Financial course leaders want more time to fight crime

As more instances of financial crime hit the headlines, Laurent Deville, associate professor at Edhec Business School in France, fears that he might one day see a graduate of his institution on the news for the wrong reasons.

“It is our duty to make sure that these young and talented students will not become embroiled in the next dirty money scandal,” he says. “I’m always frightened when I read the newspapers.”

Edhec is now stepping up its efforts to prevent the lapses in judgment that can lead to financial wrongdoing. It has hired a philosopher who takes finance students into the grey areas of morality, to ensure they recognise criminal activities inside and outside their organisations.  “Financial crime is harming economic growth and public faith in the financial system,” Deville argues.

At other business schools, however, financial crime is still regarded as a backwater of global finance studies, not a central focus of the curriculum. Many students are uninterested in a career fighting white-collar criminals and kleptocrats, and there are limited job opportunities for all but those with a very specific skill set and experience.

Financial crime is harming economic growth and faith in the financial system

But, in the past few years, unlawful conduct — such as fraud, money laundering, insider dealing and corruption — has come under greater scrutiny. This interest has been driven partly by a surge of scams during the Covid-19 pandemic, the growth of unregulated cryptocurrency markets and trading venues linked to suspicious activity, and attempts by Russian oligarchs and businesses to evade sanctions over the war in Ukraine.

Some academic institutions are starting to respond. Courses have become available that can help students fight economic crime — and they are needed.

In the US, financial regulation was tightened after the 9/11 terrorist attacks with the US’s Patriot Act of 2001, which aimed to prevent financing of terrorism. However, the global effort has been branded by many as ineffective.

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A 2020 academic study estimated that worldwide compliance costs for banks and other businesses amounted to $300bn a year — more than 100 times higher than the dirty money recovered from criminals.

A more recent report by charity Spotlight on Corruption said that UK authorities were being “overstretched and outgunned” by crooks, with the amount lost through financial crime equivalent to 14.5 per cent of GDP.

New technology can help sleuths to stay ahead of the criminals, though. At Singapore Management University, Jiwei Wang, associate professor of accounting, teaches students how to use machine learning to detect financial crime. He says algorithms can scan a vast quantity of companies’ financial and non-financial data to look for abnormalities that could be the early warning signs of fraud.

Reams of regulations introduced since the 2008 financial crisis mean that large banks such as Citigroup and HSBC already employ armies of risk and compliance personnel. But Wang says it is increasingly Big Tech companies that are hiring his students as they come under pressure to tackle the rise in online fraud during the pandemic.

“The rise in online transactions and the increasing availability of data have exposed tech companies to the threat of online fraud and data privacy or security violations,” he says.

But, while job opportunities are expanding, tackling financial crime remains a niche career path with only 20 per cent of Wang’s accounting students working in the field.

To Rémi Canavese, who works for a consultancy in Monaco that helps private banks manage their anti-money-laundering risks, it is the dynamism that appeals. “Banks have to constantly evolve in order to fight against ever more advanced practices and ever more important regulations,” he says.   

The graduate earned an MSc degree in audit and corporate governance at the Aix-Marseille Graduate School of Management in 2015 and then spent several years working for a large French retail bank, carrying out audit assignments linked to financial crime.

Canavese says curiosity and critical thinking are essential to being hired in the field. “You have to be able to collect all the elements and take a step back from what you see in order to be able to form your own opinion — a bit like a policeman conducting a criminal investigation,” he explains.

Business schools still face manifold challenges in delivering the competencies that students need to fight financial crime, however. A need for legal knowledge means that many universities deliver programmes on economic crime through their law departments rather than business schools.  

A decade ago, Grenoble Ecole de Management did launch a course that helps finance students recognise and report instances of market abuse and money laundering to the authorities.

But Philippe Dupuy, professor of finance, says: “I thought we would be the first of a big wave of financial crime teaching in business schools, but it hasn’t happened because there are not many specialists in this subject as it crosses the academic borders between finance and law.”

Academic institutions also say there is muted demand for the topic from employers or students on masters in finance programmes, in part because these degrees are for those with little or no work experience.

“Fraud cases are so complex that, in many cases, it is a grey area, which makes it hard to detect and verify,” says SMU’s Wang. “This means you need a lot of experience to get hired.”