The Future of Financial Intelligence Sharing: The key to fighting financial crime?

Industry Challenges

Public-private partnership may help the industry to explore new ways of fighting financial crime, managing risk and supporting the aims of government.

One panellist explained that suspicious transaction reports may be “people-driven”, with employees reporting unusual activity, or “data-driven,” when a bank uses transaction monitoring to identify suspicious activity. In other cases, law enforcement may provide the bank with information, or someone at the bank may read about a conviction in the press. According to the experts, 80-90% of suspicious transaction reporting in major financial markets is of “no immediate value to active law enforcement investigations.” And only about 1% of criminal flows are frozen and confiscated – indicating that despite the costs involved, the system “is not delivering results.”

Challenges related to privacy rules include how data privacy laws in each country affect the ability of banks to share data between their own affiliates. Calvery noted that in most jurisdictions, “there are exceptions that allow for information sharing for financial crime purposes.” And different jurisdictions may have different perceptions about how such sharing should occur and what type of information governments and the industry should have.

Industry Partnerships

I tend to find that when we’re in the same room having these conversations between law enforcement, regulators and industry, we can make much more progress on these issues than when we as industry stay out of the conversation and say we’ll just do what’s expected of us.

These partnerships typically begin with the sharing of typologies and later to the sharing of tactical information, such as the names of individuals and legal entities. There is a progression over time of building trust and learning not to “suspect the motives of the other partners.” The experts also talked about how smaller institutions may be affected, noting that to succeed partnerships need to deliver for the whole financial system.

Key drivers in successful public-private partnerships include:

• Technology: with a data-driven approach, the success rate from an alert is “only in the single digits” – but better data-driven techniques could lead to improvements (Calvery).
• Legislative clarity: this varies around the world, and it’s time to look at how to reform guidance and enable both public-private and private-private sharing (Maxwell).

The RUSI Study

RUSI has conducted a large study focusing on public-private partnerships, which “aspire to improve the dialogue between law enforcement and major reporting entities about threats and risks.” Over 20 countries have made a public policy commitment to develop such a partnership.

The study covers six partnerships in the UK, USA, Hong Kong, Singapore, Australia and Canada, with only four of these jurisdictions having the legal ability to share information on entities of concern. In the other two – Singapore and Canada – the focus is on “bringing together insight from the private and public sector about typologies and indicators of risk, relative to specific crime threats.”

The future has to be real time, the future has to be cross border, and the future has to be cooperative.

What's new

The experts pointed out that in only four months, the Hong Kong partnership had already resulted in more than 60 arrests and the seizure of over HK$ 2 million. Singapore is “really pushing FinTech and RegTech as a solution in this area,” and the US is “towards the front end of doing some interesting things.” The Australian partnership, Fintel Alliance gets analysts to “sit side by side, private and public, to work on a shared analytical system” and support cross-border information sharing.

In many jurisdictions, law enforcement is dealing with resource cuts. So if law enforcement lacks the resources to take the intelligence and drive a prosecution outcome, “the system has a real imbalance in resources.”