Last week, leaders from national Financial Intelligence Units (FIUs) gathered in Buenos Aires to discuss, among other things, the role of technology, innovation and fintech to ‘unlock the power of FIUs’ in a series of sessions with industry, research and fintech representatives. It is the right focus, but the ambition from FIUs needs to be matched with adequate resources from both the public and private sectors to make it a reality.
The FFIS study ‘The role of financial information-sharing partnerships in the disruption of crime’ found that in the investigative cases where financial information-sharing partnerships (FISPs) have been used, they have significantly enhanced the quality, timeliness and impact of suspicious reporting from the private sector. However, the majority of public/private FISPs in operation today are essentially low technology forums; ‘case briefing’ or insight-sharing roundtable meetings. The low-to-no technology approach has worked well for the cases that they can discuss around the table, but the model limits the scale and rate of information-sharing activity, and the scope of FISP membership. Better use of technology could support engagement beyond those that can be accommodated around a table. Without increasing the rate at which FISPs can process cases, their impact is only going to be limited when compared to the overall scale of financial crime washing through financial centres.
We have recommended that the effective use of technology, taking account of security and data privacy issues, be at the heart of expanding the potential of FISPs. It should be directed at improving the facilitation process of public/private information sharing of financial crime information and the analytical capability of the partnerships to understand the strategic nature of the threat.
We highlight a few key development areas in which FISPs should apply a greater use of technology in the fight against financial crime.
Increasing the speed of information-sharing: criminal operate in real-time and so our public/private and private/private exchange of information needs to be in real-time to match the criminal threat. Currently the general modus operandi for FISPs is to share information, then process the information in silos and come back together to discuss findings over a period of weeks. This sharing needs be brought down to hours and minutes.
Expanding the scale of case work: FISPs have demonstrated their value at a case-briefing level, but given that the best estimates indicate that only 1% of criminal funds are ever frozen or confiscated by law enforcement agencies, the scale of the case work needs to expand substantially if we are going to stem the tide of criminal finances.
Driving continuous learning and development of threat typologies: criminal behaviour is highly adaptive and so the speed at which law enforcement and FIUs can work with the private sector to understand the nature of criminal finance threats will need to improve. Greater analytical firepower should also improve the depth of detail to which financial crime typologies can go. National-level typologies for narcotics financing or human trafficking may have a use, but to understand the differences between the ways in which specific criminal networks are operating on different sides of a country, and then communicating and sharing that insight with major reporting entities is a more ambitious and attainable use of technology.
This is why the key research issues for the FFIS programme in 2018 will include looking at the different applications of technology solutions for FISPs. A key focus will be understanding the benefits of both the secondment model and the private/private dynamic sharing model. The secondment model, pioneered by the AUSTRAC Fintel Alliance, allows private sector intelligence analysts to become seconded ‘public entrusted officials’ for the purpose of supporting AUSTRAC intelligence products. This co-location and opportunity to make use of shared analytical services has a strong potential to reach the goal of real-time public/private information sharing. However, in the US, greater use of 314(b) of the USA PATRIOT Act allowing dynamic real-time information-sharing between private sector reporters may provide an alternative model for delivering real-time exchange.
In all of this development, the fight against financial crime must ensure it draws on the lessons from cyber and fraud information sharing partnerships, which in many ways are more advanced in their use of technology.
As we say in our report, ‘There is still some way to go before the AML system, as a whole, responds to the character of modern financial crime – which operates in real time, is most often international in scale, and can be highly sophisticated and adaptive to avoid detection.’
Focusing effort and resources now on improving the use of technology and analytical firepower in these partnership, provide the greatest promise to meet that challenge. The ambition and insight is there across FIUs, but policy support and adequate resources will be essential. Without this investment, FISPs may degrade into an investigative tool only to draw information from the financial sector, and thus miss the bigger opportunity of building a shared public/private understanding about strategic crime threats and improving the resilience of both the financial sector and economies, as a whole, against criminal finances.
The FFIS programme was honoured to present at the Innovation & FinTech session of the Egmont Group of FIUs Information Exchange Working Group as one of the first events in a week of meetings in Buenos Aires focused around the FATF Plenary.