In this blog, we talk to Denisse Rudich, a Director and Strategic Advisor in financial crime prevention and entrepreneur. Ever since her MA thesis on the development of soft law in anti-money laundering and counter-terrorist financing, she has worked in this field, including as Head of Policy for RBS and as an advisor to the Heads of Financial Crime/Money Laundering Reporting Officers for various top-tier financial institutions.
Denisse has also worked extensively in crypto, setting up the first global anti-money laundering and countering the financing of terrorism (AML/CFT) working group and engagement framework between the industry and the Financial Action Task Force (FATF) as well as with several neobanks, FinTechs and RegTechs.
What are public/private partnerships for financial crime information sharing?
Filling the financial crime intelligence gap
Public/private information sharing partnerships can fill the intelligence gaps that exist in the fight against dirty money.
Each actor in the anti-financial crime framework - law enforcement, financial institutions, civil society - only has one part of the complex puzzle of intelligence needed to detect illicit financial activity. For example, banks have data on financial transactions, law enforcement has information on the criminals, locations and their crimes, and civil society has access to whistleblower information, trigger events, and on-the-ground intelligence.
Bringing these actors together and sharing the different types of information they hold helps to provide a holistic view of criminal activity, the scope of their criminal network and connections, and how these criminals are using the financial system to hide their ill-gotten gains.
These partnerships allow law enforcement to share intelligence with trusted partners on active investigations (where legal mechanisms are in place to do so), and for cross-learning and the mutual development of financial crime typologies.
Types of public/private information sharing partnerships
Information sharing partnerships come in a number of guises.
They can take shape as formal or informal avenues to allow public, private, and at times (largely country-dependent) civil society to speak about illicit finance.
Formal partnerships such as the UK Joint Money Laundering Intelligence Taskforce (JMLIT), the US FinCEN exchange, and the Australian Fintel Alliance are formally established groups with participants from law enforcement, the private sector (regulated firms), and sometimes civil society. These formal groups focus on both the tactical and strategic exchange of financial crime intelligence.
Within these groups, there may be smaller working groups or ‘cells’ which focus on specific predicate crimes, such as human trafficking or bribery and corruption. Often, legal gateways and formal mechanisms exist for intelligence gathering on specific actors, such as Section 7 and Schedule 7 of the Crime and Courts Act 2013 in the UK or section 314b of the US Patriot act.
There are also a handful of transnational information sharing partnerships such as United for Wildlife, whose Illegal Wildlife Trade Financial Taskforce has a thematic focus, the Global Initiative which focuses on organised crime, and the Global Coalition to Fight Financial Crime which brings together public and private actors from around the world.
Informal intelligence sharing partnerships are more likely to arise in countries where levels of state corruption are higher and relationships between law enforcement and government are less independent. For example, in Kenya, an unofficial group met in cafes to share intelligence due to sensitivities around corruption.
Can you give some examples of public/private partnerships that are making a difference?
The US and the UK models are fantastic. In the US, the public/private partnership (FinCEN Exchange) was set up under section 314a of the USA Patriot Act.
In the UK, the JMLIT operates under the Crime and Courts Act. It has working groups/cells that develop typologies and case studies where the Ops Group allows for the sharing of case-related information and queries to be sent out to financial institutions or specific target industries. The Working Groups/cells in JMLIT also allow for civil society input, which enriches the intelligence gathering process.
I have also been looking more closely at Australia’s Fintel Alliance. AUSTRAC developed “a world-first algorithm” to allow the Fintel Alliance to protect the privacy of source data while detecting crime and was seen as being very effective in thwarting criminals when the pandemic first started.
What are the three biggest barriers to information sharing between the public and private sectors about financial crime?
1. Lack of legal gateways
In many countries, legal mechanisms do not exist for the sharing of information between various actors, so to do so would be to risk committing a crime. Even within law enforcement entities, legal agreements have to be in place before they can share information such as those which exist between the security services and the National Crime Agency in the UK. It is also only relatively recently that legal entities in the same corporate group have been able to share information to prevent financial crime.
2. Lack of trust and source protection
As mentioned above, in countries where there are high levels of corruption, there is generally either a lack of or limited level of trust between the private sector and the government, which can greatly impede the desire and willingness to share intelligence. In some instances, the risks are more extreme with a threat to life for sources and whistleblowers who share information.
3. Data Protection
Data Protection rules can pose a major obstacle to information sharing, though there are promising technological solutions such as privacy enhancing technologies that need to be explored further to prevent financial crime while complying with data protection rules.
What can the financial system do better in the fight against financial crime?
One of the biggest changes would be to allow for the sharing information about suspicious activity between private institutions in a payment chain, to allow for the submission of SARs data to law enforcement authorities, particularly in countries with strong AML/CFT frameworks and low levels of corruption.
More engagement with civil society and the protection of whistleblowers would also be very welcome, plus increased collaboration to allow for the systemic sharing of financial intelligence while protecting human rights.
Financial institutions should be engaged with public/private partnerships to help with the identification of risks and potential threats to their organisation. Information gained from public/private partnerships should be screened against internal customer databases and internal systems, and there should be greater sharing of case studies to allow the industry to learn from itself.
What does the future of AML look like?
Human + machine intelligence
I envisage something out of a Marvel movie - man and machine coming together to fight financial crime. I would be very remiss not to mention the Metaverse!
But on a more serious note, the idea of combined human and computer intelligence has to be the key to improving how we tackle money laundering and terrorist financing in the future. Use of technology must be responsible but it will allow us to share and assess big data sets more effectively, with some use of network analytics and data mining thrown in.
It is essential to have the human analysis layered on top of technology – humans bring intuition, experience, and an understanding of human behaviour that cannot be programmed into and far outstrips even the smartest AI. After all, what we are tracking is human behaviour. We need the best of both worlds - the best technology and the best people to improve the effectiveness of the AML system.
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Photo by Tim Mossholder on Unsplash
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