Sharing Suspicions

By Jamie Rowsell

“Data! Data! Data!” he cried impatiently. “I can’t make bricks without clay.” When it comes to the value of quality information to a crime investigator, not much has changed since Sherlock Holmes’ lament in 1892.

With criminals targeting the U.S. financial system to both clean and move their fraudulently-obtained funds, government expectations that financial institutions will uncover financial crime deeply hidden within an ocean of legitimate customer activity are greater than ever.

These heightened regulatory expectations require increased diligence on the part of banks; however, the value of the information that banks provide to law enforcement is immeasurable.

At the Department of the Treasury’s Law Enforcement Awards ceremony earlier this year, Jennifer Shasky Calvery—at the time director of the Financial Crimes Enforcement Network—highlighted the importance of the relationship between banks and law enforcement’s ability to prosecute financial criminals: “Without the valuable information that U.S. financial institutions provide, the significant cases recognized here today would likely never have seen the light of day.”

While the help of financial institutions is absolutely essential to law enforcement, quantity can sometimes be the enemy of quality. With a volume of nearly two million Suspicious Activity Reports submitted annually from all industry types required to report, poor quality information can greatly affect law enforcement’s ability to uncover patterns of activity and isolate the truly suspicious. Josh Brown, director of security at the Fauquier Bank in Warrenton, Va., with a background of more than 20 years in law enforcement, understands the negative effect low-quality information can have. “If a BSA officer files on something that they know isn’t suspicious, it just bogs down the whole process,” he says.

Of course, determining what is truly suspicious is not always black and white. With limited investigative resources and an absence of important customer information, financial crime investigators can end up immobilized, creating an inefficient decision-making process.

That is why information sharing and collaboration among financial institutions is no longer a luxury. In today’s environment, it is essential.

The value of collaboration
In a 2016 Verafin survey of AML/Bank Secrecy Act compliance professionals on the topic of cross-institutional information sharing, more than two-thirds of active collaborators believed information sharing helped them resolve investigations more quickly. Three quarters agreed that collaboration helped them make better investigative decisions, and more than eight in 10 said collaborating helps uncover valuable information they otherwise would not know.

With emerging software technology facilitating collaboration among banks and making it easier than ever before, the benefits available to financial crime investigators and their institutions are substantial. Information sharing gives banks the means to uncover higher quality customer information while simultaneously reducing time lost on unnecessary investigations into unusual activity.

“It lets us put the pieces of the puzzle together and move forward quickly,” says Rebecca Robertson, SVP and director of AML compliance at South State Bank in Columbia, S.C. “We don’t have to sit and ponder something. It removes the unknown when we can reach out to another institution, clears up any confusion, and we stop spinning our wheels.”

When asked about the impact of cross-institutional collaboration for her bank, Robertson is unequivocal about how these improvements have improved South State’s investigative process and the information the bank can provide to law enforcement. “It helps us avoid spending time on activity that is ultimately legitimate. We’ve eliminated unnecessary reporting while improving the quality of our filings. Our narratives are much more detailed, which gives law enforcement what they need to apply their expertise to the underlying suspicious activity.”

These sentiments are echoed by Richard Jordan, AVP for BSA and security at Winchester Savings Bank in Winchester, Mass. “In order to combat money laundering and other financial crime you need [to collaborate with other banks]—you can’t be out there by yourself.”

A retired police officer of 22 years, Jordan has unique insight into the value improved information quality can have in the hands of law enforcement. “Being able to reach out to other banks and learn more about your customer’s activity means better SARs. And because the information we include in the SAR narrative is gathered from numerous banks, law enforcement can see a pattern, know what banks are involved and who they need to talk to, and recognize it’s something much bigger than an isolated incident. As a former policeman, I know the more information I have, the quicker I can put the numbers together and take action.”

Today’s environment of increasingly organized and sophisticated criminals makes the fuller picture of criminal activity that collaboration brings to banks even more important. In a recent industry white paper, Chris Swecker, retired assistant director at the FBI, emphasized how much the FBI, U.S. Secret Service and Department of Justice rely on banks and the SARs they file to open investigations. However, due to limited resources, federal prosecutors are forced to set dollar loss thresholds before a prosecution can be initiated.

Breaking out of BSA siloes
Criminal enterprises are now using the often-siloed approach to BSA reporting to hide the proceeds of crimes ranging from human trafficking to international terrorism. With a lack of resources plaguing banks and all levels of law enforcement in the fight against financial crime, the ability to shine a light on the truly suspicious and build a robust picture of criminal activity that enables law enforcement to take quick, decisive action is mandatory. Collaboration is an answer.

“I commonly ask investigators at other institutions if they collaborate,” says Josh Brown. “If they tell me no, I ask them ‘Why not?’ There’s no additional workload. Why wouldn’t you want to know what risks someone poses to your institution and our country? You can protect your customers from elder abuse, human trafficking, international terrorism—why wouldn’t you want to do that?”

With financial crime growing in complexity and the already limited resources available to BSA/AML and fraud detection departments stretched to the breaking point, information sharing gives banks the opportunity to expand their ability to uncover suspicious activity and provide law enforcement with the information necessary to quickly act on criminal activity—all while making valuable efficiency gains.

Even Sherlock Holmes would be proud.

Jamie Rowsell is a market researcher at Verafin, a provider of fraud detection and AML software used by banks. He has written numerous published articles and white papers on a wide range of topics pertaining to fraud, AML and financial crime detection technology.