When financial institutions fail to stop money laundering, fraud or sanctions evasion, the coverage usually focuses on the penalties, the technology shortfalls and the broken processes.
According to Argus Pro, much less attention goes to the culture underneath: staff who didn’t feel able to raise the alarm, leaders who waved away concerns from the margins, and commercial targets that routinely beat protection.
Inclusion and psychological safety are not soft HR matters. They are core risk controls, and firms serious about compliance should treat culture as a first line of defence.
The biggest financial crime scandals of the past 20 years follow a recurring pattern. Cultural breakdowns came first and made the technical failures possible. Policies and whistleblowing procedures existed on paper, yet warnings were buried and escalations discouraged.
Between 2006 and 2010, HSBC Bank USA moved at least $881m in drug trafficking proceeds, including Sinaloa Cartel funds. In December 2012 it agreed a deferred prosecution agreement with the US Department of Justice and paid $1.92bn, at the time a record AML penalty, for what was called ‘stunning failures of oversight.’
DoJ documents show an employee warned of a ‘staffing crisis’ in April 2008, but requests for more resources were repeatedly rejected. Compliance served as an advisory function rather than a controlling one, and it lacked the authority to challenge the business.
Danske Bank’s Estonian branch handled around €200bn in suspicious transactions between 2007 and 2015. A whistleblower reportedly raised concerns from 2013, but they went uninvestigated. The CEO later resigned, and in 2022 US authorities fined the bank more than $2bn.
Wirecard collapsed in 2020 over €1.9bn in funds that probably never existed. Its leadership attacked Financial Times journalists instead of answering their questions, and sceptics inside the company were sidelined. Closer to home, NatWest became the first UK bank convicted under the Money Laundering Regulations 2007. It was fined £264.8m after roughly £365m was laundered through gold dealer Fowler Oldfield, despite monitoring alerts that nobody followed up.
Harvard Business School professor Amy Edmondson’s idea of psychological safety, the belief that speaking up will not lead to punishment or humiliation, is central to this problem. Google’s Project Aristotle found it was the single biggest factor in team effectiveness. Inclusion adds another layer: whether diverse voices are actively sought out and heard.
A 2018 IMF study linked board gender diversity to bank stability. McKinsey’s 2020 Diversity Wins report found that top-quartile firms were 36% more likely to outperform on profitability. Compliance teams often include more people from underrepresented groups than leadership does, so the people best placed to spot problems may be the most likely to be dismissed.
Regulators have noticed. The FCA treats toxic culture as both a conduct risk and a financial crime risk. The Consumer Duty has made culture a sharper supervisory focus, and SM&CR makes senior managers personally accountable.
The economics are hard to ignore. UK Finance recorded £1.17bn in fraud losses in 2023, and the NCA estimates UK money laundering at £100bn or more each year. The remedies cost a fraction of a single major fine: measuring psychological safety, giving compliance real authority, building a speak-up culture, diversifying compliance leadership and training managers. Culture, in the end, is a firm’s hardest control.
Read the full Argus Pro post here.
Copyright © 2026 RegTech Analyst
Copyright © 2026 RegTech Analyst
