On 3 November the Financial Action Task Force (FATF)* published the final version of its guidance for private sector information sharing. The paper sets out the challenges to information sharing and provides guidance both in the context of group wide and between financial institutions not part of the same group. Effective information sharing is considered one of the cornerstones of a well-functioning anti-money laundering (AML) and counter-terrorist financing (CTF) framework and this guidance highlights the usefulness of information sharing to increase the effectiveness of their AML/CTF prevention efforts.
One of the main challenges to information sharing is linked to different legal frameworks of Data Protection and Privacy (DPP) and to the balance between individual rights to privacy and protection of personal data and the public security interests. Lack of adequate coordination between different authorities might increase the perception of a conflict between AML/CTF and DPP objectives. Operational challenges, in terms of IT capabilities, integration tools and data standardisation, might also inhibit information sharing practices.
Whilst the guidance emphasises the wider benefits of sharing information between financial institutions to strengthen the understanding of risks and vulnerabilities, it also raises concerns about a selective use (or misuse) of information sharing that could generate unfair or improper commercial practices. In this context, an effective system of international coordination and cooperation is key to addressing the concern that the scarcity of guidance and feedback by public authorities may discourage information sharing between different private sector entities, or between private and public sectors.
Where regulatory expectations are unclear and information about risks is insufficient, national DPP and AML/CTF authorities should work together to meet their respective objective and provide clear information on the existing legal mechanisms and permissions for financial institutions to share information. This would ensure greater clarity and promote a consistent understanding across the private sector, which is considered an important partner in combatting financial crime as it holds valuable information of critical importance to law enforcement and competent authorities.
The guidance contains 2 annexes. Annex 1 articulates how differences in DPP regimes or their application can affect the information flow. Annex 2 includes country examples on addressing some of the challenges, sets out innovative practices and contains examples of established mechanisms and processes to ensure guidance and feedback for the private sector, which helps facilitate better information sharing among all stakeholders.
Financial institutions should find this document a topical reading as it provides a hint of how expectations on the private sector’s contribution in combatting financial crime are evolving and what solutions are available to them.
* FATF is an independent inter-governmental body that develops and promotes policies to protect the global financial system against money laundering, terrorist financing and the financing of proliferation of weapons of mass destruction. The FATF Recommendations are recognised as the global AML and CFT standard.