The Role of the Analyst in Financial Crime Risk and Compliance
It's an important one.
Setting the baseline for this article.
While Analyst is the most common term used to describe the largest part of the financial crime risk and compliance industry’s workforce — we have set titles like Compliance Analyst, Compliance Officer, Investigative Analyst, Financial Intelligence Analyst, Financial Crime Analyst, BSA/AML Analyst, Fraud Analyst, Investigator, and the list goes on for this vital component of what I would call the world’s largest network of analytic cells (teams going through information/data for intelligence purposes).
For this article, I focus on the term Analyst and the role of the Analyst across the four (4) primary functional elements of financial crime risk and compliance operations; Currency and Suspicious Activity Reporting, Due Diligence, and Watchlist Screening.
What is financial crime risk and compliance?
Five (5) domains fall under the financial crime umbrella: (1) fraud, (2) cybercrime, (3) money laundering, (4) corruption, and (5) sanctions. Each domain presents a risk management and regulatory compliance burden to financial services firms and corporations in other commercial segments.
I start each article I write with this question because most of the industry is segmented and siloed in their views of financial crime. I consistently offer an integrated or unified perspective as it is the only way to combat financial crime meaningfully.
Who is responsible for financial crime risk and compliance?
Ultimately the board is responsible for ensuring that management has implemented programs designed to mitigate financial crime risks and comply with applicable laws and regulations.
→ Article on “The Board's Role in Overseeing the Management of Financial Crime Risk and Compliance”
Under law, a board-designated individual is responsible for implementing the board-approved program. Commonly referred to, in the US, as the BSA Officer, this article will use the title, Chief AML Officer.
→ Article on “The Chief AML Officer and their Role as the Head of Financial Crime Risk and Compliance”
What role does the Analyst play in Financial Crime Risk and Compliance?
In short, the Analyst plays a most vital role. Identifying financial crime risk, as an Analyst, is not a checklist or follow the procedures exercise. On the contrary, it is about applying a perfect blend of method and skill.
Standards, procedures, and tools will guide and enable an Analyst. The journey of experience will sharpen the Analyst’s skill set (intuition and analytic rigor at the core).
There are three (3) fundamentals to the role of the Analyst — research, analysis, and writing. These fundamentals will span across any assignment and when executed methodically and skillfully result in sound decisioning about the identification of financial crime risk.
Research
The role of the Analyst begins with an ability to find information. In the context of financial crime, investigative or intelligence research on the tactical level is the name of the game.
Most workflow will begin with at least one target (a customer or a counterparty). A “workup” on that target means collecting information about that target from internal or external sources. Whether source information exists in KYC records internally or 3rd party commercial records externally — knowing where to find subject or target background information is the first step.
Compiling information is methodical and can certainly be inefficient if done incorrectly. Speed and accuracy are the objective of laying the groundwork for proper analysis.
Analysis
This is where the value of the Analyst comes to life. Interpreting information has always been the basic definition of analysis (to me). The ability to look at raw information and discern patterns, make connections, and identify leads is the most critical task of an Analyst.
Analysis means taking target (subject) information and connecting that information to financial transactions. Simultaneously an Analyst is referencing red flags, signals, and indicators of illicit activity.
Applying reasonable analytic techniques to the correct information supports decisions across the financial crime risk landscape.
Writing
While analysis is where an Analyst’s value is most critical, writing is where that value can be reflected.
The role of the Analyst is not to take raw information and regurgitate that information into a report. Writing for intelligence is about sound best judgments. Judgments supported by highlighting the analytical process and ultimately the analytical yield.
A most effective written analysis supports a decision by addressing any question that may arise from even the most uninformed 3rd party (regulator or auditor).
What is the right pedigree or relevant experience for an Analyst?
Bottom line up front — an Analyst must be comfortable with a desk and screens. The job is that — a full day of screen time.
However, let’s look into the evolution of the Analyst in the financial crime risk and compliance industry.
Some History
I would set the stage here — post 9/11, USA PATRIOT Act (USAPA). Regulated financial institutions scramble for resources. Resources get pulled from internal back office functions and/or the front lines of banking. As we get into the mid-’00s we have a wave of retired and/or transitioning-out law enforcement officers come into the mix. Finally, we realize the need for a pipeline of talent. The pipeline introduces recent law school graduates and graduates of specialized academic programs.
“The Bankers”
The primary pro for these professionals is that they bring an understanding of financial transactions, banking terminology, and other business-side knowledge to the table.
The primary con for bankers turned financial crime fighters is that they may not have any insight into the world of crime, and illicit activity, and how that intertwines with the global financial system.
“The Law Enforcement Officers”
The primary pro for ex-LEOs is that they generally understand illicit activities and criminal proceeds. Having real-world experience in investigating and/or prosecuting financial crimes naturally lends itself to the core aspects of the Analyst job (research, analysis, writing) — while also serving as a force multiplier in spreading that experience to Analysts on the team who need it.
LEOs conduct interviews, execute search warrants, and make arrests. A lot of the personalities who enter a career in law enforcement thrive off of fieldwork. Analyst work is not fieldwork.
The primary con for LEOs is their ability to recognize the boundaries of the Analyst work. Disinterest and productivity are common issues.
“The Recent Grads”
What are some of the staples of the undergraduate, graduate, and law school experience?
Research.
Analysis.
Writing.
Acquiring these skills through academia is an excellent headstart. Compounding skills with knowledge acquired in specialized programs is even more desirable. Experience is the trifecta that many law school grads will not have the patience for.
When entering into the Analyst ranks (<$100K salary and no clear path to it) — having spent potentially 3x that is a demoralizing proposition and patience often runs thin — the primary con for recent grads.
Takeaways
The skill set is most important (research, analysis, writing). The acceptance of working on screens for the full day is a must. Patience and the desire to acquire experience are key (this is development).
These takeaways are useful for those embarking on a career as an Analyst and for those who hire and lead Analysts.
What does the future look like for an Analyst?
Only a snippet here — embrace technology (as an enabler), be more diverse in knowledge (cybercrime = fraud = money laundering = corruption = sanctions evasion = it’s financial crime, not siloed segments), and enhance your analytical abilities (through reading and experiencing).
The future is bright for the Analyst workforce. Compensation and clearer career paths will evolve and opportunities will present for high performers. No, robots will not eliminate the Analyst in financial crime risk and compliance.