ACFE Insights Blog

A Positive Step for British Banks and Shared Information

Reuters recently reported that more than half a dozen British banks were in advanced talks with law enforcement and government agencies over plans to systematically share intelligence on major financial crimes such as money laundering and terrorism financing.

By Guest Blogger August 2023 Duration: 4-minute read
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By: Tony McClements, Head of Investigations at Martin Kenney & Co (MKS)

Reuters recently reported that more than half a dozen British banks were in advanced talks with law enforcement and government agencies over plans to systematically share intelligence on major financial crimes such as money laundering and terrorism financing. 

Two landmark pilots are expected to launch within months. The moves follow Britain recently launching a new economic crime plan and a national fraud strategy as the country grapples with the aftermath of the Russian invasion of Ukraine and London’s previous unenviable reputation as “Londongrad.”  

The agreement in the offing between the banks, including Lloyds and NatWest, will create protocols and systems for sharing information should be broadly welcomed. The objective of this proposal is summed up succinctly by Simon Fell, vice chair of a parliamentary anti-corruption group, who said, “So, any new mechanisms to share information that could help track down criminals, while respecting sensible privacy rights, is welcomed.”  

The information held by banks is quite rightly considered sensitive and demands firewalling. This data provides a deep insight into an individual’s or corporate entity’s most private information. However, there are instances where this right to privacy is exploited by the unscrupulous. The reliance on confidentiality can be manipulated by the corrupt, tax evaders, drug dealers and even terrorists. Banks are in the money-laundering frontline, an invidious situation where they can often never do right for doing wrong. 

When it spots something dubious, the normal response is for a bank to generate a Suspicious Activity Report (SAR). However, SAR systems in most countries, especially the U.K., are overrun and failing in their law enforcement objective. Banks are spending vast sums complying with their regulatory obligations, only for the intelligence they generate through SARs to disappear into an information black hole that is the SAR regime. 

Where is the system failing? It is difficult to apportion blame. Banks often generate “defensive” or “just-in-case” reports. Given the severity of potential sanctions, it is difficult to criticize banks for adopting this position. Unfortunately, such reports can often clog up the system, generating a situation where it is difficult to see the “wood for the trees.”  

Likewise, law enforcement has had to cut its cloth to adjust to severe budgetary constraints. These limitations mean that a large number of SARs, which could otherwise generate meaningful and useful intelligence, slip through the cracks. Even when the banks submit a “good” SAR, there is no guarantee that it will see the light of day in a policing context. The SARs system is flawed, but it can also never be perfect due to the human factors inherent within the system.  

It should be emphasized that what may be suspicious to one person is not necessarily considered shady by another. In addition, the banks also suffer, as does law enforcement, from corporate and geographical boundaries that create silos. These repositories can unintentionally create a situation where the left hand does not know what the right is doing.  

In law enforcement, this can result in “blue-on-blue” scenarios, where the same suspect is being investigated by multiple agencies—all oblivious to one another’s investigations. It shouldn’t happen, but it does. The banks are no different: Unless they can liaise with one another, the jigsaw will never be complete. Being able to secure this overview is essential. 

Yet the fear of breaching privacy laws has prevented banks from speaking to one another, even when they have had good cause to do so. The key phrase for me in these new measures is “respecting sensible privacy rights.” It makes sense to me that those in the inner circles of banking should be able to establish an information exchange. As long as the information is not being disclosed outside of the finance members’ tight network, there should be no need for concern. If a number of banks have a customer common to them all, and all are suspicious for similar or even different reasons, then the resultant SAR will carry with it much more significance and gravitas. The mere fact that several banks will now combine efforts to raise concerns should push that SAR towards the top of the law enforcement in tray. 

Yet the mechanics of this information-sharing plan are unknown. Indeed, several of the banks are refusing to comment or even confirm their participation in the trial. To my mind, empowering the process by which banks will be able to lawfully liaise with each other and share their concerns needs to be formalized as soon as possible. The banks will benefit from being able to discuss developing situations. Law enforcement will benefit from enhanced intelligence. And the SARs system will potentially benefit too, as the number of SARs should decrease — even if only marginally — as only one report would be generated, rather than several SARs all highlighting the same individual. 

All in all, I consider this proposal to be a positive step in the fight against financial crime and money laundering.