When Boards Break

Friday 11 July 2025  The compliance landscape continues to shift as regulators implement new frameworks and businesses adapt. Below are the latest developments across four core areas of financial crime compliance. Anti-Money Laundering & Counter-Terrorist and Proliferation Financing The European Anti-Money Laundering Authority (AMLA) officially began operations on 1 July 2025, gaining direct and indirect supervisory powers over high-risk financial entities to harmonise AML/CFT standards across the EU. Denmark also introduced new requirements on the same date, mandating that operators providing gambling services across EU/EEA markets register in the Danish Gambling Authority’s Money Laundering Register to curb illicit transactions. 🔗 Read more: Clarity on the implementation timeline for a strengthened EU AML/CFT framework (Arendt) 🔗 Read more: Denmark updates anti-money laundering requirements (ReadWrite) 2. Anti-Fraud The Home Office published its latest update to the Independent Review of Disclosure and Fraud Offences on 3 July 2025, highlighting the need for enhanced whistleblowing mechanisms, public–private partnerships, and legislative reforms to tackle fraud, which now accounts for an estimated 43% of crime in England and Wales. Meanwhile in Indonesia, the Financial and Development Supervisory Agency (BPKP NTB) convened a focus group on 2 July to accelerate fraud risk assessment in regional governments, calling for stronger early-detection controls and a fraud-aware culture. 🔗 Read more: Independent Review of Disclosure and Fraud Offences: update July 2025 (GOV.UK) 🔗 Read more: BPKP NTB urges stronger local anti-fraud measures (ANTARA News) 3. Anti-Bribery & Corruption The latest “Anti-Bribery Compliance in 2025” report outlines significant global updates: an expanded scope covering both public- and private-sector bribery (including foreign bribery), tougher sanctions tied to global turnover, and new offences for evidence tampering and whistleblower retaliation. In the UK, anti-corruption priorities are heating up as the government appoints Tom Hayhoe as Covid Anti-Corruption Commissioner and Margaret Hodge as Anti-Corruption Champion, with a new national strategy expected to steer enforcement in the months ahead. 🔗 Read more: Anti-Bribery Compliance in 2025: Key Global Updates (JDSupra) 🔗 Read more: Hot Topics in Anti-Bribery and Corruption for 2025 (UK Finance) 4. Ethics & Codes of Conduct The ICAEW Code of Ethics 2025 took effect on 1 July, embedding new requirements around professional mindset, technology use, integrity in group audits, and non-compliance reporting (NOCLAR). Down under, the Strata Community Association Australasia launched a unified National Code of Ethics for strata managers and service providers in Australia and New Zealand, setting ten core principles and an Ethical Decision-Making Framework to raise industry standards. 🔗 Read more: Code of Ethics 2025: are you ready? (ICAEW) 🔗 Read more: SCA Unveils National Strata Ethics Code (Mirage News) Lessons Learned Ltd works with multilateral institutions, private sector corporations and NGOs to embed best practices in financial crime compliance and business ethics through leadership, governance, policies and training.

Friday 4 July 2025

Friday 27 June 2025

The Danish philosopher, Søren Kierkegaard, wrote that "Life is lived forwards, but understood backwards". By which he meant, I guess, that sometimes we have to make our own mistakes before we can hope to understand why we made them. If that's true, then it's cold comfort to investors now scrambling to try and get something back from Indian electric vehicle maker BlueSmart Mobility , but it's worth remembering that we've definitely been here before. It was back in 2008 that financial journalist Alex Dalmady stuck his neck out and did what so few had done before. Risking potential bankruptcy and ruin (or worse...) he publicly called Stanford International Bank (SIB) as a fraud before the ponzi scheme there had been discovered. And he did so using his 'Duck Theory' - as in 'If it looks like a duck, and it quacks like a duck, then it probably is a duck!' The Duck Theory had four main indicators which applied to SIB, and it's instructive to see now how they slot not only into more recent cases such as FTX but also into many of the other fraud “classics” of the last few decades: 👉 "It's too good to be true." - FTX, so youthful, was sponsoring major sporting events and venues costing hundreds of millions. Just as SIB and Sir Allen Stanford did with international cricket. 👉 "It can do what no-one else can do." - FTX was offering returns at significantly above-competitor rates. Just like Bernie Madoff and his ‘elite-only’ funds. 👉 "There are only a few people, or one person, overseeing everything." - FTX management - and financial management (in a complex business) - was tightly controlled with limited genuine external oversight. Just like Nick Leeson and Barings (remember them, Old-Timers?) all those years ago. 👉 "There are very few incentives for whistleblowers." - Well, are there ever? But with massive investment rounds, huge celebrity endorsements, stunning growth multiples and a Rockstar CEO, based and regulated in an easily-impressed offshore jurisdiction and pumping cash (real, fiat cash) into good causes, who wanted to analyse the actual chemical contents of such a punch bowl? Sub-prime mortgage/CDO scandal, anybody? Of course, (and as Kierkegaard may have known), the problem with these types of 'red flags' is that whilst they are commonly found in frauds which have occurred, in themselves they cannot accurately predict fraud because they are too widespread, i.e. they can be found in businesses and situations where fraud and cheating have never been discovered because they have never existed. As an example, I have waited for years for 'explosive revelations' about how the New Zealand All Blacks manage to score so many points in the final quarter of a game. But no, just a lot fitter and more determined it would seem than most teams that they play. At most, these red flags can help us by telling us where to look more closely. And it is there that we encounter the real problem in all this - that the most common fate of those who shine a light and report a problem is... To be ignored. Consider; there were warnings - in some cases multiple warnings over several years - of trouble afoot in Wirecard , Danske Bank , The sub-prime mortgage market, the Madoff Funds , Enron , WorldCom and many more. These warnings came from informed, educated, not-obviously-insane people, in many cases insiders with a deep knowledge of the industries and sectors concerned. Yet no meaningful action was taken. Why? The full chains of causation for each are unique, but in seeking to 'understand backwards' so that we can at least try to 'live forwards' in a more savvy and alert way, it's worth remembering some truths about human nature that I would go so far as to say are profound - i.e., inescapable. We are overly optimistic - 'Optimism bias' in humans is well established in the literature of psychology (e.g. see Optimism Bias ). Maybe it's nature's saving mechanism for our species which, uniquely, (so far as we can tell) is self-aware of its own mortality, but we sure do like to look on the bright side. It may happen to others, but it won't happen to us. At senior levels within organizations this can translate into an unwillingness to believe that the worst is possible. "Nothing to see here. Everything's going to be OK, trust me!" We don't like to receive bad news - or deliver it - 'Shoot the messenger' is an instinct as old as bad news itself. In a 2019 study series , a team from Harvard found that participants generally saw the person who delivered negative information as less likeable. And the more unexpected the bad news was, the more upset the participants were. It's not hard to see the application of this in corporate settings. "I really wish you hadn't told me that. Why do you always have to do this?" We seek out data which confirms what we already believe - And we ignore or explain-away data which contradicts it. Confirmation Bias is another apparently universal trait established in multiple experiments. In a world teeming with information, it's essential that we have mechanisms for shutting out 'non-essential' data. But where corporate malfeasance is a possibility, a capacity to pay special attention to information which doesn't fit with existing 'hunky-dory' assumptions is not only advantageous, it's essential.  We don't like being the 'odd-one-out' - The trait of 'conformity' is another one that's been well established ever since Solomon Asch conducted his 'stick-length' experiments which showed people's preparedness to answer simple questions incorrectly in order to 'fit in' with the group - despite the evidence of their own senses. "Why take the risk of appearing panicky and credulous in the face of dire warnings, when no-one else appears to be doing so?" And "How am I going to explain why we chose not to make an 80% investment return, when so many others did?"