Stopping Global Financial Crimes: A Conversation with an Expert

Emerging Voices Staff Writer Dan Kent had the chance to sit down with Aishwarya Gupta, a Vice President in the Global Financial Crimes Division at Sumitomo Mitsui. Below is a lightly edited transcript of their conversation.

Could we start with an overview of your professional background?

I am the Vice President of Financial Crimes Compliance Strategy and Governance at Sumitomo Mitsui, which is a Japanese bank. Prior to that I was at MUFG Bank, which is also another Japanese bank, where I was in the anti-money laundering department. I also have experience working in consulting at EY and financial crimes at Morgan Stanley.

Could you tell me more about what financial crimes entail?

Financial crimes cover a whole slew of things. Most people think fraud, but it covers a range of things, including sanctions enforcement, i.e., any individual or entity sanctioned by OFAC. What this means in the context of a bank is preventing the sending or receipt of payments with any sanctioned individuals or entities. 

Money laundering covers what you see in the traditional sense. It could be tax evasion, fraud or terrorist financing. Ultimately, there are various avenues of illicit financial and money movement. This is where financial crimes get expansive, in that it would cover things like human trafficking or any benefit to criminal activity where they could be using the money for illicit use, for example, wildlife trafficking.

Finally, financial crimes also cover anti-bribery and corruption, under the Foreign Corrupt Practices Act, which prohibits companies and individuals in the US from giving or receiving bribes. 

How did you become interested in financial crimes as a career?

I was interning while in graduate school at UN Women and I became really interested in the ISIL-Al Qaida Sanctions Committee. I was talking to a lot of people in that realm and they encouraged me to look at what banks are doing because they’re the ones enforcing the financial crimes aspect of it. So, agencies like the Committee will do research on which entities and individuals should be sanctioned and publish those lists, but really the work that is done to monitor the money movement and to stop the facilitation of financing to sanctioned entities and individuals or illicit actors is through banks because they’re the money centers.

So that was the first time I thought about banking in general. I really didn’t know what I was getting myself into. But as I explored the world of financial crime, I realized it covers so many areas that touch on what we as international relations or international affairs professionals have studied in our careers. There’s many ways in which those worlds collide, including countering terrorist financing. And it’s a really great way to learn the nitty gritty of how regulations are actually put into action within these financial institutions. 

There’s a lot of opportunities in financial crime divisions because almost every institution has some form of financial crime program in place. You can get involved at a very operational level as an analyst, move up to associate, AVP, et cetera. You go through the rungs and you really get to see how the program evolves and builds and what are the different components of it.

What is the actual work of investigating and stopping these transactions? What does that look like?

Financial Institutions typically have a lot of systems in place to monitor activity. When we onboard a client, we obviously have teams that conduct a lot of due diligence on them to understand the financial crimes exposure and risk. But for me, the really interesting part is the investigations. 

Every transaction or money movement from one account to the other goes through sanction screening. A sanction screening system basically has the OFAC list, the UN list, and other applicable sanctions lists (by jurisdiction). It uses a logic where if there’s a close name match, it will alert the system and the payments will get interdicted. This is when we are alerted and we will investigate. The investigator asks questions like “What is the reason for this transaction? Is it just a false positive that was hitting, or is it something we need to further investigate?” And once we investigate it and determine whether it’s a positive match, then we have to go through the blocking or rejecting mechanisms where depending on the nature of the transaction, we flag the property and the account and it must be reported to OFAC. 

To detect money laundering red flags, we have transaction monitoring systems with built in scenarios, for example exceeding the $10,000 limit in a transaction, or where payments/deposits are made just below identification and reporting thresholds (for example, paying $9,000 every week at the same time). Similarly, once it is detected, the appropriate teams are alerted. After it is investigated, if it is truly suspicious activity, then we would file a suspicious activity report with FINCEN that can be used by law enforcement to investigate further. 

Could you give us other examples of illicit red flags? 

It’s important to know that money laundering typologies are 1) placement 2) layering and 3) integration. 

Layering means you are moving illicit money through the financial system to make it more legitimate. If you’ve ever watched Ozark, he was laundering money, so he had multiple fronts like casinos and other cash intensive businesses, where you can move a lot of money through. 

Other examples might be large volumes of money moving to the same accounts or a high-risk jurisdiction. A high-risk jurisdiction is based on a variety of factors related to the risk of money laundering. This can include if they have been classified by the Financial Action Task Force as a jurisdiction that does not have controls or enough governance in place to prevent financial crimes. If you have money moving to certain parts of a country that is known for sanctions evasion, or where there is a port which countries use to send or receive goods, that’s one area where we could look at as a high-risk jurisdiction (or if the counterparty is located there). 

You are in the financial crimes division, so it must be asked: are there any stories that you could share?

There are so many interesting ones. Obviously, they are very confidential, so I can’t share! But we sometimes get requests from law enforcement. We may get either a subpoena for records or a request through something called the 314(a) system to see if we are holding accounts for any specific individuals or entities that they are investigating. When we do get those requests, we have a rule to turn those around very quickly and have to investigate them further. 

What I can share is that sometimes we have transactions that are clean on their face. You don’t see that either party to the transaction presents a sanctions risk. But, over the last few years sanctions have changed. Even though you have transactions that appear clean, they could be for the purchase of goods that are sanctioned or some other item like securities that are prohibited. It is really interesting when you start investigating these because you have to also look at underlying goods and services. You have to know some of the actors where there can be potential exposure and monitor them more closely. They’re most likely to be using their accounts with the financial institution to facilitate these types of transactions. 

Has the increasing use of sanctions as a foreign policy tool made enforcement more difficult?

It’s not difficult as much as it is interesting. Some of my bigger focuses right now are the Chinese military sanctions and the Russia sanctions. Over the past three years, Sanctions have impacted the securities sectors. When we’re talking about trading equities or any type of security, the Russia sanctions and before that the Chinese Military Industrial Complex (CMIC) and Venezuela sanctions, they target the securities industry. Securities are vastly different from transactions, in that they are both traded and held in custody. It’s been a learning curve for a lot of people for how to best enforce that because you can look at it at the transaction level but a transaction will not always tell you what securities were being traded and what is being transferred. You would have to go into the trading systems and see whether those mechanisms exist and where you can implement a control to stop the trading of these sanctioned securities. 

How does cryptocurrency factor into all of this? 

Cryptocurrency presents all sorts of risks. With cryptocurrency, you don’t know who the parties are to a transaction (though there are various tools coming to the market now that allow you to monitor the blockchain as well). These industries are largely unregulated. For example, FTX had so many parties involved in the web of money movement that you don’t just look at your crypto clients or customers, you look at anyone who could have crypto exposure and how they could be used to facilitate any kind of laundering or illicit activities through the account they’re holding at your institution. The exposure doesn’t just end within the cryptocurrency world. More often than not, the Coinbases and Binances of the world have financial crimes programs where they monitor their activity, but when you have other institutions (really anyone who can be involved in the chain of activity), where you could be 3 or 4 entities removed from the actual illicit actor, but the money could still be moving through your institution. 

Crypto has made it more challenging, but it’s also a constantly evolving field where you have to look at the risk involved for each type of digital currency/DeFi institution, because now it’s not just regular cryptocurrencies – there’s crypto investment funds, there’s crypto exchanges. The world of crypto is evolving and very rapidly at that. 

What types of skills have been useful to your success in this work? 

Research skills are extremely important. When you’re investigating, you tend to use a lot of research, both open-source and vendor-sourced information. Being able to parse through a large amount of data in a truncated time frame is very important.

Secondly, Excel skills are extremely important, because we work with transaction data a lot. Being able to use that information and parse through that information, whether it’s for a risk assessment or whether it’s for an investigation, is also very important. 

For anyone who is interested in financial crimes, I would argue that understanding how financial products work is extremely important. Even if you do a primer yourself, understanding the difference between basics like savings account vs checking account vs securities trading account is really helpful.

From a soft skills perspective, it’s also very important to be able to communicate effectively; be pithy and get your point across in the most succinct manner possible. Really understanding and grasping different situations clearly and effectively. The world of financial crimes is constantly evolving. What’s true yesterday for systems of criminals moving money into the financial system may not be as relevant in another few years. Being able to keep up with the changing environment and understanding different financial products is extremely important. 

Turning to your education, how has your study of global affairs connected to your work in banking? 

It’s extremely useful. From a money laundering perspective, the frameworks and requirements are very similar globally. You have to be able to parse through regulations and directions based on policy. You have to filter that into a program and how to implement controls and systems and make them effective such that your regulators are satisfied with the effectiveness of controls. A lot of the work that we do is looking at regulatory policy and making sure we’re able to meet the intent and the function of regulations. To build an effective financial crimes program you have to be aware of a whole set of regulations that are out there. A degree in IR definitely puts you at the forefront of being able to parse through that, including risk areas that you should look at. We look at everything from counterterrorism financing, human trafficking, illicit money movements: all of these have a broader risk study and base. Even if they’re three or four removed from a financial institution, how we might see that in a bank is extremely useful. Understanding what areas of risk are currently out there, what are emerging areas of risk as well. 

What advice would you recommend to young professionals interested in this work? 

Don’t be afraid, because the world of finance is always intimidating. People tell me all the time, “I don’t have a finance background.” I didn’t either when I entered this work. Yes, you look at numbers, but you’re not in the business of sales. 

Secondly, utilize your network and learn about the positions you’re applying to. There’s a lot of financial crimes positions out there. As I mentioned there’s so many different areas of it, you can find which areas of it you want to focus on. You can have a bribery or corruption focus. Or money laundering and human trafficking can be your focus. 

My last piece of advice is networking. I teach at NYU, and I always tell my students to reach out to me or another professor and ask me if I know someone at a company they are applying to. Be sure you utilize the full potential of your network; that’s how you get new jobs. My first job in finance was through one of my friends within NYU. My second job at EY was through someone who was a guest lecturer in one of my classes. He knew someone who was at EY who then brought me in. So never underestimate the power of your network, even if you don’t know someone directly. You might know someone who knows someone who could put you in touch.

Is there anything else that you would like to mention? 

One thing I want to emphasize is the connection to foreign policy and financial crimes. It’s not always apparent when you look at jobs, but there are different areas within an institution that they can apply to. Financial crimes units are not monoliths with just investigations. We have risk assessment programs, training programs, and testing functions. They’re quite large programs when you think about it. It’s not just one area where you would be focused on. You can focus on as many areas as you like. Really just thinking about what part of foreign policy interests you. For me it was sanctions that were really interesting. For others, it may be law enforcement or regulatory interaction. I would definitely encourage young professionals who are interested in gaining exposure to foreign policy but looking at it at that granular level, because we interact with regulators very often to determine what direction we should take. It covers such a broad scope, so I would definitely encourage professionals to continue to enter this field.