https://blogs.wsj.com/riskandcompliance/2018/09/27/standard-chartered-wants-greater-sharing-of-financial-intelligence/
Risk & Compliance Journal.
Standard Chartered Wants Greater Sharing of Financial Intelligence
David Fein, general counsel of Standard Chartered Bank. Photo: Standard Chartered
Mara Lemos Stein
BiographyMara Lemos Stein
mara.lemos-stein@wsj.com
Sep 27, 2018 11:59 am ET
Standard Chartered Bank is an active member of financial intelligence sharing partnerships in the U.S., U.K., Hong Kong and Singapore. For David Fein, the bank's general counsel, these partnerships—voluntary networks where banks, regulators and law-enforcement agencies come together to deter money laundering and terrorism financing—hold the key to making smarter use of banks' vast pile of suspicious activity reports. Mr. Fein, a former U.S. prosecutor, told Risk & Compliance Journal about some of the lessons learned from the nascent collaborations. Here are edited excerpts from the interview.
Why do we need financial information sharing partnerships (FISPs)?
David Fein: We as a society have decided that the role of banks in fighting financial crime is to search for and report suspicious activity to prevent bad actors from accessing the financial system. That's a given, a requirement, and it is happening. Banks are investing lots of resources to do that. The role of information sharing partnerships is to take that obligation and do it more effectively and more efficiently.
How can FISPs improve the fight against financial crime?
Mr. Fein: One thing that is important to understand is that there are professional money launderers who are very sophisticated in going on about their crime, in disguising the ownership of the proceeds of criminal conduct and the methods of their laundering. They take advantage of silos that exist, and often work from institution to institution, from jurisdiction to jurisdiction, so their criminal activity is not detected and reported.
One of the great advantages of information sharing through private-public or private-private partnerships is to get a better view of that suspicious activity, and report that, and hopefully we will have more impactful reports.
If a FISP had been operating in Estonia, would it have been able to detect the money-laundering activity at Danske Bank?
Mr. Fein: I don't know enough about the underlying facts of that case so I cannot comment on that. But I can tell you that from the work we've done, we are able to provide much better intelligence on a [suspicious activity] filing because of the authorized sharing of information.
Is there a conflict between data privacy and financial intelligence sharing?
Mr. Fein: I don't think we have to make a choice between data privacy and information sharing partnerships. We respect the privacy of our customers, and one of the things we strive for is to create as little friction as possible for our law-abiding clients.
We're not talking about…giving law enforcement access to banks' entire data pool. We're talking about breaking down silos and giving a more holistic view of suspicious activity.
The volume of SARs just keeps growing, and yet only about 10% of them are useful. Do we need a culture shift to move away from pre-emptive filing?
Mr. Fein: It's a paradigm shift for all stakeholders, but that conversation is now happening. There is a desire to shift some of the attention from the high-volume, low-value work to the more priority areas that we, as a society, decide are important, such as combating human trafficking, terrorism finance, illegal wildlife trade.
The recipients of the filings say that's the kind of information they want, that they can act on and prevent serious crimes, which is ultimately what the whole anti-money laundering regime is designed for.
How can you replicate the financial intelligence sharing partnership model?
Mr. Fein: We're seeing partnerships in a number of important financial jurisdictions and there are positive results and consistent enthusiasm from the stakeholders.
The industry, however, cannot do anything about the silos that are the countries—we have to operate within those jurisdictions. But the cross-border groups, such as the Egmont Group and the [Financial Action Task Force], are exploring ways of breaking down silos between countries.
What must banks do generate reports with a more holistic view of illicit finance?
Mr. Fein: Financial crime compliance teams within banks are very much affected by what the regulators are asking them to do, and hopefully we can align on striving to produce a fuller picture of the suspicious activity.
Banks have been investing in advanced technology and financial intelligence analysts to detect patterns of suspicious activity that previously would have been difficult to [spot].
If you had one wish for the future of financial intelligence sharing, what would it be?
Mr. Fein: That we see more commitment from all of the relevant stakeholders to leveraging this new way of identifying and reporting financial crime. We know it's a better way. I'd like to see everybody working together to put more resources and more attention into that approach and move from pilot [sharing partnerships] into the mainstream.
Write to Mara Lemos Stein at mara.lemos-stein@wsj.com. Follow her on Twitter at @LikelyMara.
David Fein
financial intelligence sharing
Suspicious activity reports
terrorism finance
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