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It Takes Two

This week, the United States, in coordination with Panama, announced the formation of a new task force that will tackle financial crime in the Central American nation, and brings together prosecutors, regulators and law enforcement. The announcement comes a day before the WSJ, in a piece titled ‘Partnerships to Fight Financial Crime Gain Momentum, highlighted a new survey, which shows that “partnerships have produced some promising early results, and compliance officers say it could lead to a shift away from the current “tick-box” approach.”

So, how promising are the results?

The report, titled 'Five Years of Growth of Public-Private Partnerships to Fight Financial Crime', noted that jurisdictions with financial information-sharing partnerships (FISPs) now account for 41% of global GDP, and include 20 out of the top 30 global financial centers. Notably, according to the report, such partnerships have proven effective as it resulted in an increase in suspicious reporting, which specifically addressed the threats prioritized by the respective FISPs. Additionally, the partnerships “improved [the] quality and utility of suspicious reporting; and improved law enforcement outcomes supporting investigations, prosecutions, asset recovery or other disruption of criminal networks.”

Earlier this month, as part of the ACFCS FinCrime Virtual Week, Sigma hosted a roundtable discussion on the utility of using smart data for greater effectiveness in investigations, and in which we highlighted the value of info-sharing and advocated for a new approach that moves beyond box checking.Back in June, leveraging research by RUSI and McKinsey, Sigma published a two-part series that examined the ineffectiveness of the current approach to suspicious reporting. According to a study by RUSI, which was the first international study of FISPs, on a global basis, “80–90% of suspicious reporting is of no immediate value to active law enforcement investigations.” While on the flipside, in the U.S. for example, 95 percent of reporting which was submitted in response to information-sharing requests by FinCEN yielded positive results.” McKinsey, citing statistics from a “leading [financial] institution,” noted that in the absence of “information sharing or tangible leads of some kind, less than 2 percent of transaction monitoring alerts achieve productive results.” As part of the roundtable, we highlighted that smart data goes beyond providing information and has the ability to produce actionable insights and provide tangible leads. 

With the rise of RegTech, institutions now have the ability to efficiently surface, across a variety of data, the kinds of actionable insights that result in a more effective fight against financial crime, whether from the improved utility of reporting to improved law enforcement outcomes. With estimates as high as $2 trillion being laundered through the global financial system and only 1% being intercepted by law enforcement, it’s clear that a new approach is long overdue.

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