Financial Sector’s Wake-Up Call on Financial Crimes

Last week’s $1.2 billion penalty on Bank of America highlights crucial issues in the financial sector’s handling of financial crimes. It underscores not only the fine’s magnitude but also the reasons behind it. The bank’s failure to identify and report over a billion dollars in suspicious activity tied to national security and other illicit finance risks is alarming.

Notably, 76% of the bank’s risk factor weights in its transaction monitoring system remained unchanged from 2018 to 2023. Of those that changed, 80% were reduced. This indicates a significant disconnect between financial institutions’ approach to financial crime and the geopolitical landscape.

Money laundering and sanctions evasion often get reduced to mere compliance exercises. Operations involve pattern matching, assessing new behaviors, and checking names against sanctions lists. While essential, this focus neglects why sanctions exist and the national security risks implicated by financial crimes.

Financial crimes differ in impact. A local drug dealer poses a lesser national security risk compared to individuals using funds to support something as perilous as North Korea’s nuclear ambitions. A fundamental shift is necessary—one that considers American national security and foreign policy within a dynamic geopolitical context.

The Iran scenario exemplifies this shift. Economic warfare forms a crucial part of the U.S. strategy against Iran, and thwarting Iran’s sanctions evasion remains a key priority for policymakers. The consequences of overlooking Iranian sanctions evasion transcend those associated with unrelated illicit transactions.

Bank of America’s stagnant risk factor weights between 2018 and 2023, especially amid Russia’s 2022 invasion of Ukraine, demonstrate institutional complacency. Despite internal awareness of deficiencies, changes were insufficient. Recognizing evolving risks requires the institution to update its geopolitical knowledge continually.

Restructuring financial crime education is vital. The Association of Certified Anti-Money Laundering Specialists highlights education and training deficits as major risks. From 2024 to 2026, a large percentage of professionals cited inadequate training as a significant threat to financial crime functions.

Understanding the influence of American national security, foreign policy, and geopolitics on financial crimes must become central in anti-financial crime programs. Regulatory training is necessary but inadequate if it doesn’t enhance understanding of illicit finance beyond checklists.

To pivot from static to dynamic risk management, companies need leaders who comprehend these complexities and invest in substantial ongoing education. Are financial institutions simply training employees for their roles, or are they training them to think critically about evolving risks?

The sector’s need transcends operational compliance training. Institutions must critically reassess how financial crime education is imparted and maintained. At its core, financial crime isn’t a compliance challenge alone. It’s a global threat affecting people’s safety worldwide. Untrained staff can’t counter the serious threats threatening modern society.

Brett Erickson, managing principal at Obsidian Risk Advisors and advisory board member at Seton Hall School of Diplomacy and International Relations, advocates for this educational shift, understanding its profound implications for global security.