Inside the Mind of a Financial Crime Investigator
From the moment we first picked up a Sherlock Holmes novel or watched a detective movie in our childhood, the art of following a lead or solving a puzzle might have captivated many of us. Our childhood detective hero has made us believe that every criminal leaves a subtle clue – it might be a tiny anomaly or a seemingly innocent action. Have you ever wondered what it’s like to be a financial crime investigator? Unlike Sherlock Holmes following the criminal through dimly lit streets, they delve into the intricate networks of finance to expose perpetrators who disguise themselves as legitimate actors. Money launderers and illicit actors, despite their best efforts, often leave trails. An anomalous transaction that doesn’t quite add up, a discrepant document or information that holds little significance, or a transactional behavior that often goes unnoticed, draws suspicions to a financial crime investigator with a subtle glance. Detective or Investigator, in fiction or real life, often reminds us that the clue or lead is always there, ready to be uncovered by those who can see beyond the surface.
What Triggers a Financial Crime Investigation?
Financial crime investigations are often triggered by unusual activities or transactions that deviate from a known customer profile. A bank’s Transaction Monitoring tool helps identify and flag suspicious transactions. A large number of investigations are often triggered by transaction monitoring alerts. Nevertheless, investigations are also triggered by other factors:
Regulatory/Law Enforcement Inquiries: Subpoena requests received for any customer or transaction. Proactive Media Searches: Identifying adverse information potentially linked to fraud, corruption, or criminal activities connected to a customer, counterparty, or related entity.
The trigger, whether from a Transaction Monitoring tool, law enforcement scrutiny, or media monitoring, prompts investigators to initiate detailed investigations to assess potential risks and ensure compliance with anti-money laundering (AML) obligations.
Suspect Profiling
Suspect Profiling is a crucial step in the investigation process. It involves a comprehensive analysis of the suspect and their nearest circle. This includes a review of:
- CDD (Customer Due Diligence) records
- Connected parties
- Source of funds and wealth analysis (including tracing the suspect’s family connection, both direct lineage and marriage)
Investigators also check for connections to high-risk jurisdictions, unusually complex ownership structures, any links to sanctioned individuals, politically exposed persons (PEPs), or entities/major counterparties flagged in negative media coverage. All these factors help form a comprehensive understanding of the suspect’s risk profile and the legitimacy of their activities.
The Core Principle: Follow the Money
As most financial crime investigations are reactive or historic in nature, sifting through a stack of transactional records might seem perfectly mundane at first glance. A seemingly routine cash deposit, an unusual fund transfer, or certain adverse news about the customer—these clues, when observed in isolation, might appear insignificant. However, when pieced together, investigators establish the evidence that links suspects to crimes such as money laundering, fraud, bribery, corruption, and terrorism financing.
Connecting the Dots
An investigator starts the investigation by narrowing the focus or reducing the probabilities based on circumstantial findings and experience, both their own and others. Regulators and Law Enforcement agencies don’t expect financial crime investigators to prove that a crime has taken place. An investigator’s role is to identify and report reasonable grounds for suspicion based on available evidence or red flags. When it comes to finding reasonable suspicions, transactional history is just the starting point. ‘Follow the Money’ is the fundamental principle in financial crime investigation. Criminals often move funds around using complex schemes, corporate vehicles, intermediaries, and various other tactics to launder funds and obfuscate the source. Sophisticated transaction monitoring software often flags high-risk patterns, but it's the investigator’s trained eye that brings it all into focus. The more investigators dig deeper, the more they begin to see the bigger picture. Critical elements to connect the dots include:
- A series of interconnected accounts.
- Transactions are often under the reporting threshold.
- Transfers to and from tax havens.
- Turnovers that do not match the customer profile.
Throughout this process, investigators must maintain impartiality and attention to detail. Every lead must be pursued with the same intensity, gravity, and detective mindset to unfold a criminal intent.
Escalation and Reporting
Once the investigation into suspicious activity is completed, investigators document the findings in a detailed report, articulating all the rationale behind the conclusions drawn and evidence gathered. They further decide whether to continue or refer for termination of the relationship. Should the investigators identify any concerns or activities potentially linked with money laundering or other financial crime typologies, a Suspicious Activity Report (SAR) should be filed with the appropriate Financial Intelligence Unit (FIU) or relevant authorities as required by jurisdictional regulations. Note: SAR filing is an extremely crucial step as part of the investigation process, as it provides regulatory bodies with critical intelligence. A SAR does not necessarily have to be filed at the end of the investigation. Depending on the materiality, a SAR can be filed as soon as a concern is identified.
Final Thoughts
Financial crimes across the world are becoming increasingly complex as criminals grow more sophisticated. The future of financial crime investigations will demand even more advanced skills, the use of technology such as AI/Machine Learning, collaboration across borders, and an adaptive mindset to learn the ever-evolving sophisticated methods employed by criminals. Being a financial crime investigator is a unique and challenging journey; yet, the sense of satisfaction that comes from unmasking a financial crime or serving the national interest is what drives many of us in this field. For those who are passionate about making a real-world impact, the role of a financial crime investigator remains one of the most impactful careers in the world of compliance and law enforcement.
References
Editorial, F.C.A. (2023). What Is Transaction Monitoring? The Importance and Purpose of Transaction Monitoring. [online] financialcrimeacademy.org. International Monetary Fund (2023). Anti-Money Laundering and Combating the Financing of Terrorism. [online] IMF. FATF (n.d.). High-risk and other monitored jurisdictions. [online] fatf-gafi.org. The Guardian. (n.d.). Every detail counts: how detectives work with circumstantial evidence. Office of the Comptroller of the Currency (2013). Suspicious Activity Reports (SAR). [online] Treas.gov.
About the Author
Rezaul Karim, CAMS, is a seasoned compliance expert with a proven track record in KYC Compliance, AML Investigations, Risk Governance, and the effective handling of various Financial Crime and Regulatory Compliance issues. He has a decade of experience in the field and has worked for top multinational banks, including HSBC and Standard Chartered Bank. At HSBC, he has held a range of AVP roles in compliance and financial crime, building a strong track record of thought leadership and knowledge in the field.
