British banks are gearing up to share more data with their peers on suspected serious economic crime as part of wider efforts to stem “dirty money” flows into the country from Russia and elsewhere, four sources with knowledge of the matter told Reuters.
More than half-a-dozen banks are in advanced talks with British law enforcement and government agencies on plans to systematically share intelligence on major financial crimes such as money laundering and terrorism financing in two landmark pilots expected to launch within months, the sources said.
The moves come as Britain ramps up efforts to tackle economic crime, which lawmakers say costs the economy around 350 billion pounds ($450 billion) each year, and as the West has imposed sanctions against individuals, companies and industries to isolate Russia after its invasion of Ukraine.
Banks have long been wary of sharing customer data for fear of falling foul of strict British and global data protection and privacy laws, which could trigger litigation by customers whose accounts have been locked pending investigations.
However, the trials are designed to coincide with a new UK law that is expected to take centre stage in the financial crime crackdown and tackle Britain’s image painted by parliamentarians as a global “destination of choice” for dirty money.
“Banks are the first line of defence against money laundering and fraud,” said lawmaker Simon Fell, vice-chair of a parliamentary anti-corruption group. “So any new mechanisms to share information that could help track down criminals, while respecting sensible privacy rights, is welcomed,” he told Reuters.
Two of Britain’s “Big Four” banks — Lloyds and NatWest — are participating in both data trials, industry sources said.
Lloyds and NatWest both declined to comment. HSBC and Barclays declined to comment when asked if they were taking part.
The first pilot involves around six banks and Britain’s National Crime Agency (NCA), and would allow companies to share data if they identify multiple flags about potential serious financial crime, three of the sources said, speaking on condition of anonymity because the plans are not yet public.
The second pilot would involve launching a broader database for suspected economic crime and involves around eight banks, Britain’s interior ministry (Home Office) and bank lobby group UK Finance, two of the sources said.
A spokesperson for the Home Office said the government’s plans to combat economic crime would ensure a co-ordinated response between the government, law enforcement and the private sector.
UK Finance declined to comment.
Risks of oversharing
Cross-referencing data on customers who pose the highest financial crime risk would allow banks to spot patterns of criminality and reduce the risk of investigating suspicious activity in silos, one of the sources said.
Existing laws enable banks to share information related to suspected small-scale fraud, for instance through Britain’s national fraud database. But banks rarely do so for large-scale financial crimes such as money laundering, the sources said, partly because of worries they might risk breaching data protection rules.
The two pilots, however, would allow extensive information sharing between banks on large-scale financial crime, expand public-private data sharing initiatives and set up a similar platform to Britain’s national fraud database for serious economic crime.
The pilots could be formally launched by October when Britain’s economic crime and corporate transparency bill, currently on its way through parliament, is expected to become law. This legislation aims to protect regulated firms from confidentiality rules if they share information to tackle economic crime, giving them the leeway to ramp up data sharing.
One financial crime investigations lawyer, who declined to be named because of client sensitivities, said that information-sharing needed appropriate safeguards.
“The firms must still be able to show they have followed appropriate data protection rules and the right risk analysis process internally,” he said.
The NCA’s pilot, which follows a smaller trial involving just two banks, could help in circumstances such as flagging a business handling a huge influx of cash to check details with other banks and law enforcement, one source said.
The NCA told Reuters it was discussing the data sharing pilot with a number of banks to try and identify “actionable intelligence.” But it said the plan, part of a project called “Data Fusion,” was still in the design phase.
The second pilot also involves data regulator the Information Commissioner’s Office and technology firm Cifas, which already runs Britain’s national fraud database. — Reuters