Across the AML Divide: data sharing, de-risking and debate

Having spent two days this week in Brussels at a meeting of the Financial Action Task Force’s (FATF) private sector consultation forum discussing international anti-money laundering (AML) regulations, it was striking how two or three strands are now starting to dominate the debate.

First is the growing divide between the big banks and what they looking for from governments to help with their AML obligations relative to how the legal and accountancy professions see the issues. The banks want lists – as many as possible – computerised and machine readable, with the aim of removing any human role in AML checks. With this in mind, we had a presentation of a major project the UN, US and the Wolfsberg Group of banks had been working on regarding sanctions lists. There was much talk of metadata, fuzzy logic and machine readable formats, but when asked if a sole practitioner would be able to use the list or if legal professionals had been part of the consultation process on this project there was a slightly awkward silence.

There was also a real clash of thinking around data protection and the human right to privacy. It is clear that those responsible for data protection are increasingly concerned at AML proposals that will make large amounts of personal information widely available to a range of governments and institutions. This data sharing is supposedly for AML purposes, but with relatively few checks in practice about how this data is really going to be used.  The gulf here is enormous; from the US Government’s representative who found concerns about the human rights of people who might be terrorists ‘bizarre’,  to those who feel there is now an urgent need for the FATF to bring data protection supervisors into their structure at the very top (given that the AML system FATF is building is in practice now major exercise in data exchange).

The other major theme that attracted intense debate was the way the banks are ‘de-risking’ in the face of huge penalties for any AML breaches. They are therefore increasingly pulling out of business with a range of clients or jurisdictions based on their perception of potential AML risks. The debate identified correspondent banking as an area where this was already having a major impact but it was widely felt to be a growing issue across all bank business lines.  I suspect STEP members may also have views on this too.

George Hodgson is Deputy Chief Executive of STEP.

2 thoughts on “Across the AML Divide: data sharing, de-risking and debate

  1. Thanks for the update George.
    Was there any discussion on the definition of “Investment Entity Financial Institution” that has found its way into both the IGA and the OECD’s Common Reporting Standard?

    1. No definition of IEFI came out of last week’s event. The FATF’s focus at the forum was purely on anti-money laundering procedures and it does not generally discuss issues relating to automatic exchange of tax information.



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