To financially hurt fewer people, less often
It was roughly four years ago as part of a Leadership training company that I was tasked to develop an Anti-Money Laundering course for a major bank, based on their own internal material. It was approved by the bank’s multiple international departments. There was suspicion in my team that, should the course material get into the hands of unscrupulous people, it could become part of a blueprint to launder money undetected. It was no surprise two years later to discover that the bank was fined hundreds of millions of dollars for money laundering.
No matter how effective the training, preparation or safeguards, a large bank is too tempting a target. No amount of internal restriction, regulation or management are, by themselves, going to fix the problem. Neither regulator nor bank can restore confidence and later, trust. The banking systems have become so complex that we non-bankers don’t stand much of a chance. Relationship managers find it all too easy to prey on our egos with lines like “you do understand these derivatives, don’t you?”
So what can we do about it?
One of the actions we can take immediately and without requiring permission is to move towards self-policing. Not banks policing themselves, for obvious reasons. Instead, we, the customers, policing the industry. Most of us check TripAdvisor before going on holiday to learn from others’ experience. We need a similar review centre for banks, a FinanceAdvisor, if you like. Somewhere to pool our collective good and bad experiences of products, services and finance companies, rating them across a number of categories, and awarding the good ones a star. Couple that with professional reviews summarised into digestible pieces and we should begin to encourage banks to improve – or lose customers. I call it the consumer carrot to compliment the government sticks.
It obviously won’t stop every bad thing from happening, but that’s never going to be achieved. The goal of any anti-hacking department isn’t just to prevent hacks, but to accept that when hacks happen they can drastically limit the damage done. By reducing exposure to bad finance products or institutions, we should limit losses significantly. That would be a big step in the right direction. We could work together to pick up the fallen since more of us will be left standing.
There are long-surviving examples of success of this approach in other areas. Neighbourhood Watch, and TripAdvisor are the most prominent. The process took time, but they’re now both extremely effective. We need to do the same to our financial institutions.
No self-policing is an overnight process, nor, for that matter, is any other solution, and it is only part of the puzzle. The banks are still too big even after what I have suggested. We will need to break up and franchise off parts of them into localised pockets to reduce exposure of a single entity to much smaller banks. Localise penalties and put responsibility closer to where problems occur – and bail out the clients not the banks. Hurt fewer people, less often.
What a corporate target that is.