Nick J Maxwell, March 2025 |
|
Between 2023 and 2024, the UK, Singapore, the EU, Canada and Australia passed legislation to enable private-to-private (P2P) collaboration to detect economic crime risk. The UAE and Hong Kong have raised the prospect of similar legislation, and Mexico and the U.S. have enhanced their pre-existing legislative frameworks with new policy or operational developments in the field of collaboration to fight economic crime.
This paper aims to:
This paper aims to:
- Provide a reference resource to understand the international policy and legal landscape with regard to collaboration to detect economic crime in 2025;
- Compare legal approaches in the U.S., Mexico, Singapore, the UK, the EU and Canada;
- Describe key enabling factors for partnership growth and the role for the public sector; and
- Highlight innovation track options to elevate private-to-private economic crime risk information sharing to the cross-border level.
DOWNLOAD THE FULL REPORT
| ffis_a_new_era_of_private_sector_collaboration_to_detect_economic_crime_-_policy_discussion_paper_-_march_2025_-_final.pdf |
Key insights of the report:
In Chapter 1 of this study, we compare the respective legislative provisions in the U.S., Mexico, Singapore, the UK, the EU and Canada with respect to: whether the information sharing is compulsory or voluntary; what type of data can be shared; the economic crime threat domain coverage; the type of private sector entity that can participate; the legal threshold for sharing and purpose limitations; public sector involvement in the sharing; the threat prioritisation process; and whether the legislation includes an enabling provision for cross-border information sharing. We are concerned in this study with P2P information sharing between obliged entities, rather than within a financial group.
We survey the following capabilities and make assessments as to what is permissible under the legal frameworks:
• Data-driven collaborative development of typologies of economic crime threats;
• Messaging communication (bi-lateral);
• Messaging communication (multiparty and via a platform);
• Intelligence development at the level of a multi-party platform, to identify risk that no individual participant had otherwise observed;
• Joint case investigations by members (private sector only);
• Collaborative intelligence and joint investigations by members (with law enforcement or investigative agency input);
• A warning function, one to many (i.e. an adverse incident database);
• A tracing function to identify exposure to money laundering/muling dispersals (i.e. a rapid or automated warning chain of alerts to follow transactions across multiple obliged entities, illuminating the network of accounts involved in a dispersal); and
• Combined transaction monitoring for partnership members.
We survey the following capabilities and make assessments as to what is permissible under the legal frameworks:
• Data-driven collaborative development of typologies of economic crime threats;
• Messaging communication (bi-lateral);
• Messaging communication (multiparty and via a platform);
• Intelligence development at the level of a multi-party platform, to identify risk that no individual participant had otherwise observed;
• Joint case investigations by members (private sector only);
• Collaborative intelligence and joint investigations by members (with law enforcement or investigative agency input);
• A warning function, one to many (i.e. an adverse incident database);
• A tracing function to identify exposure to money laundering/muling dispersals (i.e. a rapid or automated warning chain of alerts to follow transactions across multiple obliged entities, illuminating the network of accounts involved in a dispersal); and
• Combined transaction monitoring for partnership members.
The role of supervisors and policy-makers
A key challenge in 2025 relates to the incentives for collaboration. Most of the legal gateways created are voluntary and, at present, largely inconsequential for AML supervisors. Even as collaboration demonstrates more effective results, the incentive structure created by supervisors for a private entity to invest in such collaboration remains weak.
We argue that significant changes are now required by supervisors to adapt to the new era of collaboration. We urge supervisors to consider their role in encouraging effective outcomes from the private sector and, accordingly, their role in stimulating private sector activity and investment in private sector collaboration and data-sharing.
We highlight that the growth of private sector information sharing raises the prospect of greater consistency between obliged entities in terms of customers being denied services. We emphasise that this brings a policy conflict into sharper focus as to: (1) whether there is a right to financial services; and (2) whether it is appropriate to exclude individuals from financial services based on suspicion of financial crimes.
Ultimately, this policy conflict is unresolved at the international standards level and by domestic policy-makers. Private-to-private information sharing platforms are not in a position to resolve it for policy-makers. Policy-makers will need to determine whether financial exclusion is an appropriate response to suspicion of financial crime and, if so, what the threshold for exclusion should be.
We argue that policy-makers should take an active role in ensuring that adequate processes are in place to hold private-to-private AML information sharing accountable. It is a responsibility of both public sector and private sector decision-makers involved in AML information sharing to avoid harm to innocent parties and establish a clear complaints and redress pathway to allow citizens to both challenge the accuracy of a determination of risk (assigned to them) and seek data correction, where appropriate.
Collaboration platforms are tools that can support more effective and comprehensive intelligence development and can also facilitate more consistent ‘preventative measures’ across participant obliged entities. Such platforms can assist obliged entities to achieve the intent of policy-makers in a more effective, efficient and comprehensive way. However, this presents a need to ensure that policy-makers are clear about what their intent is and how tensions are balanced and resolved with regard to financial exclusion vis-à-vis financial inclusion and relevant consumer rights issues.
The next frontier
In Chapter 2, we bring the discussion to the cross-border level.
We set out 10 innovation track options for enhancing the cross-border legal, policy and operational environment for economic crime risk collaboration.
We argue that policy-makers, supervisors and industry leaders should now take inspiration from initiatives at the domestic level related to private sector collaboration and explore how the same benefits could be achieved at a cross-border level, with robust governance protocols and privacy standards.
It is the author’s intent that this paper can help to support policy-makers, supervisors and industry leaders in that journey to implement information sharing effectively, safely and in an accountable manner at the domestic level and to advance cross-border innovation in terms of ‘connecting the dots’ of risk awareness that is being developed at the national level.
This research paper has been supported by Deloitte, FNA, HSBC, Mastercard, Nasdaq Verafin and Swift.
