Addressing Implicit Bias in Financial Crime Investigations

To maintain the integrity of a financial crime investigation, financial crime investigators must be aware of the impact their individual biases can have on the investigations they conduct. Biases can interfere with the ability to understand the facts of a case and produce fair and accurate decisions.

By recognizing and addressing their implicit biases, financial crime investigators can better conduct ethical and comprehensive investigations to help the financial crime reporting system operate fairly and effectively.

What is bias – and who has it?

Generally defined, a bias is a tendency or inclination in outlook, opinion, or feeling, often preconceived or unreasoned. One can be biased toward something, and favor it, or biased against something, and not favor it. Biases can be associated with social stereotypes and generalizations based on a person’s race, sex, gender, age, class, citizenship, socioeconomic status, religious beliefs, or even an individual’s name.

Everyone possesses biases, both explicit, or conscious, and implicit, or unconscious. Because they function on an unconscious level, implicit biases require the most intentional examination. The Kirwan Institute for the Study of Race and Ethnicity is an interdisciplinary research institute at Ohio State University. In its review of research on bias from 2018 to 2020, the authors of the report defined implicit bias as “the set of attitudes or stereotypes that affect our cognition, affect and behavior in unconscious and automatic manner. Implicit biases can be either positive or negative, and are activated involuntarily without an individual’s intention, awareness, or control. Implicit biases are pervasive; every individual is susceptible to them, including children and those with avowed commitments to impartiality.”

How does implicit bias present in financial crime investigations?

By acting as filters, implicit biases can affect and cloud judgment during financial crime investigations. Such filters can cause investigators to selectively disregard information while giving more attention to other information, which can lead to poor decision-making, ethical dilemmas, and a distortion of the facts of an investigation.

If investigators do not recognize their own biases, they run the risk of underestimating or overestimating potential threats and suspicious activity due to preconceived assumptions, which could lead to overlooking potentially suspicious activity or inaccurately evaluating parties within the investigation. Furthermore, if investigators unconsciously favor a subject, they might empathize with the subject’s actions and skew the results of the investigation.

Fraud and anti-money laundering investigators often handle numerous cases throughout a single workday. The pressure to complete a high volume of cases can lead to investigators relying on prior information to make decisions. In general, people depend – consciously or unconsciously – on previously encountered information or patterns, even when the information or patterns might not apply or be accurate in a specific situation. Relying on familiar patterns instead of conducting a thorough analysis of each unique case might appear to streamline processes or save time but can lead to the oversight of key details or failure to identify new and emerging patterns of suspicious activity.

One example of pattern recognition is borne out in elder financial exploitation investigations. The U.S. Department of Justice reports that elder abuse, including elder financial exploitation, affects at least 10% of older adults each year in the U.S. As of 2019, older adults are defrauded $3 billion annually. As such, financial services organizations are alert to red flags that might indicate such exploitation. The sheer number of alerts and cases can lead to a tendency to group them together. Investigators might make assumptions or jump to conclusions based on limited information, overlooking important details or alternative explanations. To ensure a fair and objective investigation, investigators must approach each case with an open mind, gather comprehensive evidence, and evaluate the unique circumstances of each situation without being influenced by implicit biases and relying on pattern recognition.

When providing recommendations during a financial crime investigation, investigators must make a conscious effort to prevent bias from controlling their decision-making processes. By recognizing and addressing their own biases, financial crime investigators can achieve more comprehensive, consistent, and thorough results.

How can financial crime investigators recognize and address implicit bias?

Given the potential consequences of inaccurate or incomplete investigations, financial crime investigators must take steps to recognize, address, and challenge their implicit biases. By doing so, they can enhance the objectivity and accuracy of their decision-making processes. Following are three actions investigators can take.

• Acknowledge the impact implicit biases can have. In the context of financial crime investigations, it is crucial to acknowledge the impact that implicit biases can have. By becoming aware of their own unconscious biases, financial crime investigators can consciously strive for a comprehensive and well-rounded perspective, eliminate unfair practices, and conduct ethical investigations. Much like a judge who decides a case based on evidence, a scientist who relies on empirical results, or an accountant who adheres to presented numbers, financial crime investigators need to focus on the facts at hand and draw conclusions from objective analysis rather than subjective influence or unconscious bias. By doing so, investigators can uphold the integrity of their role and contribute to a just outcome.
• Implement standardized procedures and conduct regular training. To ensure consistent and effective investigations, financial services organizations can consider implementing standardized procedures, checklists, and templates. These tools provide a structured framework for investigators to follow and support consistency and thoroughness in their work. Additionally, organizations should require implicit bias training to enhance awareness and equip investigators with the necessary skills to identify and address their own biases in their work.

  Organizations can also conduct regular training and awareness education sessions, such as annual or biannual workshops, to reinforce the importance of recognizing and addressing implicit biases. By investing in ongoing training opportunities, investigators can continually develop their ability to navigate complex situations with objectivity and fairness.

• Establish quality control frameworks and provide postreview feedback. To systematically identify and mitigate any potential biases that might have influenced an investigation and verify that the findings and conclusions are objective, fair, and free from undue influence, financial crime investigation teams can establish a quality control framework. When selecting sample sizes for quality control reviews, teams can employ a risk-based approach, prioritizing higher-risk cases or areas where biases are more likely to occur. This approach helps reviewers allocate resources effectively and select a representative sample for evaluation.

  In addition to sample selection, providing postreview feedback is essential for continual improvement. Investigators should receive timely and constructive feedback on their work that highlights any identified biases and suggests strategies for improvement. This feedback loop helps investigators become more aware of their biases and develop strategies to mitigate them in future investigations. Regular communication and collaboration between quality control teams and investigators can foster a culture of learning and improvement, ultimately enhancing the objectivity and fairness of investigations. By incorporating risk-based sample selection and establishing a feedback mechanism, organizations can strengthen their quality control processes and minimize the impact of biases on investigation outcomes.

Biases are malleable and can be changed. Even minimal interventions like webinars provided by employers or participating in diversity, equity, and inclusion activities can help reduce the probability that inherent bias could affect an investigator’s decision-making. Individuals who are aware of the impact their biases can have on the outcome of an investigation can be more effective investigators. Becoming educated, deploying accountability, and setting up quality control processes can determine the difference between true threats of criminality and bias-driven conclusions.

Third-party financial crime specialists can help address implicit bias

Financial crime investigation standards emphasize the importance of objectivity, the absence of conflicts of interest, professional skepticism, and adherence to ethical principles with integrity and professionalism. Some organizations might find that they need a third party to uphold these standards and principles.

Diverse investigative teams of third-party financial crime specialists can actively challenge biases by incorporating different perspectives and creating inclusive learning environments. This diversity encompasses unique backgrounds, varying levels of formal education, and prior professional experiences. Additionally, oversight mechanisms, such as periodic quality control reviews, play a crucial role in identifying and addressing bias-related issues.

Ultimately, it falls on inquisitive and self-aware financial crime investigators themselves to recognize and address their implicit biases so that they can conduct ethical and comprehensive investigations. By embracing a culture of learning, accountability, and continual improvement, investigators can uphold the principles of fairness, objectivity, and integrity, thereby enhancing the effectiveness and credibility of the financial crime reporting system.