1. Facilitating the integration of anti-money laundering compliance practices in the banking context: the role of argumentation.
Mihaela Sandulescu
Università della Svizzera Italiana e BSI SA
Rudi Palmieri
Università della Svizzera Italiana
The 16th Cross-border Crime Colloquium, Prague, May 2015

2. Motivation
After the birth of GAFI (FATF) and its 40 Reccomendations in 1989, almost all the countries started developing and implementing their very own AML frameworks
Due to the lack of means and resources, the responsibility of identifying potential money launderers was shifted from the public to the private sector ( Pieth, 2003; Gallo, 2005 Davies, 2007)
Financial intermediaries were forced to acquire new (investigative) skills and integrate them into their traditional profit-oriented business model and culture.
Emergence of a conflict between compliance exigencies and commercial objectives
“the tension inherent in the AML fight between the commercial ethos and regulatory injunctions can, on the practical level, create dilemmas” (Favarel-Garrigues et al., 2007);
“compliance has an inherent contradictory characteristic (. . .) remains a battle between commercial interests on the one hand and rule observance on the other hand” (Verhage, 2011);
On average, compliance officers acknowledge the AML compliance vs. profit maximization contradiction to a certain extent - i.e points on a scale from -2 (not at all) to 2 (a great extent). Moreover, if the score for this perceived contradiction increases by 1 unit, the odds of experiencing a conflictual situation with the relationship manager increase by 126% (Sandulescu, 2014);

3. Actors involved
Compliance officer (CO): caught “between the hammer and the anvil” (Verhage, 2011) he faces significant challenges when proposing compliance solutions that effectively manage the money laundering risk while supporting the business of the institution (de Koker, 2006; Gully-Hart, 2005; Subbotina, 2009; Verhage, 2011).
Relationship Manager: (RM) expected to develop profitable, trust-based and long-lasting relationship with clients, while monitoring their financial behavior and collecting additional information each time the clients’ actions don’t correspond to their predefined profile
The RM and the CO experience frequent tensioned discussions and conflicts
The existing AML literature lacks a study investigating in which particular conditions these conflicting situations take place , how the RM and CO handle them, and which are the possible strategies to resolve them

4. Hypothesis and research questions
In facing this issue we started from the hypothesis that argumentation plays an important role.
Argumentation is a type of communication by which people try to resolve conflicts in a reasonable way (van Eemeren & Grootendorst 2004; Greco Morasso 2011). In institutional contexts, argumentation is a fundamental resource for the diffusion of managerial policies (Green 2004) and for the management of various forms of disagreement involving employees and/or external stakeholders.
In order to verify this general hypothesis, we formulated the following research questions:
What types of issues (points of conflict) can emerge between the RM and the CO?
To what extent do these actors engage in an argumentative discussion to handle a conflict?
Does the choice of opting for an argumentative attitude makes the conflict resolution more likely?

5. The Swiss AML context Off-shore financial center Banking secrecy
Wealth management industry
Dual suspicion system:
Well-founded suspicion and the duty to report the client and freeze his assets wihtout informing him
Simple suspicion and the right to report

6. The model of a Critical Discussion (1)
“Argumentation is a verbal, social, and rational activity aimed at convincing a reasonable critic of the acceptability of a standpoint by putting forward a constellation of propositions justifying or refuting the proposition expressed in the standpoint” (van Eemeren & Grootendorst. 2004).
In order to define the operations that discussants should fulfill in order to resolve their issue in a reasonable way van Eemeren & Grootendorst (2004) developed the Model of a Critical Discussion., which encompasses the following four stages:
Confrontation stage: the issue and related difference of opinion is clearly defined (what are the positions/standpoint of the parties)
Opening stage: readiness to resolve the issue with argumentation, definition of shared starting points which includes material premises and procedures (e.g. the burden of proof)
Argumentation stage: arguments in favor of the standpoint and counter-arguments are advanced and critically assessed.
Concluding stage: based on the previous stages, reach a shared resolution of the issue (acceptance/retraction of the standpoint, confirmation/removal of doubts).

7. The model of a Critical Discussion (2)
Engaging in a critical discussion means avoiding violence and other manipulative means of persuasion (e.g. hierarchical pressure, threats, corruptions, etc.) to embrace instead an attitude of reasonableness, which can be summarized in four basic principles of critical argumentation (see Rocci & Danesi 2009):
Freedom: parties must not prevent each other from putting forward standpoints or casting doubt on standpoints (e.g. “You do not understand the business, you cannot tell this is the case!”).
Responsibility: the freedom of advancing/questioning a standpoint is always accompanied by a responsibility that comes with it: a party who puts forward a standpoint is obliged to defend it (e.g. “the client is a criminal. Don’t ask me why!”). Moreover, a standpoint should be accepted /retracted once it has been successfully justified/refuted.
Plausibility/Acceptability: Arguments should contain propositions being true and acceptable by both discussants (e.g. “the client did not tell me he has an account with another bank”. Are you sure?”).
Relevance: Standpoint and arguments are related by a presumably valid inferential relation (e.g. “This client comes from a drug-producing country: he is a criminal” vs. “this client is reported on many newspapers for fraud: we must file a report”).

8. Data collection
26 semi-structured interviews with relationships managers (i.e. front-line employees) working in Ticino (20), Zurich (4) and Geneva (2)
Semistructured interviews - Advantages:
new ideas can be brought up during the interview as a result of the interviewee’s answers.
respondents feel more confortable to have a free discussion instead of a tick the box series of questions
a ‘free’ narration of one’s personal experiences allows for real stories and concrete examples to emerge.
Snowball method (Babbie,1995)
Place and time: mostly at the interviewee place of work and lasted between 45 and 90 minutes
Language: Italian in Ticino and English in Geneva and Zurich.
Where allowed, the interviews were recorded

9. Results (1)
Existing literature suggests that the compliance department is seen as a business prevention office by the other units of the bank, particularly the front office.
Our study found both confirmatory and contrary evidence and enabled us to specify the conditions under which the compliance’s contribution is destructive (the “business killer” model) or constructive (the “healthy business promoter” model).
The “business killer” model, according to which the CO adopts a authoritative approach entailing in particular a low level of argumentation.
The “healthy business promoter” model, according to which the CO acts as a critical scrutinizer who fosters a problem-solving collaborative approach and an argumentative reflection on the suspicious case.

10. Results (2) – the outset
Especially during the first years after the AML law came into force, COs and RMs experienced numerous conflicting situations characterized by argumentative disputes and, in the worst case, interpersonal conflicts.
[RM1] Initially, both in the client’s and the RM’s mentality, the AML compliance duties were seen as an obstacle, as a hindrance to the business. Meanwhile, I think that the function of the compliance has changed, such that each of us does his work, while sharing a common goal: if there is the possibility to develop a business opportunity, we do it, and they provide us with the needed support” .
[RM11] I remember that at the beginning we considered it as very controversial and there were a lot of discussion, but in the end we all understood that in order to go on, we need to accept this challenge
[RM14] Initially, I was very critical toward this law. I considered it to be another obstacle for the business, it was a sensitive issue for the banker as he was responsible for identifying what was unusual

11. Results (3) : Business promoter
The RM’s view regarding the role of the compliance officer is in general positive  The compliance officer is highly appreciated when he helps the RM to assess the activity at issue in its merit, with a more critical approach, by recalling the amount and type of information that must be collected by the RM in order to “plausibilize” the activity while avoiding that emotional factors affect negatively the quality of the controls. An RM might, in good faith, be blindly attracted by the client’s wealth or investment proposal. The CO, being detached from the business opportunity, is more objective and critical and can thus help the RM to avoid being influenced by excessively subjective judgments.
[RM1] Certain things cannot be seen by the RM alone; the CO, who sees the picture from a “detached” perspective, helps us to safeguard ourselves by asking the elements that are essential to give credibility to the transaction.
[RM4] Due to my long relationship with the client, I might not spot something unusual in his behavior. The CO, being independent, has more possibility to evaluate the things in an objective way. In fact, it’s a good thing that they are not business oriented, because they don’t care about acquiring a new client.

12. Results (4): Business killer
Have you ever had any conflictual discussions with the compliance officer/would you consider him a business prevention officer?
Yes: 20; No: 2; N/A: 4
“Ahhh…some compliance officers are more catholic than the Pope himself” [RM13]
“The compliance officer is not the eternal God who came down on Earth” [RM2]
“We still live in different worlds and sometimes they really give me the impression that they enjoy nagging us as they hope to find something illegal” [RM10]
“The compliance officers should not forget who pays their salary, they should help me to do the business…. [RM15]
“Very often, the compliance officer is envious because we are always dressed up, we have lunch at expensive restaurants and we stay in luxurious hotels when we travel and we also have a higher salary. [RM21]

13. Results (5): Business killer
We single out the following critical aspects which, according to the RM, sometimes can characterize the behavior of the COs, who seem to fail in providing the argumentative contribution mentioned above:
1. Lack of relevance in information requests and superficial advice
[RM2] “The things that they ask are really impossible, unthinkable”
[RM9] “sometimes is annoying because instead of answering my questions, he send me directly the law articles…I am not a lawyer and moreover why should I spend my time on reading them instead of taking care of what I a supposed to?”
2. Lack of justification for a request
[RM24] “There are different ways to say no to a business opportunity, but the front must understand why the compliance said no…c’est le ton qui fait la musique”
[RM2] if the CO comes up with other requests that, to my opinion, are useless, I will ask him to motivate them.
3. Time effectiveness
[RM6] “the compliance officer should first try to think about all the additional information and documents he needs and then send his request to me so I can ask everything to the client at once...I hate to bother my client because the compliance officer forgot to ask something or because he has suddenly come up with a new idea”

14. Conclusion
By interpreting the dialogue between CO and RM with the theoretical model of the critical discussion we were able to single out the conditions that the compliance officers should ensure in order to support the RM in his/her assessment of the client/transaction.
Particularly important is the opening stage, where the CO can make the difference between creating the conditions for a reasonable discussion on the issue or give rise to a hostile and counterproductive relation which prevents the reconciliation of the compliance duties and the commercial objectives of the bank.
It is at mainly at the level of this stage that the CO may become a business killer or , rather, a sound business promoter!

15. Suggestions for a smoother interaction
Compliance Officer:
Clearly state the parameters that must be respected/ documents to be provided such that a certain operation can be done
No prejudices about thresholds and important amounts
Make complete requests (info, documents) such that the client is disturbed as less as possible
Use common sense to see the whole picture, don’t focus on small things, have a proactive approach
Don’t take advantage of the power they have in stopping a transaction/business opportunity
Don’t change their minds in front of a RM’s promise to make the case look plausible
Don’t have religious, political or national prejudices
Relationship manager
Take a long term vision, don’t get greedy by the immediate profit.
Anticipate what kind pf complementary information the CO could ask
RM & CO:
Don’t take possible conflicts personally
Be aware of their own responsibilities and respect the fact that they belong to two different teams. They can be friends but never grant favors to each other.