Global Financial Crime Framework Needs Overhaul to Deliver Success

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A consensus is emerging that the global financial crime framework needs to be refined and redefined to prioritize outcomes over compliance. The current system is criticized for focusing too much on mandating reporting requirements rather than delivering effective results, such as providing actionable intelligence to law enforcement.

Need for Clear Leadership and Supervisory Framework

The need for clear leadership and a supervisory framework that incentivizes high-value activities has been emphasized. A “whole system” approach is required, with all stakeholders working together to address financial crime risk management.

Creating a clearer structure across priorities, deconflicting competing legislative frameworks, and outlining performance objectives are essential steps towards achieving a coherent approach.
National-level fragmentation between regulators, policymakers, law enforcement, and the private sector continues to hinder progress.

Risk-Based Approach Remains Critical

The risk-based approach is widely recognized as a critical driving principle in financial crime risk management. However, there is a need for continued improvements in its implementation, efficiency, and confidence.

Intelligence sharing, collective prioritization, and coherence between policymakers and supervisors are key enablers of this approach.
The private sector’s input into the system must also be optimized to ensure that the capacity and capabilities across the anti-financial crime ecosystem are utilized effectively.

Addressing the Mismatch Between Inputs and Outcomes

A significant mismatch remains between what is put into the system and the outcomes achieved. This is particularly evident in the private sector, where huge resources are mobilized to meet reporting obligations but often do not lead to tangible results.

Increased information sharing and reforms that ensure supervision and examination are centered on identified and agreed measures of effectiveness are critical steps towards addressing this mismatch.

Implementing the Fundamentals

The FATF has made progress in establishing standards for information sharing, but more needs to be done. The organization should prioritize effective cross-institution, cross-sector, and cross-border data exchange, reflecting the reality of organized international criminal activity.

A new standard on establishing domestic and cross-border information sharing mechanisms is also needed.
This could involve moving from non-binding recommendations to binding standards, setting a global baseline that would help achieve better results by enabling stakeholders to see a fuller picture of financial criminal activity.

Conclusion

The global financial crime framework needs a significant overhaul to deliver success. A “whole system” approach, prioritizing outcomes over compliance, is essential. Clear leadership and a supervisory framework that incentivizes high-value activities are crucial steps towards achieving this goal.

By implementing the fundamentals, including effective information sharing mechanisms, we can better combat financial crime and ensure a safer financial system for all.