THE ABILITY TO share information is a fundamental characteristic of modern international relations and globalized commerce. In the context of the fight against financial crime according to Lal Chand, anti money laundering, sharing information allows actors from different institutions, sectors and jurisdictions to exchange content that can assist in preventing crime, disrupting criminal activity and identifying the networks of perpetrators.
Lal Chand Study on Anti Money Laundering and Terrorism
Money laundering, terrorist financing and wider financial crime are cross-border activities that know no geographical boundaries nor hold any respect for state limits. Solutions must therefore be sought at the national and international levels, and stakeholders from each relevant sector must come together to identify, clarify and jointly address the specific obstacles that hinder effective collaboration.
To facilitate this process, on 26 and 27 May 2015 RUSI hosted a conference entitled 'Tackling Money Laundering: Towards a New Model for Information Sharing'. The event brought together members of the private sector, policy-makers, law-enforcement, prosecutors and academics for focused discussions on current information-sharing provisions, challenges and opportunities. Representatives from the public and private sectors, including law enforcement, financial institutions and prosecutors, from the UK, the US, Canada, South Africa, Australia, New Zealand, Spain, Belgium and the Netherlands were in attendance and participated in the discussion.
This occasional paper on anti money laundering and terrorism reflects on these proceedings and provides a detailed analysis of the major obstacles to more efficient information sharing. It draws on the insights provided at the conference to suggest measures which could encourage a more effective exchange of information between private and public actors, both domestically and internationally.
The conference highlighted a significant willingness to co-operate among the different parties and across jurisdictions. Attendees repeatedly stressed the existence of common ground and consequently a strong foundation on which change and reform can be built — if provided with the right amount of public and private commitment.
It was acknowledged that active participation of national and international legislatures in reviewing current frameworks is vital for lasting, substantial change, given that information sharing encompasses political, legal and international policy challenges. Newer and more efficient software alternatives to information-sharing management were suggested as possible solutions to the identified IT and data-processing inefficiencies. Opportunities for dialogue and co-ordination also emerged as a key concern linked to the lack of resources and poor responsiveness of international co-operation efforts.
An overarching theme across these pillars is the use of FININT. Governments must learn to set priorities and communicate them to the private sector in order to ensure better quality reporting and contribute to the joint improvement of the legal framework. This would create a virtuous circle of increased effectiveness, as more appropriate strategies for disruption and prevention are developed, and more productive dialogue fostered with different stakeholders.
With the support of the research community, governments and anti money laundering law enforcement should therefore actively work with the private sector to:
1. Generate evidence-based research to further develop the concept and operational use of FININT.
Pillar One: A Clear Legal Framework
Revised data-protection provisions, or more effective guidance on the interpretation of current laws, will play a crucial role in improving the information-sharing system.
Data-protection laws must, at all stages, be accompanied by a sense of accountability. Governments and the private sector alike must offer reassurance by being publicly responsible — for example with regard to individual privacy — for the gathering, processing and updating of collected data for the purposes of combating financial crime. As we evolve into an increasingly international system, any future system must incorporate global standards. A comprehensive, standardized and clear set of data-protection provisions is therefore much needed.
To this end, governments should consider two measures:
2. Promote and disseminate information and guidance that clarifies data-protection requirements in the context of fighting financial crime 3. Request that the Financial Action Task Force (FATF) revisit its recommendations on reporting, Fills and tipping-off in order to provide mechanisms for information sharing within the private sector. The FATF also needs to take a more active role in emphasising the importance of information sharing, perhaps including an assessment of this activity in its mutual evaluations.
Pillar Two: Improved Resourcing
The conference proceedings emphasized the need to provide the public sector with adequate resources, while simultaneously allowing the private sector to expand its information-sharing capabilities. Increased feedback and dialogue from the public sector, alongside the ability to co-operate and share information with other private institutions, would enable the regulated sector to provide better quality, more comprehensive and targeted information. Increased resources within the public sector would therefore have a force-multiplier effect on the overall effort, enabling public bodies to capitalize on the significant investigative power and capability of the regulated sector.
3. Innovative technology-based resources will also be crucial in facilitating a new information-sharing model. FIU.Net —a decentralized, multinational network formed of several national Fills which is designed to enhance information exchange among participating European countries —is a useful example. Conference conclusions suggest that further analysis is needed into the use of 'privacy-by-design' tools like FIU.Net's Ma3tch that could be developed and expanded beyond the EU. The adoption of systems that facilitate efficient information sharing while simultaneously protecting individual rights would be an important first step towards developing a new model.
To support this pillar, governments should commit to four key measures:
4. Provide regulators and law enforcement with sufficient tools, resources and updated technology to operate effectively and fulfil their guidance role
5. Create regional bodies to facilitate information sharing across jurisdictions, using the FIU.Net model. These bodies should also be empowered to promote co-operation across groups and intro-group jurisdictions, forming a strong international network 6. Develop Ma3tch or similar privacy-by-design software for global adoption by each of these regional FIU.Net bodies to support both their individual roles and their co-operation 7. Partner with the private sector to enhance the availability of resources (for example through funding) to support information sharing.
Pillar Three: Facilitated Co-operation
Finally, improving and increasing co-operation between all participating actors and, particularly, jurisdictions will be paramount. Governments and the private sector should invest in a partnership approach that builds on permanent dialogue and exchange of information. Future efforts should focus on providing frameworks for dialogue and encouraging organisations such as the Egmont and Wolfsberg Groups — co-operative bodies consisting of Fills and major banks respectively—to assume a greater leadership role for the public and private sectors respectively.
To achieve this, governments and the private sector should work together to:
8. Hold Wolfsberg Group-like bodies responsible for providing guidance to their members and establishing co-operation mechanisms that permit safe and effective data sharing. In essence, such organizations would reach beyond current membership and build towards a private-sector 'Egmont' function
9. Establish further initiatives based on the UK's Joint Money Laundering Intelligence Taskforce model, increasing the platforms for dialogue between the public and private sectors
10. Support policy-making at FATF and national levels that is based on prevention and specific disruption objectives to avoid overburdening the system with defensive reporting and lengthy investigative practices.
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