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June 29, 2020
By: Jack Walsh, ACSS Reporter

For this Member Profile, ACSS spoke with Paul McCarthy, a founder and partner of The Mizen Group and the new chair of ACSS’s Sanctions Innovation and Technology Taskforce (SITT).  Mr. McCarthy is a senior technologist and strategist with extensive experience delivering complex and diverse technology, analytical, and governance solutions. 

Before helping found Mizen Group in 2014, Mr. McCarthy served as the Principal of BI Solutions Inc., a value-oriented data, analytics and technology consulting firm, which focuses on providing consulting services to clients in the areas of Enterprise Architecture, Business Intelligence, Data Governance, Data Hygiene, Integration, CRM and Data Analytics.

ACSS: Can you tell us about your background and how you became involved in sanctions compliance work?

Before founding The Mizen Group, I was engaged as the Technology & Operations lead for the monitor appointed by the New York State Department of Financial Services to oversee the remediation efforts of a global bank under a consent order.  In this role, I was responsible for overseeing the team reviewing and validating the implementation of an AML solution for the Correspondent Banking division of the bank’s U.S. entity.

Over the past 3 or 4 years, there has been greater alignment between fraud detection and traditional AML/BSA solutions. This has really accelerated the incorporation of more advanced artificial intelligence (AI) and machine learning (ML) techniques into the AML space.

The pace of similar technology adoption has been slower in the sanctions realm. At the same time, under the current Trump administration, targeted financial sanctions became a foreign policy tool of choice of the U.S. government, and therefore a greater regulatory concern for a growing range of businesses. Against this backdrop of more complicated and pressing sanctions challenges, I felt the desire to get involved with SITT to help raise awareness about the different technology options that could be used to improve sanctions compliance practices.

ACSS: Could you tell us about your work with Mizen Group and how your experience there has influenced your approach towards sanctions compliance?

The Mizen Group is a compliance advisory firm that uses diagnostics and technology to assess, remediate and validate all aspects of compliance programs. We help clients conduct in-depth explorations of their systems, effectively manage risk, and determine gaps, inefficiencies and areas for improvement.

We have designed tools to examine organizational subcultures, conduct, risk, and compliance. These tools, which are based on behavioral science and academic rigor, provide insights to identify and interpret how characteristics of cultures influence appropriate outcomes within a particular domain.

Our view is that these subcultures have a very important role when it comes to compliance outcomes and in ensuring that sufficient trust exists within an organization to improve. This includes a willingness to innovate and to take some risks, as well as actively harnessing the collective knowledge and experience of employees to thresh out the best solutions and most appropriate responses to sanctions-related issues.

When decision-makers in a company are not fully on board or sufficiently engaged with the adoption of a new compliance technology, it is easy for implementation to be derailed. Alternatively, in rigid, top-down environments where decision-making processes happen in a silo, employees may be reluctant to voice their concerns and objections when the adoption of a new compliance system or technology is being discussed.

There ultimately needs to be buy-in and thorough consultation across different levels of an organization. The execution and management of compliance technologies can’t just be left to a single team.

ACSS: Can you tell us a little more about SITT, why you believe the work performed by the taskforce is important for ACSS members, and what your objectives are as the new Chair?

It is very difficult to talk sanctions without considering how technology is used to meet and address the most prevalent challenges facing compliance officers, whether from a data perspective, analytics perspective, or matching perspective. Technology really is the key to an effective sanctions program.

The overarching goal of the Tech Taskforce is to allow ACSS members to tap into the expertise of a group of individuals with extensive and diverse experience in the sanctions technology field. We aim to provide frequent and relevant information through various resources for our members. The SITT has just produced a Sanctions Technology Resource Guide, a comprehensive resource guide to assist day-to-day application and adoption of innovation and technology in support of sanctions compliance efforts.

Another essential function of the taskforce is to monitor and report on the latest developments and trends in the sanctions tech space. Over the next couple months, SITT will be releasing a series of webinars and articles that discuss the implications of COVID-19 on sanctions compliance, especially the impact of stay-at-home orders.

The ongoing health crisis has led to rapid changes in the work environment, introducing major challenges for sanctions professionals. Many internal compliance systems were simply not engineered to accommodate a remote workforce, and greater direction is required to help sanctions professionals mitigate and manage these risks introduced by stay-at-home orders.

One of our primary objectives this year is to provide sanctions professionals with regular insight and resources to help them navigate these complicated compliance dynamics in a post-COVID work environment.

ACSS: The ongoing coronavirus pandemic has created tremendous financial uncertainty in nearly every industry. In your opinion, what are some of the most significant ramifications of these recent developments for sanctions professionals, specifically in regards to sanctions innovation and technology?

Firstly, the economic downturn over the past few months will adversely affect compliance budgets. Given the cost of cutting-edge compliance technologies, sanctions professionals will need to be more creative with budgeting and finding effective alternative solutions. This is another area in which I perceive SITT as a valuable resource for ACSS members by helping to demystify some of these topics and presenting actionable and realistic solutions.

Something else I am particularly interested in observing is how sanctions enforcement may change as governments begin navigating the post-pandemic economic recovery. The humanitarian impact of COVID-19 on Iran has been well-documented, and I am curious as to whether this will force an easing of sanctions against the Iranian government. To my knowledge there has been no official guidance issued or signal that might indicate a new stance on enforcement, but it is nonetheless a situation to monitor.