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Expanding the Capability of Financial Information-Sharing PartnershipsNick Maxwell
Occasional Papers, 20 March 2019
Centre for Financial Crime and Security Studies, Cyber, AML/CTF, Global Security Issues, Information, Intelligence, International Institutions, Law and Ethics, National Security, Organised Crime, Technology
Public–private financial information-sharing partnerships have changed the way in which economic crime and terrorist financing can be understood, analysed and addressed. These partnerships have demonstrated how law enforcement, regulatory and intelligence agencies and financial institutions can work collaboratively to analyse and disrupt shared threats, rather than acting in isolation.
Data relating to the positive impact of partnership activity, for both public and private sectors, is becoming increasingly available. Partnerships have contributed to: improvements in the quantity and quality of reports of suspicion related to particular economic crime threats; and to the timeliness and relevance of such reporting to active investigations or live incidents. They have supported arrests, asset recovery and other disruption of criminal networks, and heightened understanding of risk in both the public and private sectors. Perhaps most importantly, partnerships have changed institutional and investigative cultures from ‘need to know’ to ‘dare to share’.
However, the role of partnerships is relatively small when considering the scale of financial crime threats against the operational tempo of the partnerships, or the recorded impact of partnerships as a proportion of total law enforcement effort against economic crime, or the membership of partnerships in proportion to the regulated sectors as a whole.
Tactical-level partnerships generally deliver a specialist capability to advance high-end or particularly challenging cases. Overall, they have not yet been resourced to provide a more substantial and wide-ranging contribution to tackling economic crime. For private sector members, partnerships are currently voluntary, additional and parallel to the principal obligations which arise from the respective national anti-money laundering/counterterrorist financing (AML/CTF) regimes.
What factors affect the impact of partnerships? Is it desirable for them to grow? What are the development challenges and opportunities for partnerships?
These are the some of the questions that this research programme asked public and private partnership leaders and other expert stakeholders in 22 high-level events, held over 12 months in 13 jurisdictions. This paper compiles insight from those events, including presentations and new data shared at the first dedicated knowledge exchange event designed specifically for financial information-sharing partnership leaders – the FFIS Conference of Partnerships – held in London on 22 June 2018.
Partnerships face challenges related to increasing their operational capacity and membership, without undermining the format, trust and interpersonal dynamics which have supported the success of current models.
The current scope of partnerships has clear benefits in terms of: the impact that can be achieved with relatively limited public sector resources; the high-quality two-way interaction that can be facilitated within in-person briefing formats, given a manageable number of participants; the ability, in many jurisdictions, to involve a large proportion of the producers of suspicious reports with only a relatively small number of institutions; and the relatively high levels of trust that can be developed in small groups, processing small volumes of information.
However, the status quo of partnerships appears unsatisfactory. Policymakers and leaders in the regulated community may wish to achieve a greater magnitude of law enforcement impact with the support of partnerships, or to use partnerships to develop both tactical and strategic intelligence at a higher tempo. They may also wish to support more regulated entities and sectors contributing to and benefiting from membership of partnerships. Policymakers may wish to achieve the ambition of real-time information exchange and move beyond models characterised by manual and slow information transfer, low technology, limited visibility of the financial sector outside retail banking, and limited bandwidth to process operational cases.
Several partnerships have already stated developmental ambitions to increase their scope, membership or capacity. The Australian Fintel Alliance has described an operational ambition to introduce new members to the partnership, including: casinos; fintechs; foreign banks; foreign law enforcement agencies; second-tier banks; and second-tier remitters. UK policymakers have described an intention to include accountancy and professional perspectives in UK Joint Money Laundering Intelligence Taskforce (JMLIT) information sharing.
The focus of this paper is to describe key challenges and opportunities for partnerships relevant to expanding their scope, capacity and membership. The paper is intended to support established partnerships in their consideration of how to achieve a larger, more integrated and effective contribution to AML/CTF regimes, while controlling for risks. 11 development themes and corresponding recommendations are proposed, set out in the Recommendations at the end of the paper.
It is important to note that partnership-responsive reporting by regulated entities will not replace obligations for regulated entities to understand their unique risks and report suspicions of crime proactively.
However, policymakers now have more choices and greater capabilities at their disposal. With higher-quality performance data across the breadth of the AML/CTF regime and a strategic approach to prioritising resources towards national objectives, policymakers should be able to achieve a more effective balance of the use of AML/CTF tools and a more efficient application of resources in national AML/CTF systems, including with regard to the role of partnerships.
The primary recommendation of this paper is that achieving ambitious growth in partnership activity will require active participation and support from supervisors. Partnerships will need to move from being extracurricular to being recognised and supported as a mainstream component of the respective national AML/CTF regimes. Partnerships could be formally recognised within supervisory guidance, ensuring that relevant regulated entities are encouraged to consider both specific threat information arising from partnerships and the general importance of partnership-responsive activity in their mainstream AML/CTF compliance and risk-assessment processes. However, supervisors may require a clear policy mandate for doing this within a national AML/CTF strategy.
The establishment of the UK National Economic Crime Centre, described in this paper, illustrates the potential for greater alignment of supervisor, law enforcement and private sector priorities in disrupting priority national financial crime threats.
There is no ‘one size fits all’ in partnership development. Policymakers have new options and new capabilities and a range of challenges and opportunities to resolve. Jurisdictions have an opportunity to make a conscious determination of the appropriate role and capacity of partnerships to achieve their national AML/CTF strategies. The 11 themes and corresponding recommendations in this paper are intended to support national and international policymakers, supervisors, enforcement agencies, FIUs, and regulated entities to leverage the benefits of partnerships while mitigating the challenges of scale. The framework of development themes described in this paper should be considered as a prompt for further national and supranational discussions about what role and ambition partnerships should have in any given AML/CTF regime.
Nick J Maxwell
Nick is the founding Director of NJM Advisory, a research consultancy focused on
anti-money laundering issues and public–private collaboration. Prior to this role, Nick’s professional career has included leading the Research and Advocacy team for Transparency International UK; serving as an anti-money laundering specialist liaison officer for a NATO Task Force in Afghanistan; managing the International Economics Programme at Chatham House (Royal Institute of International Affairs); and leading the public policy function at the Institute of Chartered Accountants in England and Wales (ICAEW). Nick is currently undertaking doctoral studies in Law at Queen’s University Belfast.
BANNER IMAGE: Business people working on laptops, 2018. Courtesy of Pxhere