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#Financial Crime Prevention

Drugs, cycling, and the financial sector...

International Compliance Association

code of omerta , culture , ethics

I’ve been keeping half an eye on the Lance Armstrong doping case that’s rocked the world of cycling and finding it hard to ignore some of the similarities it bears to the various crises and scandals that have hit the financial sector. Indeed, like any fraudulent act, the practice of doping can be shown to fit into the classic model of “motive”, “opportunity” and “rationalization” familiar to anyone involved with the prevention or detection of financial crime.

In terms of motive, the world of professional cycling (much like the financial sector) presents the potential for considerable personal and professional gain, which attracts talented and ambitious individuals, but may also result in an environment of intense status and financial competition, introducing the temptation to “bend” the rules for personal profit.

In terms of opportunity, the Armstrong affair has revealed a serious shortage of regulatory will and/or firepower. It has emerged, for example, that Armstrong enjoyed a cosy relationship with the UCI (cycling’s international governing body), receiving financial donations from him, leading some to question whether a blind eye was being turned to his doping activities. It brings to mind the charges of “light touch” regulation levelled against financial regulators post-crisis.

Moreover, in cycling a landscape has emerged of well-resourced “players” and under-resourced “officials”, with cycling teams able to continually develop ever-more-elaborate means of circumventing the rules of the game through the development of increasingly sophisticated doping programmes. Again, the parallels to the financial sector are clear.

Next is the rationalization of such behaviour. In both the financial sector and the world of cycling, “success” has typically been measured by fairly crude metrics (i.e. race position, volume of sales, etc) at the expense of less tangible ones (such as fair play or ethics). Where a single bottom line is elevated in this way above all other considerations one might suggest that individuals may more readily bend or break the rules.

Moreover, owing in part to the motives and opportunities mentioned above, a culture of “win at all costs” may emerge. Where individuals or organizations are seen to achieve success through rule-breaking, without sanction, such success serves as an example for others to follow. Indeed, such individuals may even become leaders by virtue of their success (as Armstrong did) meaning that their attitudes and approach are emulated further afield, just as it has been shown within the financial sector that senior individuals have the potential to impact broader culture within their organizations and the industry as a whole through setting a “tone from the top”. 

Under these circumstances, it is easy to see how rule-breaking may become “de rigeur”. Doping becomes “systematic”. Misselling becomes “baked into” sales practices. There is a failing of culture. And this failing may extend beyond the confines of the sport or industry, into the wider world. Just as fans of cycling have long suspected and accepted that doping was widespread in the sport, so too it could be argued that there has been a belief and tacit acceptance amongst the general public of misconduct in the City as being simply “part of the game”. 

Lessons?

The above is by no means comprehensive, nor is any analogy perfect. But nevertheless, can any insights be drawn from the Armstrong scandal which might be of value to those in the compliance community?

A first point to note is that, in the words of the Guardian’s Owen Gibson: “it was not the UCI or Usada that ultimately did for Armstrong but a federal investigation in the US. Once a gun and a badge were placed on the table, it finally broke thecode of omerta.” Those who argue for more meaningful criminal actions against white collar criminals would doubtless find this point of interest. Not only does criminal enforcement and sanction present a powerful deterrent effect, but it also sends out a powerful cultural message.

A second point is the response of both the sport itself to the crisis and of those outside of the sport. Some feel that the Armstrong case has been detrimental to the image of cycling, dredging up its chequered past and portraying it as a “dirty” sport. Others, by contrast, have insisted that the practice of catching and exposing cheats demonstrates that cycling takes the rules seriously, and that the absence of similar scandals within other sports simply demonstrates a lack of will on the part of their governing authorities to take the problem of drugs in sport seriously. They argue, therefore, that cycling is probably cleaner than many other sports. And surely one has to side with the latter view: a transparent and effective enforcement regime (whether in sport or the financial sector) is surely preferable to one which allows rules to be broken for the sake of keeping up appearances?


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