Enhancing the co-ordination and collation of intelligence from Suspicious Activity Reports (SARs) would bolster the UK’s defences against money laundering and terrorist financing, argues Mariola Marzouk.
The Financial Action Taskforce (FATF) is an intergovernmental organisation that works to counter money laundering (ML) and terrorist financing (TF). The Task Force evaluates member states’ ability to follow its recommendations, and published its UK Mutual Evaluation Report last year. The FATF complemented the UK and its Financial Intelligence Unit (UKFIU) on:
- A robust understanding of its ML/TF risks
- Strong public/private partnership particularly on TF matters
- Wide regulatory supervision of financial and non- financial institutions
- Achievement in investigating and prosecuting wide range of financial crimes
- Global leadership in promoting corporate transparency.
But the report also points to shortcomings regarding UKFIU’s lack of mandate to drive and disseminate intelligence out of the submitted (SARs), something the UK government is working to address with a £3.5 million budget for work to reform the UK SAR regime in 2019 and 2020. Under the current model, UKFIU does not conduct sufficient strategic analysis of the intelligence received leaving the authorised agencies accessing the SARs database to undertake their own. The insights they generate are frequently not used to update the UKFIU database, and that can only hinder the county’s holistic understanding of criminal activity.
- To understand the enormous value a coordinated approach to SARs can create, listen to our podcast with former FBI Special Agent Greg Coleman.
The 5th AML Directive stresses that FIUs’ collaboration plays an important role in tracing cross border flows of money to illicit networks at an early stage. The UK, being the fifth largest economy in the world, and the largest net exporter of financial services (£51 billion) is in possession of invaluable global SAR intelligence. But the limited role of the UKFIU undercuts its ability to effectively share information with foreign counterparties.
The functions, competences and powers of national FIUs differ across Europe, as there are no prescriptive international standards. Yet Member States are encouraged to ensure a more efficient and coordinated approach to deal with financial investigations such that empower FIUs to:
- Continuously enrich their data with intelligence provided by competent authorities, held by another FIU or accessed from obliged entities without undue delays
- Conduct their own analysis with the aim of establishing links between suspicious transactions and underlying criminal activity
- Disseminate the results of its analysis as well as additional information to the competent authorities where there are grounds to suspect money laundering, associated predicate offences or terrorism financing.
The UK regulated sector has been vocal about how it feels the country’s SAR regime is not fit to foster such an holistic approach to crime mitigation, and the Home Secretary’s investment of £3.5 million can only help. The FATF evaluation may just provide enough backing to bring UKFIU in line with the 5th AML Directive FIU vision; a vision than can only be effectively accomplished with the right combination of human, IT and Analytical tools.
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Mariola Marzouk is a product manager for Regulatory Compliance Solutions at BAE Systems Applied Intelligence.