Fincrime intelligence sharing is a process of exchanging encrypted information between regulators, financial institutions, and law enforcement agencies, with the purpose of alerting them to possible financial crimes. Fincrime intelligence sharing allows parties to exchange and enrich data on bad actors, actively detect and counter money laundering, terrorism financing, fraud, identity theft, scams or confidence tricks, bribery, embezzlement, counterfeiting.
Fincrime intelligence sharing is based on the same principles underlying intelligence sharing, but with a major difference: in fincrime intelligence sharing, financial intelligence is gathered by compliance teams and not by financial intelligence units (FIUs). Fincrime intelligence sharing can take place within public-private partnerships and private-private partnerships, where it supports greater insights and greater criminal justice outcomes through collaboration and co-development of financial crime risk intelligence.
History of fincrime intelligence sharing
Fincrime intelligence sharing would not be possible without the frameworks laid out by FIUs. The first FIUs were set up in the early 1990s, following the establishment of the Financial Action Task Force. The primary purpose of FIUs is to gather and analyse suspicious activity reports (SARs) on cases related to financial crimes, including money laundering and terrorism financing. FIUs are instrumental in preventing and investigating financial crimes on a local, national, and international level. In 2022, 160 FIUs compose an international network known as the Egmont Group of Financial Intelligence Units.
The effectiveness of FIUs largely depends on the mechanisms that enable them to cooperate and coordinate their actions within and across borders and jurisdictions, which include developing and implementing policies and activities to combat money laundering and terrorism financing. The key to effective cooperation between FIUs is based on trust from their counterparts.
Since 2015, the introduction of public-private financial information sharing partnerships has led to improved effectiveness and efficiency in jurisdictions that have applied them. Recognising the importance of public and private sector cooperation to combat financial crimes, Europol decided to set up the first transnational public-private partnership for financial information sharing. Launched in 2017, The Europol Financial Intelligence Public-Private Partnership (EFIPPP) brought together experts from 15 major banks and competent authorities from eight EU member states and non-EU countries, involving FIUs, law enforcement authorities, and supervisors.
In 2018, the Egmont Group Plenary addressed the opportunities and challenges of public-private partnerships in connection with FIUs. The outcomes highlighted the role of public-private partnerships in fostering access to information, enhancing quality and trust, providing more flexibility and agility to adjust and respond to emerging financial crime threats, and developing new non-traditional information sharing partnerships – both between and within the public and private sectors. There is still a long way to go to overcome legislative, security, and technological challenges, the plenary’s outcome document points out.
In October 2020, Estonia’s financial leaders initiated a countrywide fincrime intelligence sharing project called AML Bridge. By 2022, AML Bridge developed into a Europe-wide fincrime intelligence sharing platform and network that enables tactical information exchange across three use cases: fraud, anti-money laundering (AML), and sanctions. Initially, the network’s efforts were dedicated toward prevention, detection, and mitigation of money laundering. Salv, an Estonia-based regtech company, is credited with coining the term “fincrime intelligence sharing”.
Challenges of fincrime intelligence sharing
Financial institutions hold critical information on customers who may be involved in criminal activity, but due to limited capacity to exchange sensitive financial information, it is not always possible to raise timely alerts to law enforcement authorities. A lack of timely and accurate response may lead to large losses and serious, long-term reputational damage for financial institutions.
Despite the collective efforts of FIUs, cross-border public-private and private-private partnerships, financial crime remains a pressing global issue. According to the UN, criminals launder between $2.5-4tn every year. Between 70-80% of this money is laundered through traditional banking structures. A 2019 review of Suspicious Activity Reports filed in Europe found that FIUs had the information they needed to act in only 10% of cases.
Financial crime is mostly facilitated by organised crime networks who also heavily rely on money laundering as a way to legitimise their proceeds. A networked environment makes it possible for a systematic cooperation between criminals, giving them an unfair advantage over law enforcement authorities. Combating financial crimes is essential to the integrity of the global financial system. In order for these efforts to succeed, traditional law-enforcement methods need wider support from external networks specialising in fincrime intelligence sharing.
Fincrime intelligence sharing networks
Fincrime intelligence sharing has been pioneered by the four largest Estonian banks: Swedbank Estonia, SEB Estonia, Luminor and LHV (representing a 90% share of the domestic market). Together they formed the core of the Europe-wide fincrime intelligence network, later known as AML Bridge. The AML Bridge project was initiated with the full support of Estonia’s Financial Supervisory Authority, Data Protection Inspectorate, and the FIU of Estonia. As of 2022, all 10 members of the Estonian banking association are using AML Bridge.
The chief difference between AML Bridge and traditional law-enforcement methods of collecting financial information lies in the thorough crime-fighting approach. AML Bridge provides a cross-border network that connects members of the global financial system. It creates a fincrime intelligence sharing environment that facilitates the secure exchange of encrypted information between the network members, allowing them to quickly detect and report suspicious activity that is invisible to financial institutions working in silos.
Fincrime intelligence sharing networks: operational principles
AML Bridge operates on the basis of private-private financial information sharing partnerships. It provides a secure messaging channel that encourages the network members to proactively share and exchange information concerning high-risk customers and suspicious transactions. Private-private financial information sharing offers capabilities that the private sector needs in order to respond to emerging financial crime threats. This type of information sharing provides banks and financial institutions with a much bigger, smoother, clearer picture, and contributes to the development of typologies of money laundering and terrorism financing.
Fincrime intelligence sharing promotes increased cooperation between industry participants, and reduces time of investigations of suspicious activity. The fincrime intelligence sharing environment created by AML Bridge eliminates potential security loopholes in interbank communication, and provides a structured system to manage incoming and outgoing requests for information (RFIs). AML Bridge encourages collaborative investigations that allow network members to resolve complex cases of money laundering, and safeguard their customers’ funds. Close cooperation, trust, and regular communication between financial institutions is essential to combating the crimes of money laundering and terrorism financing.
Fincrime intelligence sharing networks: impact
The initial outcomes of the AML Bridge project showed a significant improvement in the quality of enhanced due diligence (EDD) procedures across the participating banks and financial institutions. The collaborative intelligence sharing reduced major time-delays in both sanctions and AML cases, meaning that banks that are part of AML Bridge can resolve sanctions and AML related cases faster, in a secure and legally compliant manner. The network members reported solving urgent cases in between three and fifteen minutes, which is a vast improvement on the previous 24-48 hour delays reported in the industry. With AML Bridge, banks and financial institutions can expand oversight beyond their own customer data, and access evidence to uncover multi-institutional scam or money-laundering schemes.
As of 2022, AML Bridge facilitated over 1200 collaborative investigations, preventing up to €3 million from reaching criminal-controlled accounts.
Legal framework of fincrime intelligence sharing
The European Union’s General Data Protection Regulation (GDPR) has provided a clear legal basis for private-private financial information sharing across the 27 member states and the UK. The precise scope, as to what data, and in which instances it can be exchanged will often depend on nation-level AML/CFT legislation, provided that network members adhere to data-minimisation practices, and ensure that the data exchanged accords with principles of necessity and proportionality.
There is growing policy and regulatory interest in fincrime intelligence sharing. The following pieces of legislation focus on supporting more effective collaboration for the detection of money laundering risks and expanding private-private financial information sharing across jurisdictions and across continents.
- FATF ‘Stocktake on Data Pooling, Collaborative Analytics and Data Protection (2021).
- The Netherlands 2019 “Joint Action Plan” on the prevention of money laundering (transaction monitoring and post-suspicion private-private sharing).
- 2019-2022 UK Economic Crime Plan (pre-suspicion and post-suspicion private-private sharing)
- The US 2021 Anti-Money Laundering Act and prescribed growth of FinCEN Innovation programmes.
- Singapore public consultation on a new ‘COSMIC’ platform and accompanying legislation – “Collaborative Sharing of ML/TF Information & Cases”.
Fincrime intelligence sharing is gaining momentum across the world. If you have any questions, get in touch with us and see fincrime intelligence sharing in action.