March 2021 Summaries

Financial regulators face challenges in promoting information sharing within the industry due to data privacy compliance issues, particularly under GDPR, but Privacy-Enhancing Technologies (PETs) offer a solution by enabling secure data sharing without compromising privacy and regulatory compliance. During a discussion on Financial Intelligence Sharing under GDPR, experts highlighted successful implementations such as the DANIE consortium for Customer Due Diligence, Transaction Monitoring Netherlands for collective transaction monitoring, and the Cyber Defence Alliance for fraud investigations, all of which utilized PETs to enhance data protection and collaboration. These technologies help overcome regulatory uncertainties and compliance risks, allowing institutions to share encrypted insights, thus facilitating innovation in financial crime prevention. Despite regulatory grey areas, PETs minimize compliance risks, enhance machine learning applications, and promote efficient cross-border data sharing, suggesting a need for clearer regulatory guidance to further encourage such initiatives.

Participants in recent Financial Action Task Force (FATF) roundtable events discussed the responsible adoption of new technologies to enhance Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) processes, focusing heavily on Privacy-Enhancing Technologies (PETs) for financial intelligence sharing while maintaining privacy compliance. Emerging technologies, such as homomorphic encryption, were highlighted for their potential to facilitate secure, cross-border collaboration without compromising privacy or regulatory standards. It was noted that while technology is not a standalone solution, its integration with strong data governance can significantly improve personalized customer interactions and compliance. Regulators were urged to drive technology adoption through incentives, risk reduction measures, and harmonization across jurisdictions, addressing the current regulatory ambiguity in intelligence sharing. The necessity for regulatory clarity was emphasized, specifically concerning what data can be shared, with whom, and under what circumstances, to overcome barriers to global cooperation in the financial sector.