Interview: Duncan Jepson – Former Head of Legal, BNY Mellon Investment Management, Asia Pacific

Author: InnoXcell

August-30 2016

Duncan Jepson is the former Head of Legal for BNY Mellon Investment Management, Asia Pacific, and the founder of Liberty Asia, an NGO dedicated to the prevention of human trafficking in Southeast Asia. He speaks on cross-border risk management in AML practices at the IAS Singapore.

Would you say that Know Your Customer (KYC) and Know Your Supplier (KYS) systems in the financial sector have been successfully implemented?

The financial sector has had the legal and regulatory requirements to implement infrastructure and create robust KYC governance for some time now, while the non-financial sectors (which covers a massive array of products and services) have yet to be required to do so to their KYS to the same degree.

You founded Liberty Asia, an NGO which seeks to promote the rights of victims of forced slavery and human trafficking. How do the processes detailed above apply to intelligence on human trafficking?

KYC and KYS systems that relate to human trafficking and slavery have yet to be implemented. KYC processes (similarly to KYS), can be used for detecting and reacting to information concerning existing or potential client involvement with slavery and trafficking, providing two elements are present. First, that the information is available to people with the interest and/or the duty to act. Second, that there is a better understanding of human trafficking and slavery within such personnel, i.e. that trafficking and slavery are a crime of crimes and that such crimes involve money laundering, bribery and offences against a person. As these elements develop and become more pervasive, the private sector as a whole will increasingly respond with consistency and effectiveness.

What are the main barriers preventing shared intelligence on anti-money laundering (AML) across borders?

First, there are the obvious legal barriers. Second, issues of security and the mechanics of sharing. Third, identifying sources of information. Fourth, training researchers to identify which research is most relevant. Fifth and finally, there are the issues surrounding trust.

You will be discussing the extent to which firms are bound by overseas regulations at the IAS Singapore. Are these regulations prioritized by multinational corporations?

Let me give an example – an organisation with securities listed on a US exchange are subject to many US laws. Those with businesses in certain jurisdictions are also caught by certain other laws such as the UK Anti-Bribery Act. Then there are local laws. Furthermore, it is made more difficult to prioritize because some laws relate to organizational structure and governance across the entire group, and so are transnational. One should not prioritize, but take a holistic approach, as the enforcement of these laws is certainly not prioritized by any one regulator.

What are the primary costs associated with AML solutions?

The primary costs are those involving skilled professionals, infrastructure and obtaining a continually improving stream of intelligence. The last decade or so has seen a huge development and increase in the strength of influence of risk control functions in organizations by the addition of legal counsel, compliance officers, internal audit, risk officers, CSR officers and now, criminal intelligence analysts. The voices on the risk control side of an organisational structure now challenge the propositions of the risk-taking side of the business more readily and with more experience, though at present there is still far too much "box-ticking" and not enough thoughtfulness.

There are likely still further costs to organizations for more accurate and comprehensive risk controls that provide higher quality decisions. While the risk control and solutions industry continues to develop, it is only just beginning.

What are the hidden or concealed costs associated with anti-money laundering solutions?

One of the main concerns is lost business due to imperfect or incorrect information. What is needed is better information and intelligence that allows for better decision-making and so encourages businesses, banking and investment to conduct their activities with much improved knowledge of the risks and how to mitigate such risks so that they don't avoid markets (as we have seen with certain banks who have pulled out of certain Southeast Asian markets). Instead, they would feel more confident participating in new and existing business ventures, and in so doing, creating more jobs.

What do you foresee as the biggest threats to AML solutions in the coming years?

The speed that quality of information is improved and how it is distributed. There is a lot of work to do to develop better quality of information from around the globe, and move it in front of people who can decide that they do not wish to be involved in activities such as trafficking and slavery. The use of "big data" is still in its infancy and the use of open source intelligence gathering is confined to very few. The understanding of the global framework and transnational movement of goods and money and their relation to crime needs much more attention and resources. We need better communication and collaboration with clear purpose and strategy so resources and time are not wasted.

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