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In Pursuit of Big Data: An Analysis of International Funds Transfer Reporting

Anagha Joshi
Occasional Papers, 7 April 2017
Centre for Financial Crime and Security Studies, AML/CTF, Organised Crime, Technology
Policymakers have been exploring different ways to fight serious and organised crime and terrorism while upholding fundamental rights to privacy and ensuring that financial institutions are not overburdened with regulation. One such policy initiative is international funds transfer reporting (IFTR). This paper asks whether IFTR requirements are necessary and proportionate, and therefore whether their impact in limiting fundamental rights can be justified.

Based partly on a detailed study of IFTR requirements in six countries – Australia, Canada, India, Indonesia, Norway and Romania – this paper asks whether IFTR requirements are necessary and proportionate, and therefore whether their impact in limiting fundamental rights can be justified. It concludes that, while IFTR requirements have intelligence value and are a feasible and likely cost-effective option, decision-makers should carefully explore a number of regulatory considerations as well as alternative policy options.

This paper recommends that policymakers take into account the following eight key issues when considering the adoption of IFTR requirements in their jurisdictions:

  1. Compare apples with apples: This paper assesses a range of policy and regulatory considerations for policymakers. While international experiences are useful, they cannot replace detailed national assessments. The population, financial sectors, social policy needs, crime risks and ability to enforce compliance differ greatly between countries. It is important for policymakers to avoid comparing apples with oranges.
  2. Benchmark success: One of the key challenges faced by countries implementing bulk data collection measures, such as IFTR requirements, has been the ability to produce compelling evidence demonstrating the success or value of the policy. Better articulation of the indicators of success, particularly where those indicators require nuanced, qualitative assessments, is vital at the outset of policymaking.
  3. Explore alternative options: Policymakers should consider alternatives to IFTR requirements and determine whether they might adequately meet the identified tactical, operational and strategic analysis needs of FIUs. Several other methods are discussed in this paper.
  4. Balance national security interests with protection of individual rights: Benchmarking success and arguing the need for IFTR requirements above and beyond alternative options, which have less impact on the right to privacy, are important in taking an informed position that balances national security interests with the protection of individual rights.
  5. Adopt robust data-protection measures: Sound justification should underpin the need for any agency to have access to IFT data and the purpose for which they may be used. Policymakers should consider oversight mechanisms, including the option of an independent body responsible for this.
  6. Consider adopting a reporting threshold: Monetary thresholds for reporting may be useful in mitigating resource burdens for both FIUs and financial institutions. However, they can also have consequences that diminish the value of IFTR requirements. Countries should assess their crime risks and consider whether reporting thresholds inhibit the detection and disruption of high-risk crimes.
  7. Assess IT capabilities: An investment in IT will be necessary, and may also be crucial in limiting resource impacts on both FIUs and financial institutions. Policymakers should assess the ability of their country’s financial institutions, particularly small and medium-sized institutions, to access and use technology to promote compliance with reporting requirements.
  8. Support remittances and financial inclusion: Policymakers should ensure that IFTR requirements work to complement, not conflict with, remittance and financial inclusion objectives. Reporting thresholds and IT solutions might assist in mitigating the impact on resources for remittance service providers.

Author

Anagha Joshi
Associate Fellow

Anagha undertakes research projects for RUSI’s Centre for Financial Crime and Security Studies. She also works as an independent... read more

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