Sweden has this week become the latest country to formalise an information sharing initiative between banks and law enforcement, to enhance the fight against financial crime. This is an important development and formative step to shift the narrative of the anti-money laundering failures that put the Nordic region in the spotlight in recent years.
The Swedish Anti-Money Laundering Initiative (SAMLIT) began as a pilot last June, under which the five largest banks in the country started sharing information with each other and with the Swedish police force’s intelligence unit. Whilst currently the banks can only share generic themes and typologies with each other, the police have been able to use the forum to share specific information (for example names and addresses) to enable the banks to investigate and report any associated activity. The police state that this has already yielded positive results. Looking ahead, as SAMLIT develops a more formal framework for information sharing, it is likely to advocate for legislative and regulatory amendments to allow banks to more freely share confidential information with each other. It is also likely that other banks will join the forum.
The advantages of such partnerships are well-known within the industry. The model of SAR (Suspicious Activity Report) filing is plagued with challenges and does not appear to be making an impact on the up to USD 2 trillion estimated illicit funds laundered every year. Banks have to monitor hundreds of thousands of transactions every day. When operating in a silo, it is extremely difficult to judge what constitutes suspicious activity. However, the threat of regulatory action for failure to report results in a huge number of SARs filed with little evidentiary value. The high number of reports is a challenge for law enforcement, who struggle to find the worthwhile ‘needle in the haystack’. The vast volumes also result in time delays, meaning criminals have time to move money and even change their methods, long before a SAR lands on the desk of law enforcement.
When law enforcement shares specific, actionable intelligence with banks on an ongoing basis, it enables law enforcement to gather additional evidence. After receiving information from law enforcement, banks may be able to identify individuals, entities, addresses and more, linked through financial data to the subjects of an investigation – building out a more complete picture of a potential criminal network. The banks can in turn be more confident in taking action to mitigate or manage their financial crime risk, rather than face the uncertainty that arises where a SAR is filed but no response is received.
On the global stage, Sweden is just the latest country to have adopted some form of information sharing measures. The first country, the UK, set up the Joint Money Laundering Intelligence Taskforce (JMLIT) in 2015, which allows for the sharing of both typology information and tactical intelligence between banks, law enforcement and the regulator. To June 2020, JMLIT reports over £56 million secured and 210 arrests made. Similar models now exist in at least 20 countries including the US, Hong Kong, Singapore and Australia.
Taking collaboration to a significant new level, in July 2020, five banks in The Netherlands announced the formation of a joint transaction monitoring agency. Transaction Monitoring Netherlands aims to improve and speed up the detection of criminal funds flows by identifying patterns and networks across the participating banks. The initiative is due to go live this year and Sweden, along with the industry as a whole, will no doubt be watching to see if shared transaction monitoring will be the next step in their private-public partnership evolution.