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third party risk

Tackling financial crime through big data

Che Sidanius

24 Apr 2018

The fight against financial crime was a major talking point at this year’s ASEAN Regulatory Summit on 8 May 2018, in particular the value of data analytics and cross-border public-private information sharing.


    1. Fighting financial crime requires the public and private sector to exchange data and expertise, in addition to sharing information across borders.
    2. We are helping to promote a more effective information-sharing regime at a coordinated global level.
    3. There is a delicate balance to be found between appropriate use of data and the sharing and employment of such data to combat financial crime.

Regulators, law enforcement agencies, data providers and financial institutions are doubling up their efforts to tackle financial crime.

Illicit proceeds from criminal activity are estimated by the UN to account for 2-5 percent of global GDP, with less than 1 percent of this amount seized or frozen in the financial system.

And it appears the situation is getting worse. Earnings from illicit activity are growing at an exponential rate in the United States alone, as the chart below shows.

Estimated earnings from criminal activity in the U.S., billions (tax evasion excluded). Source: United Nations Office on Drugs and Crime report

AML regime in need of reform

There needs to be a fundamental re-think of the current anti-money laundering (AML) system, because the current regime is just not effective.

Its inefficiencies pose a significant risk to the integrity of the global financial system, undermining public trust in the process.

As we work towards reforming current AML practices, a number of critical factors must be considered:

  1. Technical compliance rather than effectiveness is at the center of the current AML regime.
  2. Barriers to information sharing at the national and global level need to be revisited. While governments and law enforcement agencies tend to operate within national borders, financial crime rarely does. Perpetrators often exploit the differences in regimes and regulations to their advantage.

Public-private partnerships

No single party can combat financial crime alone.

As regulators require banks to make more stringent checks on their customers, and perform rigorous due diligence to fulfill their compliance obligations, it’s crucial to use all the tools at our disposal to step up the fight against financial crime.

Public and private sector organizations must work in tandem with each other to exchange data, harness their expertise and share this information across borders.

In partnership with the World Economic Forum and Europol, we recently launched a Coalition to Fight Financial Crime with the aim of raising awareness on a topic that has grave financial and human consequences.

Together with public and private sector partners, we plan to promote a more effective information-sharing regime on a coordinated, global level, as well as enhanced processes to share compliance best practices.

Read: ‘The role of Financial Information-Sharing Partnerships (FISPs) in the disruption of crime’ by Nick J Maxwell and David Artingstall, Oct 2017 — Rusi Occasional Paper

Balancing data needs

The use of data also presents its own challenges in an era where companies, governments and organizations have to collect an increasing amount of information on who they do business with.

At the same time, our individual online footprint expands by the day.

The balance between ensuring that data is used appropriately, but can also be accessed in the fight against financial crime risk, is a delicate one.

Leveraging the information we have will help to keep us — as individuals and society as a whole — safe, and drug gangs and human traffickers at bay.

But people must be reassured that their personal data is not being traded or shared for anything other than the most vital security purposes.

Data is king

Nor should it be forgotten that if banks lack confidence in the data at their disposal, they may avoid ‘high risk’ activities and withdraw financial services from the communities and markets that need them most, with a subsequent negative impact on economic cohesion.

As governments around the world seek to codify new data protection laws, all parties have a role to play in ensuring that we get this framework right. and ensure financial crime compliance.

Only then can we really hope to take the fight against financial crime to the child traffickers, drug cartels and prostitution rings around the world.

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