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More private, public data sharing needed to thwart criminals, terror groups: FATF

Thursday, November 9, 2017   (0 Comments)
Posted by: Brian Monroe
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By Brian Monroe
bmonroe@acfcs.org
November 9, 2017

Financial institutions regionally and globally need to have more mechanisms to share data with each other on potential illicit activity, and have that transactional data buttressed by government analysts and law enforcement to better thwart increasingly international and creative criminal and terror groups.

Those are just some of the conclusions by the Paris-based Financial Action Task Force (FATF), which sets global anti-money laundering (AML) standards, after its latest plenary session held November 1st - 3rd in Buenos Aires. Those suggestions come in new guidance on information sharing, available here.

To get a quick recap of all of the plenary outcomes, please click here.

The issue of information sharing in the context of financial crime compliance, investigations and regulatory enforcement is a huge challenge right now, with criminals in recent years more aggressively looking for the paths of least resistance into the global financial system and using secrecy havens and anonymous corporate vehicles to prevent banks and law enforcement from putting the pieces of their schemes together.

Financial institutions are trying to increase ways to improve data analysis and customer monitoring to find trends and keep criminals out. Simultaneously, they are seeking to share that intelligence with other parts of the organization and other institutions to prevent illicit groups from gaming the system, but can be prevented from doing that by stringent secrecy laws in certain jurisdictions.

As well, law enforcement in major economies like the United States, United Kingdom and European Union nations are trying to find ways to better capture and analyze criminal trends, and share that back with institutions.

But, unfortunately, law enforcement can also be hamstrung in sharing information with each other domestically or internationally due to turf wars, data not being the proper format or not being available due to lax beneficial ownership disclosure requirements in a given region.

“Information sharing is critical for combatting money laundering, terrorist financing and financing of proliferation,” according to FATF. “Multinational money laundering schemes do not respect national boundaries.”

In that same vein, any barriers to information sharing “may negatively impact the effectiveness of AML/CFT efforts and conversely, inadvertently facilitate operations of such criminal networks,” according to the report.

That means the public and private sectors domestically and internationally must have access to “rapid, meaningful and comprehensive sharing of information from a wide variety of sources, across the national and global scale.”

Law enforcement information sharing, particularly across borders, promotes financial transparency and helps strengthen intelligence.

Similarly, banks need and can use that information on trend analysis, patterns of behavior, targeted suspects or geographical vulnerabilities in order to better manage their risk exposure, monitor their transaction flows and provide a more useful input back to law enforcement, according to FATF.

But banks must also have the freedom to share information between each other beyond just what is required by FATF, their regulators and law enforcement.

Such a strategy can also “ensure better compliance and leveraging of capacities by the private sector and preventing criminals from exploiting individual financial institutions’ lack of awareness of their activity with other institutions.”

For example, some jurisdictions have come to realize that sharing alerts or information about customers who are refused or dropped due to AML/CTF concerns can “prevent arbitrage of the financial system by criminals, who may attempt to engage with many different institutions.”

As well, creating bad customer databases by consolidating information on payments by multiple institutions can identify criminals structuring payments using multiple institutions to avoid detection by other means, according to FATF.  

But those benefits, however, can also “raise a range of public policy concerns about how the information will be used (or misused), including unfair commercial practices, encouraging de-risking and financial exclusion, potentially breaching STR confidentiality and increased risk of tipping-off, customer confidentiality, data protection and privacy” and financial institution secrecy.

But to get to that point, jurisdictions must overcome many obstacles.

Legal constraints, including different legal frameworks of data protection and privacy and their implementation, financial institution secrecy provisions and operational challenges may impede information sharing in group wide context as well between financial institutions not part of the same group, according to FATF.

There are, however, measures to overcome these hurdles, including AML and data protection authorities “engaging with one other, wherever appropriate to arrive at a shared ground. This engagement can also identify areas where there is a lack of clarity or divergent views between the public sector and private sector. Clarity and guidance on such issues may help facilitate an efficient application of obligations.”

Effective and timely exchange of such information helps law enforcement in pursuing its objectives, the same objectives of banks to prevent their institutions from being part of a criminal act.

Furthermore, it is a “two-way relationship between the public and the private sector, and this can be achieved if there are appropriate mechanisms for sharing of strategic, operational, tactical and targeted information by law enforcement with the private sector as well,” according to the guidance.

Building of networks, an environment of trust and ongoing dialogue between authorities and the private sector may help achieve a positive outcome in this regard,” FATF concluded. 


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