The Developing Partnership Between Financial Institutions and Law Enforcement

International Comparative Legal Guide: Business Crime 2019

In this chapter of The International Comparative Guide to: Business Crime 2019, Claiborne (Clay) W. Porter explores the growing importance of information sharing in the fight against terrorism and financial crime.

"The Developing Partnership Between Financial Institutions and Law Enforcement"

Financial institutions of all types, regulators, and law enforcement across the globe recognize the vital importance of information sharing in the fight against terrorism and financial crime. Experience has shown that efficient, timely information sharing by a bank, broker-dealer, or a money services business (MSB) with law enforcement can often help prevent a terrorist attack or dismantle a crime syndicate. Indeed, according to the Financial Action Task Force on Money Laundering (FATF), which was founded in 1989 on the initiative of the G7 to develop policies to combat money laundering (ML), “[E]ffective information sharing is one of the cornerstones of a well-functioning anti-money laundering/counterterrorist financing (AML/CTF) framework.”  

Required Information Sharing vs. Public-Private Partnerships
Information sharing through formal reporting requirements and statutorily required committees composed of law enforcement and members of the financial services industry is the typical mechanism through which these entities share information. As a general matter, this method of information sharing is most often in the form of information being passed from the financial institution to law enforcement – the financial institution reports suspicious activity to law enforcement, or another regulatory authority.

Public-private partnerships, on the other hand, are a two-way street. Typically set up in the form of a committee or a working group, these partnerships have representation from both the public sector (federal, state, and/or local law enforcement and regulatory authorities) and the private sector (banks, MSBs, broker-dealers, and other financial institutions). Membership in the partnership may often depend on the committee or working group’s area of focus, such as financial crime typologies. Ideally, it is intended that information flows freely in these partnerships among the members, and each member reaps a benefit from participation. For example, if typologies are the focus, banking representatives share information with law enforcement on a specific ML typology they have found in their compliance work. Law enforcement and regulators would in turn share information that would help the bank when identifying certain typologies or schemes related to typologies, which may help the banks adjust and adapt their transaction monitoring or refine how their financial intelligence unit (FIU) is conducting investigations into these typologies, as appropriate.

Current Trends in Public-Private Partnerships
In the United States, statutorily mandated information sharing, such as Suspicious Activity Reports (SARs) and Currency Transaction Reports (CTRs), has existed since the advent of the Bank Secrecy Act (BSA) of 1970. Public-private partnerships between financial institutions and law enforcement, where members of banks and law enforcement convene to discuss current trends in anti-money laundering enforcement, have existed about the same amount of time, though most are informal and often on an ad hoc basis.

With the passage of the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (USA PATRIOT Act), public-private partnerships have taken on greater importance as financial institutions and law enforcement working to enhance their cooperation in the fight against terrorist financing and financial crime. And in the past five years, as BSA and sanctions enforcement increased, many financial institutions have been requesting a greater emphasis to be placed by the U.S. government on public-private partnerships.

Outside of the U.S., the concept of public-private partnerships has already taken root, as foreign banking regulators crack down on money laundering and terrorist financing (ML/TF) in their jurisdictions and regulators become more active.

This chapter identifies the current information sharing mechanisms and the public-private partnerships existing today and offer potential reforms designed to further improve the process. To be sure, informal and confidential public-private partnerships addressing immediate threats are always taking place – this chapter, however, is devoted to public partnerships that address systemic ML/TF compliance efforts. Read the full chapter to learn more.


Used with permission by Global Legal Group Ltd.

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