
I like that.
Speaker 3 (39:32):
So I like in my personal life, in my professional life.
I like to fix things, and I had to really
work on boundaries, which a lot of people always kind
of you know, you know, hear that word boundaries is
something that's only in relationships, you know, personal relationships. And
(39:53):
I think it's also professionally because if I try to
fix all these things and I tried to you know,
pitch in whether or not it's wanted or not, I
will get burnout and I will not have as much
focus as I need to to actually see things through.
And that's where I mean, while I'm still involved in
quite quite a bit with my consulting company and my
(40:15):
bank and my other startups, it's.
Speaker 2 (40:19):
Something where.
Speaker 3 (40:22):
I like, I had to learn very early on, when
you know, we had the Graham we had the gram
Leach Blily Act, we had the ID theft Prevention Program,
we had all these things in the early two thousands
that everyone was also trying to be experts on.
Speaker 2 (40:36):
And I had to pick a horse.
Speaker 3 (40:38):
And so my horse is sanctions an email, So I'm
not trying to be an expert in the alphabet, soup
regulations or basically anything else. And so that was my
one horse. But even after I chose that one horse,
I still had to make sure that I wasn't trying
to fix all these things right. I had to keep
as I tell my daughter, like, don't move your fan
(41:00):
into someone else's yard. And so when I find all
of these issues in our email and sanctions industry, I
want to go move my fence into that yard to
fix it.
Speaker 2 (41:16):
But if I continue to do.
Speaker 3 (41:17):
That, then I'll run out of the band like the
bandwidth to actually make an impact in other areas that
are within my yard.
Speaker 2 (41:25):
So does that make sense?
Speaker 1 (41:28):
It does.
Speaker 4 (41:29):
But you also just casually mentioned that you have a bank.
You started a bank. You know, I've seen honey, I've
bought a zoo. I've never seen, honey, I've started a bank.
So could you tell us about that?
Speaker 3 (41:42):
Yeah, So this was actually born out of the desire
to help the massy risking trend that we saw in
twenty fifteen and sixteen where foreign financial institutions I believe,
or as a whole, unfairly cut off from the US
(42:07):
financial system by a lot of the Tier one banks.
And you know, there's been Senate hearings and all of
this stuff that we've seen over the years where these
banks say, no, we didn't do you know, we didn't
just mass cut these people off. And the regulators are like,
oh no, we never told you know, Bank X to
(42:28):
exit their foreign a financial institution customer base. But you know,
so no one's taking any fault for this is basically
what that means. So twenty eighteen, I met Damon who
is one of my co founders. I was doing a
project for a bank. He was also at the bank
(42:48):
doing something completely different, and he was like, Hey, tell
me about what you're doing. What are your biggest pain
points in your industry? And I was like, oh, I'm like,
I'm playing matchmaker to banks and island nations and I'm
trying to one by one match them up with community
banks in the US that I believe have a strong
AML program and that would be a good bank partner
(43:09):
for them to clear their US dollars. And that was
not sustainable. And he was like, well, what do you
want to do? And I'm like, I want to start
a bank, and I want this bank to be so
narrow focused that the regulators aren't worried about us, because
we're not trying to do all these things that you know,
these large tier tier one banks do. And then they
have this little, tiny sliver that they bank for in
(43:31):
financial institutions. I'm like, I only want to bank foreign
financial institutions. So we kind of started on this process.
It was twenty eighteen we started working. We were in
a different state than we are now at the time,
and we were essentially told throughout our two years that
that wasn't going to happen, that they did not want
us banking foreign financial institutions because they wanted us to
(43:54):
have a super compliant compliance program and there was no
way for them to test it. So we decided to
bank US financial institutions first, so then our regulators federal
and state, can kick the tires. They can see what
a great sanctions and email program we have when we're
only banking domestic financial institutions in the US, And once
(44:17):
they get to kick the tires on that, then maybe
hopefully some day in five to eight years, the regulators
will let us bank foreign financial institutions. But we found
and what our goal is right now is to only
bank US financial institutions. Because as we started down this path,
(44:38):
we started to see where we really could use our
technology in a way that helps community banks credit unions
make money on something that they're already doing where they
make no money and they have a lot of compliance
risk that shifted to them and are a technology. We
have two patented pieces of technology and it fixes both
of those issues. I won't go into the details of it,
(45:00):
but during this process, like because me, I like to
fix things, like I said earlier, during this process, you know,
the thing I wanted to fix was banking foreign financial institutions,
but that's kind of off the table for right now.
Speaker 2 (45:14):
So what we.
Speaker 3 (45:16):
Found was domestic financial institutions could also use our help,
not just with making money, but also that rising tide
lifts all boats. Because we have super sophisticated technology that
we're deploying, and because we're solely focused on sanctions and
aml compliance right we're not making loans, we're not taking deposits,
so we don't have to deal.
Speaker 2 (45:35):
We aren't distracted.
Speaker 3 (45:37):
And because we're getting this area so right, we have
the opportunity to inform our client banks, so our US
community banks and credit unions that will bank with us,
we get to have that open pathway with them saying hey,
I'm not sure what you guys have found on John Doe,
but this is what we've found. Has your system found this,
(45:57):
and then that gives the opportunity for that community bank
to go, oh, no, crap, what are we missing? And
so it you know, it's that rising tide. And then
we help a community banks and credit unions get better
and better at sanctions at mL as well as you know,
helping them with our services that we offer.
Speaker 1 (46:15):
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(46:37):
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(47:01):
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clear to learn more. I wonder if you can explain
the purpose behind even your overarching goal, because I don't
(47:23):
think a lot of people, I mean a lot of
people don't understand how the banking system works and correspondent banking.
So tell us what's wrong with you what you've noticed
in terms of certain banks being cut off? And are
these mostly banks from certain types of countries? You know,
what's the problem there?
Speaker 3 (47:43):
Yeah, So, I mean this was about a decade ago
when this really started to kind of make the news.
I know, the world banks head panels, and the IMF
has head panels, and we've had lots of panels in
DC on this, and I would say as a whole,
most foreign financial institutions are cut off because the US
(48:05):
designates the country that they're in as higher risk. You know,
that's kind of the first step. Now, that doesn't mean
now I'm not talking about sanctioned countries, right, I'm not
talking about Russia. I'm talking about like, you know, island nations. Yeah,
I am talking about island nations, typically Central America, South America,
(48:26):
the South Pacific, where their aml frame framework at their
national level may look a little bit different than ours,
their enforcement is not going to be as broad as ours,
meaning no one has you know, what is it six
different federal law enforcement agencies that have access to stars
(48:50):
like we do, right, we have, you know, many many
different ways in which we can act on suspicious activity.
And not every country is designed like that or even
close to that. So I think, you know, there's lots
of different factors that kind of go into the US
taking a stance and saying, hey, this country in this
(49:10):
area of the world is higher risk. And as soon
as the US designates another country as higher risk, it
it makes the bank, the US bank partner that's banking them.
It forces them, in an informal manner, to then put
a whole bunch of people in technology and monitoring behind
(49:31):
that so they can justify to their regulator that they
aren't banking banking a bank that has illicit clients downstream
from this bank. And so I think I think that's
probably the first kind of blush on this. As soon
as you see a higher risk and I'm not talking
high I'm talking higher risk country, a lot of banks
(49:56):
just go oh yeah, nope, sorry, I'm not going to
do it. It's like wait, wait, wait, bute. If you
actually look at that country's framework, let's say island nations
down in the Caribbean, most of those countries have been
enforcing beneficial ownership requirements both at the collection level when
(50:17):
they go to a bank as well as the FIU.
Right they're a financial intelligence unit at their federal level
or at their national level. They've been collecting beneficial owners
on businesses for eight years, longer than the than the
US has right now. Granted that's only one tiny part,
but still like those that type of data needs to
(50:41):
be looked at, you know, in a like a very
sober manner, because what we do is we kind of
lump them all in because they may have a reputation
for offshore businesses.
Speaker 2 (50:55):
Yet the US has.
Speaker 3 (50:56):
The largest onshore offshore generation generating states for anonymous companies.
Yet that yet no one's you know, no one's going
to these banks saying hey, you Tier Tier one bank,
you shouldn't on onboard any businesses that were incorporated in Delaware.
Speaker 2 (51:17):
No one's doing that.
Speaker 3 (51:18):
But then we'll go and do the same thing for
a country that has way less corporate establishments and generally
higher risk view even though they are collecting beneficial owners.
Speaker 1 (51:32):
So yeah, well, I mean, no, it's it's great because
you're you're trying to, you know, bring fairness into into
the ecosystem and and I mean that's I think a
very noble goal and you're doing it in a practical way,
and you're starting, you know here with with with institutions
and building you know, building something that could be expanded upon.
(51:54):
So yeah, I commend you. I think that's great work.
And again, looking at your career, what you've done, your
sort of service to I would say to the greater
good is you know, it's it's it's something that I
think we need to acknowledge that people need to acknowledge.
You know, Sarah Beth, with all of your experience, I
know there are probably people here listening or watching compliance officers.
(52:20):
You know, is there any singular advice that you'd like
to give to those compliance officers that want to get
better and be excellent at AML and sanctions.
Speaker 2 (52:31):
That's a great question.
Speaker 3 (52:35):
I think probably to follow the boundary advice right to
pick pick the things that you can change and change
those right don't don't don't spend your time trying to
fix things that are completely out of your control. But
you know, because I said that earlier, but I think
I think the other one would be, don't be afraid
(52:55):
to like burn it down and start over. Meaning because
we've had the manual, this exam manual for twenty years now.
Happy twentieth anniversary, every AML officer. If you're in a
traditional financial institution, you know, bank or credit union, they
(53:19):
they don't want to strip everything down and rebuild because
they don't have enough people. But I think it's a
good exercise, right if you start from scratch and you
go If I had, if I had nothing to go
off of, right, I didn't have this legacy risk assessment
that's been handed down to me for the last ten
(53:40):
ten years, in which we edit you know, the numbers,
and we go in and add a little, you know,
a few lines about what we're doing. You know, if
I didn't have these procedures that we've had for twenty
years that we just keep adding to and taking from
depending on who audits us and gives us their advice,
if you had to burn it down and start all over,
or what would it look like, and I think that's
(54:02):
a great exercise. And again, I know when I say that,
people will hear this and go like time right, yeah,
but you know they don't like I mean most I
will say, unless a bank is under an order or
under some type of penalty, they are going to be
understaffed in this function. So I think it's hard for
(54:25):
me to say, oh, let's burn it down and then
you know it takes you weeks to build it back.
But I think doing it in a controlled burn, if
you will, you know, you know how they do controlled burn,
so then the fires don't overtake everything. And I think
that's kind of the mindset. You know, if you were
to look at your technology, look at your solutions and
go all right, if money wasn't an issue, if if
(54:48):
the technology wasn't you know, if if I hadn't signed
an eight year long deal, what would my daily alerts
look like?
Speaker 2 (54:56):
Would they be all structuring?
Speaker 3 (54:57):
Would they have you know, some of the higher typologies
that banks are charged with finding from all the finsend guidance.
Like those types of exercise, I think in like the
burn it down, it needs to be controlled, it needs
to be focused, and I think that has the opportunity
to really change an AML program, and you know that's
(55:20):
probably the advice that we give.
Speaker 1 (55:23):
We can learn quite a bit from Sarah Beth Felix.
She tells us how the anti money laundering ranks at
the banks need to be active and perceptive in identifying
suspicious transactions within their institutions. But Sarah Beth is not
just an identifier of illicit activity, but a problem solver
who is building her own bank to serve as a
(55:43):
model for how foreign banks from smaller nations can attain
the high AML standards necessary to gain access to the
US financial sector. Impressive work she helps to fight financial
crime around the world. I'm Yaya Jata Finussi and this
is designated on the Illicit Edge Network.
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