Ray Blake is an authority on creating personal organisers. He teaches people how to make diaries by cutting their own leather and fashioning their own paper inserts. His Youtube video on “Making your own Midori-style Leather Traveler’s Notebook” 1 exceeds 370,00 views, and his Facebook group2 has over 17,000 members. As he says tongue-in-cheek, he empowers people so that they’re “Not beholden to Big Diary”.
His friend and business partner Graham Barrow used to write computer generated music, some of which has been featured in computer games. The royalty-free music he created and the editing skills he acquired came in handy when he and Blake decided to co-host The Dark Money Files podcast3.
From podcasts …
Focusing on financial crime in general and money laundering in particular, the podcasts involve the two financial crime fighters breaking down complex issues into manageable chunks, and garnishing them with insights, analysis and humour. They discuss how “dirty money” made from modern slavery, prostitution, drug smuggling and counterfeit goods makes its way through the financial system and eventually appears as if it came from “clean”, legitimate activities.
… to live events …
The podcasts have become so popular that they have been supplemented with live, in-person and online interactive events4.
… to primetime TV
So why on earth would global financial crime experts flock to hear insights from a stationery enthusiast and his friend who used to write music from his bedroom as a hobby? And why would the BBC seek out Barrow to provide expert commentary as part of its primetime investigative documentary series Panorama5?
Cryptic crossword clues …
Blake and Barrow met over a quarter of a century ago, and bonded over a love of cryptic crosswords when they were both working in financial services training.
The regulatory reforms that followed the 2008 financial crisis led to increased demand for experts who could improve the resilience of the financial system. The pair became highly sought after within the financial crime space, initially as trainers, and then as investigators, working around the world with organisations such as Coutts and HSBC.
… have own internal logic
An innate ability to identify patterns and spot connections within masses of information proved invaluable in tracing illicit funds. The skills they deployed to decode the internal logic in cryptic crosswords helped them make associations between clues hidden in vast volumes of disparate data, revealing how criminals use the financial system for their own ends.
Tackling knowledge silos
The Dark Money Files is the culmination of the two friends’ experience in combatting financial crime. Through working with bankers, compliance professionals, regulators and law enforcement, they became aware that the knowledge needed to rid the financial system of “dirty money” is divided between different groups of people addressing the issue from a variety of angles.
Identifying a thirst for a common understanding, the pair have become advocates for increased collaboration between specialists tackling financial crime from different perspectives.
The Avengers trump Batman …
Blake contends that those fighting financial crime “Could win tomorrow” if they worked together as well as the money launderers.
He argues that “Most firms’ approaches to financial crime are modelled on Batman” 6, whose obsession with secrecy prevents him from collaborating with others (apart from his sidekick Robin) to further the common good. Worse, his enemies know his weaknesses and exploit them.
… because they are team players
Instead, Blake recommends firms model themselves on the Avengers, primarily because the superheroes work together as a team. “They can use their individual powers separately or in a variety of combinations to react flexibly to a whole range of threats and opportunities that would be beyond Batman, with or without Robin.”6 And, as Barrow adds “They talk to each other.”6
In this respect, criminals are ahead of the game. Barrow explains: “In our work, we see similarities in approach and methodologies between disparate actors that can only mean active sharing of information among those criminal concerns.”6
Fintechs are solution-oriented …
On the subject of fintechs, Blake says that they have been fantastic for established financial services companies. Fintechs are “Solution-oriented; they’re about working around problems as they appear, if not before they appear.”
… and can easily make fixes on the go
He points to challenger banks such as Monzo, which were built from the ground up using clean, modern, modular architecture7. This means that when developers want to improve, repair or change what their technology allows them to do, they can isolate the part they want to work on, while keeping everything else running.
Fintech AML systems built from scratch
Barrow adds that, traditionally, banks have tended to store data collected about customers in different systems that don’t communicate with each other. This means they’re unable to compare customer information provided at the account opening stage with ongoing account monitoring data, thereby depriving them of the opportunity to build up a fuller picture of a customer’s activities.
He explains that new banks, in contrast, have systems able to analyse all the data for a particular customer together, making it easier to identify patterns of behaviour that could indicate illicit fund flows.
Putting AI to work on AML
A number of fintechs are deploying cutting-edge technology to offer stand-alone articifical intelligence (“AI”) solutions to flag and investigate suspicious transactions.
One advantage of AI-based solutions is that they can process vast quantities of data in a fraction of the time a human being would require.
UK regulator bans “black box” AI …
However, Blake notes that the UK regulator, the Financial Conduct Authority (“FCA”), takes a dim view of “black box”8 AI solutions, which fail to show why one customer is rated as higher risk than another. He summarises the regulator’s view as “If you can’t explain why you’ve made these decisions, we can’t let you use that system.”
This is because a human being, in the form of a Money Laundering Reporting Officer9 (“MLRO”), must take personal responsibility for an FCA-regulated firm’s compliance with anti-money laundering (“AML”) rules. If the human relies on AI that does not show why it has identified certain transactions as being suspicious, then the MLRO is effectively delegating part of their job to a machine, and risking fines or imprisonment10 .
… leading to XAI focus
This has led to a focus on Explainable AI (“XAI”) within the anti-money laundering space. As its name suggests, XAI makes it possible for a human being to track and understand how the technology makes decisions.
Rather than analysing data about a customer’s activities and simply outputting an automated response, XAI allows people to see how the technology arrived at a particular conclusion.
As well as ensuring that standardised decision-making criteria are being used, XAI provides a record of the parameters applied and the logic underpinning each and every step of the analysis. The firm can therefore automate more of its monitoring, safe in the knowledge that it will be able to provide the FCA with evidence as to how decisions were made, if necessary.
Royal connection
On a lighter note, it might be worth putting XAI to work on investigating Barrow’s claim that he knows the man who started British rock band Queen11; an anecdote that includes a cameo appearance by Thomas the Tank Engine12!
In common with many money laundering sagas, the story connecting Barrow with the Queen founder is long and convoluted, and involves navigating all manner of twists and turns.
It could be argued that only the most advanced XAI could possibly analyse such a complex web of information, come to a conclusion, and output the rationale in human-readable format.
1Ray Blake (2013) ‘Making your own Midori-style Leather Traveler’s Notebook’ [online video] Available at: https://www.youtube.com/watch?v=hCYAnmQnn6w&t=3s. (Accessed: 1 May 2020)
2Midori Traveler’s Notebook resources [Facebook group] Available at: https://www.facebook.com/groups/132642456932203/ (Accessed: 1 May 2020)
3The Dark Money Files, ‘Podcast’ Available at: https://www.thedarkmoneyfiles.com/podcast (Accessed: 1 May 2020)
4The Dark Money Files, ‘The Dark Money Files: Live (Online)’ Available at: https://www.thedarkmoneyfiles.com/liveonline (Accessed: 1 May 2020)
5Panorama ‘Following the Drug Money’ (2019), BBC One, 28 October. Reporter: Verity, A. Available at: https://www.bbc.co.uk/programmes/m000b8b6 (Accessed: 1 May 2020)
6The Dark Money Files (2020), ‘Let’s Get Together!’ [Podcast] 13 March. Available at: https://www.thedarkmoneyfiles.com/podcast (Accessed: 1 May 2020)
7Monzo blog (2016) ‘Building a Modern Bank Backend’, 19 September. Available at: https://monzo.com/blog/2016/09/19/building-a-modern-bank-backend (Accessed: 1 May 2020)
8‘Black box’ (2020) Wikipedia. Available at: https://en.wikipedia.org/wiki/Black_box (Accessed: 3 May 2020)
9Financial Conduct Authority, ‘FCA Handbook’, SYSC 6.3 Financial Crime, SYSC 6.3.9 The Money Laundering Reporting Officer. Available at: https://www.handbook.fca.org.uk/handbook/SYSC/6/3.html (Accessed: 1 May 2020)
10United Kingdom. ‘Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017’ Part 9: Enforcement, Chapter 3: Criminal offences, penalties and proceedings etc. (2017), p.82. Available at: https://www.legislation.gov.uk/uksi/2017/692/pdfs/uksi_20170692_en.pdf (Accessed: 1 May 2020)
11‘Queen (band)’ (2020) Wikipedia. Available at: https://en.wikipedia.org/wiki/Queen_(band) (Accessed: 3 May 2020)
12‘Thomas & Friends’ (2020) Wikipedia. Available at: https://en.wikipedia.org/wiki/Thomas_%26_Friends (Accessed: 1 May 2020)
Note: Paragraph 24 has been updated with more succinct wording.