FATF: Methods for banks and financial institutions to exchange data without violating privacy laws

A report outlining safe information sharing between financial institutions was released today by a global watchdog on financial crime.

The organization claims that its report outlines cooperative methods for sharing data without flouting privacy laws.


In order to "responsibly enhance, design and implement information collaboration initiatives" among banks and financial institutions, the report aims to assist nations.


"A single financial institution has only a partial view of transactions and sees one small piece of what is often a large, complex puzzle," according to the FATF.


The paper, "Stocktake on Data Pooling, Collaborative Analytics and Data Protection," outlines how information sharing can be carried out in accordance with DPP regulations.


The task force stated that "by using collaborative analytics, bringing data together, or developing other sharing initiatives in responsible ways, financial institutions seek to build a clearer picture of the puzzle, to better understand, assess, and mitigate money laundering and terrorist financing risks."

Without making formal recommendations, the paper provides policymakers with advisory recommendations.


AML financing regulations around the world are examined in the report, as well as how responsible private-to-private cooperation can aid in their successful implementation.


The agency's widely expressed belief that public-private partnerships are essential in the national and local fights against financial crime has been strengthened by the report released today.


According to the agency, its regulations are made to ensure that the dangers of increased personal data sharing are properly considered.


The report examines the requirements for global anti-money laundering, counter-terrorist financing, and counter-proliferation financing as well as the role that ethical private-to-private cooperation can play in ensuring their successful implementation.


While this is going on, banks, fintechs, and other financial institutions are urged to think about implementing privacy enhancing technologies (PETs), improve data interoperability, measure performance, pursue data protection by design, and avoid excessive or unwarranted de-risking.


It also gives an overview of the DPP goals and principles that stakeholders should (or have to) take into account when planning initiatives for private sector collaboration.


According to FATF, its report offers case studies that demonstrate how members of the FATF and its Global Network have increased information sharing in the private sector while still adhering to their respective domestic DPP frameworks' legal requirements.


“Their experiences indicate that private sector information sharing measures can be achieved in compliance with DPP rules and obligations, subject to key tests and requirements,” according to the agency.


The report offers non-binding recommendations to help countries that are thinking about increasing private sector information sharing to design and implement such initiatives responsibly and effectively. The report draws on these experiences and lessons learned by members across the FATF Global Network.


Among the suggestions are the following for the public sector:


1. participate actively in information-sharing initiatives

2. consider whether specific legal gateways are required for such information sharing, develop an AML information sharing strategy, and support innovation and sandbox initiatives.

3. Determine whether it is feasible to create a safe environment for the exchange of information in the private sector.

4. Take into account how to encourage frequent communication between DPP and AML/CFT/CPF authorities.


It is now up to the government and financial institutions to work together to combat financial crime, as the paper outlines how criminals cooperate to gain financial advantage.


"Criminals exploit this information gap by using multiple financial institutions within or across jurisdictions to layer their illicit financial flows. As a result, it is increasingly difficult for individual financial institutions to detect these illicit activities," according to the Paris-based organization.

By fLEXI tEAM