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The Bank of England

Public–Private Partnerships and Financial Crime: Advancing an Inclusive Model

Tom Keatinge
Commentary, 1 December 2017
AML/CTF, Organised Crime
Two key problems must be addressed as law enforcement and financial institutions seek to tackle financial crime together: the danger of creating an exclusive system; and the risk that the daunting challenge some countries perceive in just starting this process would inhibit any progress.

There has been a remarkable growth this year in forging public–private partnerships (PPPs) between law enforcement and financial institutions as they seek to create a step-change in identifying and disrupting financial crime.

Following the lead of the UK’s Joint Money Laundering Intelligence Taskforce (JMLIT), set up in February 2015, further models have emerged in Australia, Singapore, Hong Kong, Canada and the Netherlands. Countries with less well developed financial systems, such as Kenya, have also joined in.

The logic of such partnerships seems irrefutable; gatherings such as the October 2017 Financial Action Task Force Plenary in Buenos Aires and the recent South East Asian Counter-Terrorism Financing Summit in Kuala Lumpur are filled with agreement that partnership is the way forward.

 Still, we must ensure that in 2018 there is a greater diversity of voices around the table, including smaller smaller, regional and domestic banks, as well as those organisations that champion privacy and data protection

Yet the success of any new initiative is dependent on constantly assessing progress and identifying areas for improvement and development. Last month’s RUSI Occasional Paper, The Role of Financial Information-Sharing Partnerships in the Disruption of Crime, sets out the arguments in favour of this process, and provides 26 recommendations to support that development.

As we draw to the end of a year that has seen PPPs and information sharing placed firmly at the centre of the global response to financial crime, it is appropriate to pause for some critical reflection.

Gatherings of policymakers and private sector representatives to discuss PPPs are typically collegiate affairs. This is not just because all share a desire to find ways in which the response to financial crime can be made more effective. It is also because these events bring together the same people, or at least the same global financial institutions, who are well known to each other and see tremendous benefit for themselves and the integrity of the financial system in furthering partnership models.

The time and effort these institutions dedicate voluntarily to strengthening the system is to be welcomed and benefits all. Still, we must ensure that in 2018 there is a greater diversity of voices around the table.

These must include smaller, regional and domestic banks, as well as those organisations that champion privacy and data protection, if we are to ensure that the benefits are recognised and shared by all stakeholders and not merely by those within this echo chamber.

Consider the position of a medium-sized domestic bank in the UK, based outside London. Those gathered at the JMLIT in London are made aware of subjects of financial crime interest ranging from human trafficking rings to suspected terrorists.

However, notwithstanding the issuing of alerts and briefings via the Financial Crime Alerts Service (FCAS) from UK Finance, it is likely that a bank in Belfast, Birmingham or Edinburgh will not truly benefit from the fruits of this partnership.

Space should be created for dissenting voices that should be encouraged to challenge what some may view as a new, emerging form of ‘mass surveillance’ that is deeply intrusive

Thus, as those at the JMLIT table work together to restrict financial access of suspect individuals and entities, there is a danger that the bad actors will gravitate to the less well informed and resourced institutions.

Second, as well as recognising the diversity of private sector actors who could benefit from greater information sharing, we need also to acknowledge the wide variety of viable models for information-sharing, depending on the legal systems and starting points that countries face.

Some countries, the UK, the US and the Netherlands among them, have been able to take advantage of enabling legislation that facilitates such partnerships. Other countries face cultural and legal hurdles that must be overcome if they are to create the sorts of partnerships that are emerging elsewhere in the world.

The recent RUSI paper identified that effective partnerships do not need – at least initially – to look like JMLIT or Australia’s FinTel Alliance with their detailed, account and client level information sharing.

Partnership models that focus on developing typologies and better shared understanding of risk, such as those in Singapore, Canada or Kenya, can be effective vehicles by which the private and public sectors come together to discuss mutual financial crime challenges, building trust and confidence in each other.

At a recent conference attended by the author, an Asian central banker wondered whether public–private partnerships were relevant for his country, as he simply saw no way of sharing information under the local legal framework.

Yet when it was suggested that a more appropriate first step might be for the domestic financial intelligence unit or his central bank to host monthly roundtables at which financial crime experiences and typologies were exchanged, cooperation suddenly seemed far more achievable.

Finally, the lack of ‘challenge’ to the rapid integration of private sector and government information and intelligence leaves these emerging partnerships open to criticism from those focused on protecting data privacy and civil liberties.

Space should be created for dissenting voices that should be encouraged to challenge what some may view as a new, emerging form of ‘mass surveillance’ that is deeply intrusive, but does not yet seem to have registered in the general public’s consciousness.

Openly addressing these potential concerns from the start will help to ensure the long-term success of this new approach to tackling financial crime.

There is no doubting the benefit of partnership, but partnership can take many forms, all of which should be recognised and nurtured. While the ultimate objective is to secure better outcomes against financial crime, this will not be achieved without building inclusive trust and confidence across the public-private sector divide.

It is therefore incumbent on those in the vanguard of championing the benefits of PPPs to ensure that a wider array of voices is heard, including smaller financial institutions and those that might challenge the notion that information sharing is a positive step.

Furthermore, where the creation of partnerships is seemingly constrained by cultural or legal barriers, more work needs to be done to help those countries take the significant steps made by some leading financial centres, so that they can begin to secure some benefit from public–private sector collaboration. 

Banner image: The Bank of England. Courtesy of Diliff/Wikimedia

Author

Tom Keatinge
Director, Centre for Financial Crime and Security Studies, RUSI

Tom Keatinge is the Director of the Centre for Financial Crime and Security Studies at RUSI, where his research focuses on matters at... read more

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