75% of professionals in a recent poll said complying with Anti-Money Laundering regulations was a top priority. However subconscious biases could be preventing them from acting on suspicions.
Competing motivations on professionals’ time and the potential cognitive and cultural barriers are all at play. To overcome these barriers, we must become aware of our own biases and how they are influenced by our environment.
Criminals laundering money earn hundreds of millions of pounds each year from illegal activities ranging from selling firearms and drugs to organised immigration crime, human trafficking, and child sexual exploitation. They know the triggers of suspicion and can structure transactions and deals to lessen the appearance of any red flags.
But in the game of cat and mouse between crime agencies and criminals, crucial information comes from well-trained human intelligence: the subconscious, gut feeling of unease in the accountants at the border between legal and illegal.
What happens when we encounter suspicious activity?
Our minds work less like computers and more like simulators. When we encounter a door, our brains don’t calculate “rectangular object, hinge and handle…door”, we expect a door and assume we can open it.
We feel suspicion as a gut feeling, of slight distress or unease. To ease this feeling, we seek out information that will once again leave us able to predict the world.
What the mind sees is largely based on past experience, but it also knows when something in its simulation feels wrong. When our expectations are violated, part of our brain at the base of the prefrontal cortex, the dorsal anterior cingulate cortex (dACC), fires.
That firing tells us that something in our model of the world needs to be fixed. We feel suspicion as a gut feeling, of slight distress or unease. To ease this feeling, we seek out information that will once again leave us able to predict the world.
In this crucial moment, various cognitive biases can lead us from suspicion to carrying on with our day rather than further investigating and if appropriate, filing a Suspicious Activity Report (SAR) with the National Crime Agency.
What might prevent us from reporting suspicious activity?
Two related and important biases are important to recognise. The first is confirmation bias – we seek out information that supports what we already think or want to think, rather than information that properly tests our beliefs.
Accounting 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 – a 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 and motivated 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.
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 have more accurate gut feelings.
It’s like experienced firefighters, 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.