Financial crime: How to see the whole picture and why it's imperative banks and agencies share information

Jennifer Calvery
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Financial crime is a complex, long-term challenge (Source: Getty)

Financial crime has devastating effects. It threatens not only people’s livelihoods but also their lives.

Fraud ruins companies and bankrupts individuals; tax evasion deprives societies of money to pay for public services; and money laundering facilitates bribery, corruption, terrorist financing and human trafficking.

I started my career as a public prosecutor in the US because I wanted to help stop crime. I still have the same goal working in HSBC today. Banks have a crucial role to play in detecting, deterring, and preventing financial crime.

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Financial institutions can act independently to strengthen their defences. In HSBC, for example, we have upgraded computer networks over recent years, tightened the controls we apply to stop money laundering and sanctions breaches, and invested heavily in training staff.

But financial crime is a complex, long-term challenge. No organisation can solve the problem on their own. Banks, governments and law enforcement agencies are all working together to understand and tackle it.

Sharing information is vital. Public bodies such as police and intelligence services gather insight about threats to public safety. They investigate companies and individuals that they suspect of breaking the law.

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Banks are able to see financial transactions in detail. They can use technology to analyse large bodies of data and pinpoint patterns of suspicious behaviour.

By sharing their complementary sets of information, banks and law enforcement agencies can better focus their collective efforts to safeguard society. For banks, like HSBC, this means knowing our customers so we can spot when a criminal is targeting their money. Accurate, complete and up-to-date information on our customers will also help our systems detect criminal activity more effectively.

But legal and regulatory barriers make it difficult to share information. Privacy and data protection laws sometimes prevent banks from sharing information between their own operations in different countries, let alone with third parties. The result is neither governments, law enforcement bodies nor banks are able to see the full picture.

Policymakers in many places acknowledge these challenges. Some have set up information-sharing initiatives such as the UK’s Joint Money Laundering Intelligence Taskforce.

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Banks exchange data with public authorities inside strictly defined parameters designed to balance privacy and data security with the need to tackle serious problems including human trafficking and terrorist financing. The taskforce is already delivering results: in its first three months alone, it contributed to 37 arrests and the closure of 114 accounts.

These forums are welcome and valuable. This is why HSBC, along with other organisations, is supporting the think-tank the Royal United Services Institute and NJM Advisory to carry out an international review of approaches taken in different jurisdictions around the world. The first meeting will take place today in London and lessons learned can help us agree ambitions for the future.

There is an urgent need for wholesale reform in the financial crime risk management realm. We must become more precise in targeting illicit conduct within the system and this can only be done by dramatically improving collaboration and information sharing through these forums.

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Financial crime crosses borders, so our response also needs to be international, with close cooperation between those taskforces. And it is vital to make the most of rapidly evolving technologies which can make sense of the data, spot anomalies and provide the evidence needed to target serious crime.

There is no easy answer to this challenge. Financial criminals are smart people with significant resources who constantly learn and constantly adapt. But sharing information can help us develop a more effective and sustainable approach to stopping them.

City A.M.'s opinion pages are a place for thought-provoking views and debate. These views are not necessarily shared by City A.M.

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