Organized Criminal elements have become increasingly sophisticated, with new “innovations” introduced during the COVID-19 Pandemic, where digital flows of both information and assets move quickly through financial vehicles, across institutions and jurisdictions. As criminal networks expand their use of both technology and distributed methods, both private and public organizations have recognized a need to collaborate further to detect, deter and mitigate these activities.
- Private-Public Partnerships have proven effective in the fight against Money Laundering.
- The current environment is evolving quickly - largely driven by technology and evolving financial innovation, which also provides opportunities for illicit actors.
- Future will require us to act quickly and nimbly to address emerging threats – existing PPPs comprise elements of scanning and typology development, analytics and information sharing that could be deepened, expanded or expedited through new approaches to partnership and technology.
Building from current collaborations
Since 2015, FINTRAC and partners have engaged in public-private partnerships related to several high-profile themes, namely,
- BMO-led Project Protect (Human Trafficking)
- BNS-led Project Shadow (Child Sexual Exploitation).
These collaborations point to how practical models of collaboration among industry, civic leadership, FINTRAC and law enforcement can improve results in terms of deterrence, detection and prosecution of organized criminals. Countries such as the US, UK, the Netherlands and Australia have developed new partnership models to refine the identification of suspicious transactions and share them with AML authorities.
We can state that the technology has the potential to improve timely information sharing and respect privacy concerns in a way that has not been previously possible. Moreover, trusted knowledge sharing and awareness are other aspects that require dedicated fora and resources from all stakeholders to mitigate ML activities. There is a need to expand the use of technology and analytics to improve effectiveness and let go of how things have been done traditionally.
Opportunities and considerations
The level of engagement and willingness to increase the efficiency and effectiveness of the current landscape through new approaches to information sharing and technology is definitely high.
So we see that opportunities exist to both learn from international counterparts and to develop Canadian-made solutions. Opportunities also exist to further engage the technology community more substantively and develop proof-of-concept or pilot initiatives.
Challenges must be deliberately reconciled:
- Current legal and privacy frameworks and requirements are misaligned with current technological realities.
- Opportunity to strengthen roles and cohesion across the federal regime as the interface with private and international engagement.
- Resource, cost and administrative implications (both a cost and a potential opportunity – i.e., front-loaded investments may result in diminished future burden).
- Canada’s AML partners are working hard to clarify roles and increase horizontal effectiveness.
States of Readiness: Digital and Building Partnerships
FINTRAC has developed a Digital Strategy with the objective of using emerging and enabling technologies to increase efficiency and effectiveness. Through this Strategy, expected outcomes are that FINTRAC can collect, analyze and disseminate information more efficiently to mitigate ML techniques.
FINTRAC is also taking lessons learned from other international counterparts who have developed Proof of Concept use cases using a variety of technologies and platforms, including machine learning and artificial intelligence.
The Public-Private Collaborative Steering Committee (PPCSC) was created to provide coordination on AML/ATF efforts with a focus on specific initiatives that can improve procedures, effectiveness and efficiencies within existing authorities, using a phased approach.
In working directly with the Office of the Privacy Commissioner (OPC), it is anticipated that:
- OPC colleagues will become more aware of the evolving threats of illicit finance.
- OPC may advise on best practices that should govern the commencement of any initiative.
- As appropriate, the specific allowance of disclosures within certain parameters can be vetted by the OPC.
- Industry-led
- Supported by national FIU – FINTRAC and law enforcement agencies
- Voluntarily participation
- Material impact beyond awareness building
- Recognized internationally
- Focused on vulnerable peoples and groups
Lessons learned
Increased awareness on the role the AML industry plays in social good initiatives within the Environment, Social and Governance (ESG) framework.
Underreporting of a given predicate offense does not necessarily mean that offense is happening at a reduced rate compared to other more commonly reported offenses.
Certain corporate actions can be taken, derivative of lessons learned through AML operations, that can be leveraged to address the motivation/demand to commit a crime in the first place.
Canada’s approach to PPPs is unique and admired globally.
Increased governance and information sharing would be useful.
Challenges to Law Enforcement
The nature of the threat: underground, international, multisectoral.
Capacity: recruitment, retention, diversity, partnerships, and priorities.
Legislation: MLATs, case law, judicial authorizations, disclosure, and information sharing.
Big Data: complex, encrypted, multilingual, and varied.
A law enforcement perspective to PPPs
The RCMP is the operational arm of Public-Private Partnerships in Canada
- Lead priority setting in this space as a focal point between domestic policing and international law enforcement.
- Promote enhanced communication.
- Implement a systems-level response.
- Drive deliver/assess impact.
- Leverage international models and lessons learned.
- Compliment and not compete with other established mechanisms within the AML Regime.
- Not a replacement for regulatory requirements.
- If gaps exist in the regime – i.e. obtaining more information and faster, and in different formats from financial institutions, these need to be considered as larger discussions that could be brought forth to PPCSC/FINTRAC.
Generally, each portion of the new structure should complement the other, not circumvent.
RCMP – A law enforcement perspective
Connecting regional and national illicit finance public-private initiatives is a perfect synergy.
- Share data and identify trends with key public-private stakeholders.
- Increase education and awareness of ML.
- Achieve a wider range of options and tools to reduce criminal activity.
- Achieve standardization and coordination across the Provincial and Federal government Ground-level surveys and scientific advice to create an agile, functional model that can be replicated across provinces, and exist in perpetuity.
Key Takeaways
FINTRAC looks at the changing landscape through many lenses:
- Effectiveness/Efficiency o Technology/Data/Analysis.
- Tactical/Operational o Policy/Legislative/Regulatory.
- Overall regime improvements have to arise from concerted, coordinated efforts across private, public and international players.
In Canada, there is a strong willingness across the AML Regime to improve policy, processes, methods and techniques to build from recent success. It’s all about the network, clear roles and responsibilities, collaborative development of priorities, information, sharing and technological advancement.
We would be happy to know more about your fintech startup and consult you on Canada’s AML novelties to ensure your business is in line with the framework adopted by the legislator. For further information on how we can assist you on this matter, reach us at info@zrtolerance.com.