Does fear sell better?

Is it true?

"Fear sells"...Have you heard this statement before? Or, have you experienced this situation in your professional life? This post is all about my experience in witnessing the selling of fear, particularly in the compliance space.

If we look around us, we are living in an environment of fear. The most prominent fear - will our bank/FI be the next one to be fined by the regulator? If this was not enough, the fear of regulators is always hovering around - what if they found out something we did not self identify? If we go a little bit deeper the fear of missing any possible sanction violations or the fear of not identifying criminals who may have used your bank/FI for money laundering/tax evasion and going unnoticed will keep on bothering you. You may have encountered one of the other during your professional career, if not, I will be positively impressed! As I stated earlier, fear is good and also natural, but what about the selling of fear? I know what I will state in the following paragraphs may be a bit harsh but just trying to state my observations.

Fear in the compliance space

We know there are all sorts of challenges in the compliance space and many are driven by one or the other fear. However, have you taken a step bank and realized what is the cost of this fear? Let me take an example (one of my famous ones - Model validations in AML). I have seen so many projects, several hundred man hours spent, involvement of large consultancy groups doing this exercise over and over at different banks/FI’s. All this to prevent the fear of “unknown”. The question is, is this “unknown” worthy enough for spending several million dollars on? However, the fear of this particular “unknown” has been sold so well that every bank is rushing out to fix this unknown. Take another example - the classical case of "reducing false positives" in your Transaction Monitoring or Screening solutions. The fear of high volume of false positives and their impact has been sold so well that almost every vendor out there uses this as a parameter to demonstrate effectiveness of their tooling. This fear alone attracts significant amount of attention and hence opens up doors for good business. If this were not enough, we have hundreds if not thousands of people working on one project after another - some trying to achieve one target - and another (funny but true in so many situations ) trying to redo the same work but in a hopefully “smarter” way. Again, this is only possible because correct amount of fear is sold to the stakeholders. There are some smarter ways to tackle this problem (as I wrote in another piece)...but then this is the smart way ;-)

You may wonder, why I am talking about all these fears and why today. Let me take you to the start of my professional journey in the AML space. "Think like a criminal and only then you will be able to catch a criminal" - This was the statement I was told on the very first day of my job - working as a data miner to prepare behavior detection scenarios. My core objective since then has been to study the criminal behavior as much as possible and try to best use technology in designing/defining/implementing patterns to detect such criminals. I started amlabc.com back in 2012 (now regxsa.com) to gather all ML/TF crime related information and published on a periodic basis so that professionals in AML space may get a consolidated overview of information and learn what criminals do. And then during my professional journey (as a freelance consultant) I started encountering all these fears thrown at me. Somehow, while tackling all these fears (head-on on ground), I would ask myself - what is the real fear we are tackling here - fear of criminals OR fear of upsetting the regulators? In my opinion the ambition is to deal with the former but the drive is for the latter.

I have been having some good discussions on this topic with my current and former colleague and it leads up to some very interesting observations. I would bluntly call it fear, but in most cases people agree to the observations but are just short of calling it a fear. I would leave this post here and give you some food for thought… Think about it, are you becoming a commodity in this whole fear cycle? More important, which fear you should be more concerned about?

When I founded Regxsa, one of the key message I had for my team was - let's sell hope! Hope to connect banks in their fight against criminals, hope to empower investigators (who are mostly left out), hope to be few steps ahead of the criminals. I wish the industry, rather than selling fear, moves in a direction of hope and focuses energy on the most important aspect - fight criminals!