But it leads to another and another to the point where the money is simply too good to turn away, no matter how many red flags there are. There may be less pecuniary explanations too. Regardless of the profit potential, our sensitivity to warning signs can fade from lack of practice. For every time we look the other way, it is incrementally easier to ignore the next instance. On the flip side, each time we intervene, the next intervention is easier too. Effective compliance gets better with practice. Like ethics, it needs to be a habit. And don’t think that the bad guys don’t notice a firm’s reputation—or, dare I say, its culture. Word spreads quickly. A law firm or accounting firm or auditing firm can quickly become known for being “creative” in its approach to an internal investigation or issuing a tax or audit opinion. The same goes for corporate reputations for strong and weak compliance programs, or high or low tolerances for risk. Clients may be attracted to firms with reputations aligned with their goals, for good or ill. So, my first word of advice on where to go from here is to safeguard your corporate reputations by developing good habits. Just Because It’s Legal, Doesn’t Make It Right 3/6  BIS central bankers' speeches  That’s very high-level, prudential advice—not legal advice. A second point I’d like to emphasize is to avoid cabined views of what’s permissible or impermissible. Just because something is legal, doesn’t make it right.
As I have said in other contexts, one challenge in a rules-based regime is that the pace of rulemaking is not always commensurate with the pace of rule breaking.6 Complying with minimum legal thresholds may not be sufficient in all circumstances to appropriately mitigate risk to your firm or the payment system.7 Technology has greatly expanded access to the payment system. Many of us— everyday consumers, that is—effect payments not only directly through our banks, but also through various “fintech” intermediaries. There is much good in this, but technology is not riskfree. The creative development and application of technology can create opportunities to improve the payment system. Technology also creates new opportunities to compromise that system. Take, for example, the nascent challenge presented by the development of digital currencies. The New York State Attorney General’s office estimates that more than 1,800 virtual currencies are exchanged around the world.8 Many digital currencies use distributed ledger technologies, which can help institutions achieve efficiencies in customer due diligence programs. Distributed ledgers also promote traceability, which in theory assists law enforcement. That said, the use of private exchanges for these digital currencies may facilitate anonymity, which tends to help the bad guys. My concerns, however, are less about the technological frontier, and more about well-established risks to the payment system. Recent press reports about financial crimes involving 1MDB, Danske Bank, Swedbank, and, yes, Bangladesh Bank make no mention of fancy new digital currencies.