FinCEN and the importance of taking responsibility

It is amazing how quickly the news moves on these days. Even the most scandalous headlines only last a day or two, and then we’re quickly onto new ones.

But if we don’t take a moment to reflect on the issues, can anything change?

Last week, if you can remember that far back, you might have watched the Panorama report on the ‘FinCEN files’. In that case you may have become much more aware of the term ‘SAR’ or ‘Suspicious Activity Report’ and FinCEN (The Financial Crimes Enforcement Network), regarding large amounts of potentially fraudulent funds passing through accounts at very large international banks.

But does it matter? Yes, it does!

Financial fraud is a huge and growing issue in countries all over the world, and working to stop it is a key responsibility for any regulated financial institution. The regulations are there to protect not only the individual customers, but the integrity that is the foundation of wider financial systems as well.

The news that emerged around the ‘FinCEN Files’ is that some of the largest financial institutions in the world may not have been doing everything they can to fight fraud, and that despite having suspicions about certain accounts and transactions, the money is still being let through.

While it would seem that some traditional banks may see this as ‘normal’, we at Dozens do not, and we think it needs to change.

Without going into too much detail, a regulated business must do these two things - it must know who it is dealing with (also known as KYC, or Know Your Customer) and when it is concerned about any individual, account or transaction, it must file a SAR, or Suspicious Activity Report. These are reports that are sent to the relevant authorities in that country to deal with.

These reports give legal authorities and enforcement agencies the information they need to carry out their work. As explained in the programme, SARs can be the materials that help prosecutors to join the dots when making their cases.

It is not the banks or financial institutions that have to prosecute wrongdoing, but as they are the conduits for all the money that flows around the world, it is a legal responsibility (and we believe a moral obligation) to watch out for anything suspicious - so others can then stop money laundering, terrorism, trafficking and other crimes.

But it is not enough to do this monitoring if suspected funds are then released (or not stopped in the first place). Otherwise the harm will still be done; money may be lost, ‘laundered’ or used to fund illegal activity. We believe that filing a SAR is only the start of the institution’s responsibility, not the end of it.

Dozens has invested huge amounts of money, effort and time to identify and stop fraud. We invest not just in technical systems and software, but we also hire many staff to deal with enquiries to make sure we do our best to meet the regulations and also look after our customers, and we even develop our own data-led ways of identifying and stopping fraud.

If we see something suspicious, we believe it is our responsibility to take action – by removing the money from the financial crime cycle, or wherever possible returning it to a victim. Instead, big banks are making profits on those transactions, which discourages them from taking action.

In the end, everything that Dozens do is dwarfed in comparison to the amounts that go through the accounts of the large international banks. Just one or two of the potentially suspicious deals mentioned in the Panorama report are more money than every single penny that goes through Dozens in a year. While the effect we can have on total fraudulent volumes is small, this work is important, so it is also vital that the large institutions do more for themselves.

Taking this action, as we do, means those individuals involved can get upset. Our team deals with these hard customers’ communications every day – most of it you don’t see; however some of it is public, to pressure or coerce us into changing our systems or decisions.

This will usually be as complaints on the app store or on review sites about accounts being closed, but this is because we have taken decisive action. We know that this carries a risk of such a reaction, but we take it anyway because it is the fair and right thing to do.

Yes, as a startup these public reviews matter to us and could tarnish our reputation, but we also believe that we must make the system fairer and more reliable, and do everything possible to fight those who want to take advantage of it.

It may seem counter-intuitive, but having these reactions is a positive sign that we are doing our job. That is why we believe it is not fair when there is news that others, who could have so much more impact and influence, do not take a similar principled position.

This affects us all and should empower us to work together to fix the underlying issues.

It is unfortunate that the news cycle moves on so quickly that we don’t get a chance to discuss and understand these issues enough. Instead, UK consumers are left only with an impression of wrong-doing and further distrust in institutions, but not with any sense that this can, and should change. This affects us all and should empower us to work together to fix the underlying issues.

That’s why I think it is worth sharing this information with you, and starting a wider discussion.

Do let me know your thoughts and questions and I’ll do my best to answer them.


The problem, I think, is this - we all know this stuff goes on, we’re not surprised it’s happening more than we perhaps thought before FinCEN.

But what can we do? For the vast majority of people it’s probably not enough of an issue to persuade them to leave their legacy bank… those of as that might have likely already left.

For big corporations and high net worth individuals isn’t it just a choice of the lesser evil?

It’s great that fintechs are promoting higher standards in this area - but can they get to multi-nationals scale without slipping down the same slope the legacy banks have?

(I assume for now that the legacy banks didn’t set out to profit from enabling financial crime…)

Blocking people’s money due to suspicious activity is never going to be popular. You can see why banks don’t want to do it, especially with high-value customers… and I can understand the urge to look the other way rather than suffer the negative publicity caused by someone with a blocked account closing it or worse still trashing you on Twitter/Facebook etc…

There’s a risk/benefit calculation for the institutions involved, and of course huge banks have a higher capacity for risk…

As you say, we should all care about this - but we don’t. It’s complicated (bet I’m not the only one reluctant to post because I didn’t know where to start…) there’s very little you can do (already moved banks because I like the app…) and easy to think ‘that’s a problem for the regulators…’.

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really interesting reply, many thanks

I’ve had a think about it and my conclusion is that you may well be right, and this is the key issue:

There is a cost benefit analysis going on, and there’s probably a path of less resistance, but it is not just up to the regulator to add that resistance, but also up to customers, and the industry to do this.

Together, we need to increase the cost of inaction because the ‘value’ of inaction (for the potential fraudster, and also the platform that allows this) is already high and continues to increase.

As you say, the scale that fintechs are dealing with is, so far, relatively small, but we are growing and hoping to capture the attention of those customers and businesses that want things to change, so we need to continue to speak out and support the regulators in their jobs, even if it causes us some short term pain