December 16, 2019

i-KYC is pleased and proud to take this opportunity to put Arnold Hardick in the spotlight. At the age of 70 and with 45 years of hands-on international banking experience to his name, Arnold has a unique perspective of how the banking profession has changed over time. His many years as a client-facing banker before joining the AML Operations team 15+ years ago helped him to become one of The Netherlands most knowledgeable and respected KYC specialists. We sat down with Arnold and put his feet to the fire with a few pertinent questions.

Arnold Hardick resume

After graduating from the Rotterdam School of Management in December 1973, Arnold started as concern trainee at ABN Bank in January 1974. Following various positions in ABN and, from 1978, in Amro. After the merger of ABN AMRO in 1990 Arnold was active in corporate commercial banking in The Netherlands, Far East and USA. Arnold Joined the Regional Due Diligence Department of ABN AMRO in 2005 and stayed there until it was closed by RBS in November 2012. He has since worked as KYC Compliance contractor for several large and small banks in The Netherlands, as well as providing KYC training as subject matter expert. Arnold lives in Bentveld, The Netherlands, is married and has three children and five grandchildren.

  1. Has integrity risk awareness & culture in banks changed much in the 45+ years that you have been a banker, and if so, how?

There was a famous anecdote about a Board Member of a large Dutch bank who, when asked whether he invested on the stock exchange based on inside information answered: “but sir, investing without inside information is pure gambling”.  Perhaps insider trading was the most common crime Dutch bankers indulged in during the ‘70s and ‘80s. Laundering money was not really an issue in those days as there was much less drug money in circulation. Moreover, preventing money laundering was considered to be the responsibility of tax authorities and the police. There was quite a bit of tax evasion as there were no limits on cash deposits and withdrawals. Even the government itself encouraged tax evasion by issuing so-called Spaarbrieven (savings bonds), which were bearer documents that could be purchased in cash at the bank counters.

Terrorist financing was basically non-existent in Western Europe.

Banking was done on a much more personal basis between bankers and their customers and as a result perhaps bankers knew their customers better than nowadays.

I see three big trends that changed the integrity and culture in banks starting in the ‘90s:

  1. Digitalisation estranged the banker from his customer. The customer could do his business online.
  2. The introduction of bonuses for bankers, which was taken over from the Anglo-Saxon culture. This encouraged bankers to go more for personal gain and lose sight of the interests of their clients.
  3. The growth of international (drugs) criminality which created huge flows of cash all over the world and that had to be reintroduced into the banking system and made bankers more vulnerable to bribery and corruption.

As banks became aware of this, we see the emergence of Compliance Departments in the ‘90s, focussing in first instance on insider trading and making sure that stock options (earned through bonusses) could only be exercised within certain trading windows.

After 9/11, and even more so after the crash of 2008, this all changed drastically and integrity risk control became institutionalised. Compliance Departments expanded and KYC work exploded, which is the reason I am still working at the age of 70.

  1. What do you consider to be the most striking changes in how banks manage ML/TF risks in the 15+ years that you have been engaged in AML Operations?

I recall the first rudimentary KYC attempts within the bank that I worked for started around 2002 when I received a request from our London branch to supply them with certain KYC documents of Dutch mutual customers. We did not have these documents in our files and I told them to contact the customers directly as I did not have time for such nonsense. This attitude changed drastically in 2005 when the Bank was fined US$ 500 mln by the US authorities for breaching sanctions on Iran. This caused such a shock in the organisation that the Board was determined to ensure that this was a one-time event that should not happen ever again. KYC was institutionalised and introduced throughout the bank and I became part of the team. At first, procedures and tooling were very primitive but soon became more sophisticated, efficient and eventually as of 2011 with a global fully digitalised KYC system, applicable for all countries. I should add that some banks have much better developed systems than others and the difference can be quite striking.

Of course, the introduction of the WWFT (the Netherlands law that addresses money laundering and terrorism financing – i-KYC) had a big influence. So did the ever-larger fines levied by especially the US authorities, but more and more also in Europe. In this respect it amazes me that there are banks that still don’t seem to have learned their lessons.

Furthermore, the introduction of filtering and monitoring of transactions through automated systems has been a big change although for these activities there is also still a lot of room for improvement and cost containment. This explains the current initiatives by banks such as in The Netherlands and in Scandinavia to centralise this activity.

  1. What has worked best in financial crime prevention and where do you see most room for improvement in banks?

In my opinion it has worked best in the prevention of tax evasion by otherwise law-abiding citizens thanks to Fatca and CRS. It has worked to some extent in reducing bribery and corruption. It is difficult to judge whether it has reduced or prevented acts of terrorism or whether it has merely changed the way of execution of terrorist activities, making huge impact acts such as 9/11 and the Madrid metro bombing much more difficult to organise. The least effect I see is the prevention of international crime and the related money laundering and one wonders whether all the KYC investments by banks in this area are worth the effort.

  1. Do you think the general public’s response to banks who have been fined for regulatory breaches has been too harsh, balanced or too forgiving?

Banks certainly deserved public wrath for the causes of the crash of 2008. Banks, by the way, are like lemmings, when one jumps off the cliff, they all follow. They deserve scorn for being too greedy, for lack of integrity and for losing sight of the interests of their customers. On the other hand, governments have been quick to exploit the public mood by laying responsibilities with banks at tremendous costs for the banks while they failed in their own obligations to the public.

  1. If asked, would you advise your grandchildren to pursue a career in banking?

My grandchildren are still far too young to think about what career they would like to pursue, and a lot can change between now and when they are old enough to start their careers. At this point in time I would certainly not advise them to go into banking, spending half your time on ever changing and increasing KYC demands and being subject to public contempt. Unless you are a specialist in an area which you can really enjoy, the fun has been taken out of being a banker. And now I sound like a grumpy old man, who has not kept up with time.