Information is the lifeblood of any enterprise. This is especially true in relation to detecting and deterring financial crime, money laundering and terrorist financing.
In an interconnected world, lines of inquiry are often blurred, borders are immaterial and technology assists anonymity. As a consequence, the traditional ways in which law enforcement investigations and intelligence analysis are conducted have had to adapt to keep up with an ever-increasing sophistication of criminal and terrorist syndicates.
The current report on “The Role of Financial Information-sharing Partnerships to Disrupt Crime” provides a timely and practical focus on new mechanisms and structures to meet current and future financial crime information needs more effectively.
Under international standards and national regulations, financial institutions are expected to be the primary source of financial information both from a customer due diligence perspective and from a criminal justice perspective.
Historically this relationship between government, on the one hand, and the private sector, on the other, has been formal and at arms’ length. The distance can and should be shortened so as to maximize the quality of information available under law and to leverage the skills and knowledge available in both sectors.
How could that be achieved?
Financial institutions, as part of their business, possess detailed information on financial transactions and who conducts them. As part of their business, they assess the risks associated with providing services to clients. Making better use of their knowledge and skills and information, in partnership with law enforcement agencies, will improve the detection and investigation of financial crime.
The FFIS report highlights that, in many countries, the legislative regimes do not permit or facilitate public/private or private/private information sharing. It also highlights that there is typically an imbalance between a regulatory compliance-led signals to the private sector about what to report and law enforcement priorities.
The reality of financial crime today requires supportive laws which encourage information sharing, while appropriately protecting confidentiality. Operational level sharing produces operational results to support investigations. The report provides good examples from a number of countries where mechanisms to do so have been put in place and are working effectively. These are useful models for other countries.
These examples also show that a more flexible approach to public/private information sharing can greatly improve the quality of suspicious transaction reports while potentially reducing their volume and allowing both public and private sector actors to focus attention on where the real risks lie.
The study sets out 5 principles and 26 recommendations in a ‘tool-kit’ for developing FISPs. These should provide a helpful basis for international standard-setters and national policy makers to consider and establish a coherent and specific policies on information-sharing between the public and private sectors.
The work of standard-setters gathered in Buenos Aires this week will be focused on supporting the effective deterrence and disruption of financial crime. The insights contained in the FFIS report, based on operational experience, about how to improve the system through public/private information sharing are worth acting on because they will enhance operational outcomes in the way that the FATF standards and its Effectiveness Methodology intended.