Lawyer Monthly Magazine - April 2019 Edition

APR 2019 41 Dr. Michael Muthukrishna www. lawyer-monthly .com Legal professionals are aware of their obligation to report suspicious activity, and the reputational and legal costs to themselves, their firm, and their industry of not doing so. But they are also aware of the low likelihood of encountering a crime, the fact that relationships with their clients are important and the long list of other priorities. In other words, they have competing motivations, which leads to the second important bias - motivated reasoning. We all come up with reasons to support what we want to believe, due to underlying incentives. As professionals, it is the client relationship and other business activities that we’re incentivised to care about for our career and organisation. However, at a subconscious level, this raises the bar for how suspicious something must be for it to be reported. These personal incentives combined with a criminal’s willingness to provide plausible explanations can cause inaction. These competing motivations lead to seeking plausible deniability – justification that the activity was ambiguous or probably isn’t suspicious or that reporting won’t make a difference anyway and might even increase the number of false positives. Motivated reasoning leads us to believe these things so we don’t have to report. How do we overcome these biases? Confirmation bias andmotivated reasoning are easier to identify in others. It is difficult to detect our own biases. Being aware of these biases can help, but a more successful strategy is creating a culture of discussing suspicions with colleagues or seeking advice from a professional body. Encouraging each other to report and recognising what’s preventing us from doing so. The norms in a culture matter. A culture where the prescriptive norm (you should report your suspicions) and descriptive norm (most people report their suspicions) are aligned will increase reporting. Combined with observability – knowing that this activity could be viewed by others who are likely to file a SAR on the basis of the same data (leading to questions about why you didn’t) can greatly increase the likelihood of reporting. Crucially, all of this assumes that your brain and your intuitions are well-trained to identify suspicious activity. Experts who have seen thousands of examples of both regular and suspicious activity havemoreaccurategut feelings. It’s like experienced fire fighters, who can tell when a house is likely to collapse and therefore unsafe to enter, even if they can’t articulate why. Training our gut can lead to more accurate recognition of suspicious activity. Good training tailored toward the activities relevant to our job can help us see the red flags we might otherwise miss. These two factors combined can help us to overcome the cognitive barriers that prevent us from identifying suspicious activity and flagging it up with a Suspicious Activity Report. Further findings from the Flag It Up campaign’s snapshot poll: • 72% of the 100 lawyers polled were motivated by stopping criminals, safeguarding their firm and reputation of the profession. 1 Poll undertaken by Coleman Parkes in January 2019 for the Flag It Up Campaign in collaboration with partners. The research findings are based on responses from 100 accountancy professionals and 100 legal professionals in the UK. 2 http://www.nationalcrimeagency.gov. uk/news/1347-national-crime-agency- publishes-2018-analysis-of-serious-and- organised-crime-threats • 42% didn’t recognise a change in the identity of the lead client or beneficial owner as a potential money laundering trigger. • 61% didn’t see a change in the nature or purpose of the business relationship as one. • 41% didn’t recognise changes in the client’s instructions without warning or reason as one. • 41% didn’t recognise an increase in spending that is inconsistent with the client’s means as one. • 38% of legal professionals polled had not received formal AML training. LM