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Global Challenges in 2012

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By Christine Lagarde
Managing Director, International Monetary Fund
Berlin, January 23, 2012
Webcast of the speech

As prepared for delivery
Good afternoon. It’s a great honor for me to be here, in Germany, in this great city of Berlin. Germany plays a vital role in Europe, in the global economy, and on the global stage. There can be no resolution to the crisis without Germany, and a lack of resolution will in turn hurt Germany, the euro area’s economic linchpin. I can think of no more suitable place to make this point than the German Council on Foreign Relations, which has been at the forefront of the debate on Germany’s role in the world for the past fifty years.cl2
Before going any further, I would like to pay tribute to the tireless efforts of my good and highly-respected friends Chancellor Merkel and Minister Schäuble in seeking solutions to this crisis.
As we turn the page on a turbulent year, a year in which so much of what could go wrong did go wrong, many look to the future with trepidation and foreboding. They worry about uncertain economic prospects, dwindling job opportunities, and rising inequality. About what kind of future awaits their children.
Indeed, in the economic outlook that the IMF will release tomorrow, we will lower growth forecasts for most parts of the world. Even these lower forecasts assume a constructive policy path that is by no means assured.
In too many places, uncertainty is holding back demand and the willingness to lend. A legacy of high public and private debt is hurting economic prospects. The global financial system remains fragile.
In an interconnected world like ours, these forces are feeding each other across borders. Capital flows to emerging markets have already dropped off, and growth is expected to slow even in the most vibrant parts of the world economy. Low-income countries are especially vulnerable.
Yet before we indulge in yet another bout of collective pessimism, which is becoming something of a global sport, let me ask a simple question—why did 2011 turn out so badly?
I would argue that it was not because of any fresh wound to the global economy. No, it was driven instead by a lack of a collective determination to reach a cooperative solution. We saw many false starts and half measures in 2011—in Europe, but also, for instance, in the United States with its debt ceiling debacle.
Put simply, policymakers let an old wound fester, and in doing so made the situation worse.
Looking at it from this perspective, 2012 must be a year of healing. But as Hippocrates put it long ago: “Healing is a matter of time, but it is sometimes also a matter of opportunity”.
And today, it has to be an opportunity of our making. Otherwise, we could easily slide into a “1930s moment”. A moment where trust and cooperation break down and countries turn inward. A moment, ultimately, leading to a downward spiral that could engulf the entire world.
I remain ever hopeful. I believe we can avoid such a scenario. I say this for a simple reason: we know what must be done. That is my core message to you today—although the economic outlook remains deeply worrisome, there is a way out. Now the world must find the political will to do what it knows must be done.
I would like to lay out the core elements of a policy path forward, in three broad aspects:

  • First, the path for the euro zone.
  • Second, the role of the rest of the world.
  • Third, the particular role and responsibility of the IMF.

Policies in the euro zone
I will start with Europe, which is at the center of concerns—not only because of the historical project it represents but, more pointedly, because of the extensive trade and financial linkages that bind everyone else to it.
In coming to grips with Europe’s crisis, I want to acknowledge up front just how far the euro zone has come in addressing the new realities it faces.
Eurozone countries have established their cross-border safety net with the European Financial Stability Facility (the EFSF) and outlined a permanent version of it with the European Stability Mechanism (the ESM)—only two years ago, this was heresy. They have taken a harmonized approach to recapitalizing banks, and set up a systemic risk board. Governance reforms to enforce stronger and more effective fiscal discipline are in train and individual countries are taking tough decisions to rein in fiscal deficits. In addition, the European Central Bank has unleashed impressive resources to make long-term liquidity available to banks.
These major steps must be recognized. Yet I would not be the first to argue that these moves form pieces, but pieces only, of a comprehensive solution. Many within Europe are themselves making this point with increasing forcefulness.
Let me therefore offer my perspective on what remains to be done. There are three imperatives—stronger growth, larger firewalls, and deeper integration.
First, stronger growth. This has a number of dimensions.

With the euro area economy slowing sharply, inflation is already declining and we see a sizable risk that it will fall well below target next year, raising debt burdens and further hurting growth. Additional and timely monetary easing will be important to reduce such risks.
Stronger growth also means preventing banks from going into reverse gear, contracting credit in the face of market pressure. Solutions should focus on raising capital levels—rather than cutting back lending—as the way to boost capital ratios. Maintaining orderly funding conditions is also imperative.
On fiscal policy, resorting to across-the-board, across-the continent, budgetary cuts will only add to recessionary pressures. Yes, several countries have no choice but to tighten public finances, sharply and quickly. But this is not true everywhere. There is a large core where fiscal adjustment can be more gradual. Automatic stabilizers, which let tax revenues fall and spending rise as the economy weakens, should certainly be allowed to operate. And those with fiscal space should support the common effort by reconsidering the pace of adjustment planned for this year.
Some countries still have much to do to boost their competitiveness and growth potential. For this, structural reforms are critical, however medium or long-term their impact might be. As experience tells us, fiscal sustainability depends, ultimately, on generating long-term growth.
Second, we need a larger firewall. Without it, countries like Italy and Spain, that are fundamentally able to repay their debts, could potentially be forced into a solvency crisis by abnormal financing costs. This would have disastrous implications for systemic stability. Adding substantial real resources to what is currently available by folding the EFSF into the ESM, increasing the size of the ESM, and identifying a clear and credible timetable for making it operational would help greatly. Action by the ECB to provide the necessary liquidity support to stabilize bank funding and sovereign debt markets would also be essential.
We must also break the vicious cycle of banks hurting sovereigns and sovereigns hurting banks. This works both ways. Making banks stronger, including by restoring adequate capital levels, stops banks from hurting sovereigns through higher debt or contingent liabilities. And restoring confidence in sovereign debt helps banks, which are important holders of such debt and typically benefit from explicit or implicit guarantees from sovereigns.

This brings me to my third point—deeper integration. In a sense, the crisis is a crisis of incomplete integration. At the euro-area level, the fundamentals look good—the current account is balanced and inflation and the fiscal deficit are both low. But the euro area does not handle internal imbalances well. In addition, a single financial market cannot rely on legal and institutional frameworks that operate on an asymmetric national basis.
To break the feedback loop between sovereigns and banks, we need more risk sharing across borders in the banking system. In the near term, a pan-euro area facility that has the capacity to take direct stakes in banks will help break this link. Looking further ahead, monetary union needs to be supported by financial integration in the form of unified supervision, a single bank resolution authority with a common backstop, and a single deposit insurance fund.
The euro area also needs greater fiscal integration—it is not tenable for seventeen completely independent fiscal policies to sit alongside one monetary policy. To complement its “fiscal compact”, the area needs some form of fiscal risk-sharing, which would allow for common support before economic dislocation in one country develops into a costly fiscal and financial crisis for the entire euro area.
A number of financing options are available to support such risk sharing, including the creation of euro area bonds or bills or, as proposed by the German Council of Economic Advisors, a debt redemption fund. Political agreement on a joint bond to underpin risk sharing would help convince markets of the future viability of European economic and monetary union.

Policies in the rest of the world
Let me now turn to my second broad area—policies in the rest of the world. I have dwelt on Europe only because it is at the epicenter of the current crisis and thus key to the global outlook. But other economies have at least as important a role in getting to a better outcome.
The United States, as the world’s largest economy and the center of the global financial system, has a special responsibility. Yes, it is recovering, but at a timid pace, and unemployment—while declining—remains unacceptably high.
The key policy priorities must be to relieve the burden of household debt and to deal decisively with the issue of public debt.
On housing, we have been calling for ways to make mortgage debt sustainable, including programs to facilitate write-downs. I understand the legal and political complexities but the current strategy is not working satisfactorily, and we need a rethink.
On public debt, American policymakers need to find a way past the partisan impasse, grasping all reasonable means of bringing down tomorrow’s deficits—including by reforming entitlements and raising revenue—without bringing down today’s economy.
This brings me to another worrisome tendency in many quarters—to view fiscal policy as a morality play between profligacy and responsibility. Political and market commentary is too often cast in these terms. Yet markets themselves have been schizophrenic about fiscal tightening, at times rewarding it with lower interest rates, and at other times recoiling at the implied growth slowdown and pushing up interest rates.

To reiterate our advice: credible measures that deliver and anchor savings in the medium term will help create space for accommodating growth today—by allowing a slower pace of consolidation.
What about other countries and regions?
In Japan, there is no way to avoid a credible consolidation plan that brings down public debt in the years ahead. Japan also needs reforms to raise long-term growth.
Countries with current account surpluses, whether advanced or emerging, also have a role to play—primarily by shifting to domestic demand to support global growth. After all, global deficits will shrink only if surpluses shrink too.
Here, China can help itself and the global economy by continuing to shift growth away from exports and investment, toward consumption. To get there, I’m thinking of such measures as fiscal support to household consumption and expanding social safety nets, and liberalizing the financial system. These are all reforms that the Chinese government itself has embraced.
One more point: We must not let financial regulation slip off the policy agenda. We simply cannot carry on with the financial sector that gave us the global financial crisis. We need a safer and more stable financial system, one that serves rather than destabilizes the real economy. While policymakers have made a lot of progress, they still need to complete the reform agenda and ensure that the new standards are implemented in a way that is consistent across countries.

The role of the IMF
Let me now turn to the role of the IMF, my third and final issue.
Clearly, a cooperative path means that all countries must work together with a common diagnosis toward a common solution.
A key role of the IMF is to lay out the inter-dependencies between countries and push for a cooperative outcome.
But the IMF can provide much more than analysis, advice and exhortation.
It can also provide financing when needed. I am convinced that we must step up the Fund’s lending capacity. The goal here is to supplement the resources Europe will be putting on the table, but also to meet the needs of “innocent bystanders” infected by contagion, anywhere in the world. A global world needs global firewalls.
In the coming years, we estimate a global potential financing need of $1 trillion. To play its part, the IMF would aim to raise up to $500 billion in additional lending resources. Right now, we are exploring options and consulting the membership.
In addition to resources, the IMF can also provide a “commitment mechanism” to lock in good policies when funding is not needed. Italy’s request for IMF monitoring of its policies is a good example of this.
Finally, because there has been so much loose talk about special “European bailouts”, let me reiterate a few points. Our financing is for all members, euro area or otherwise. We only lend to individual countries that request support and make strong policy commitments. That said, any support we provide to euro area countries must be anchored in a clear policy framework for the entire euro area. To safeguard our members’ resources, we have a responsibility to lend into sustainable debt positions. Our role is to catalyze, not indefinitely replace, private financing.

Conclusion
Let me wrap up. Although we all know what must be done, I realize that none of this will be easy. I understand the great political challenges facing policymakers.
I understand the frustration of the Europeans, who have built such a remarkable project out of the ruins of World War II. No, monetary union did not get everything right, but the global financial crisis that started across the Atlantic exposed its vulnerabilities more starkly. I also understand why Europeans feel that the difficult decisions they have taken are not being sufficiently recognized.
I also understand the frustrations of the rest of the world. Just as they were picking up the pieces after the 2008 crisis, they watch their recovery being blown off course by trouble in Europe. They wait for a resolution to this crisis that never seems to come, on a continent they feel is rich enough to resolve its problems on its own.
I understand the pain felt in those European countries that need to adjust, and the difficulty of sharing the burden in a way that is socially fair. But I also understand the feelings in countries that have been thrifty, asked to help those who could have managed their economies more prudently.
But what we must all understand is that this is a defining moment. It is not about saving any one country or region. It is about saving the world from a downward economic spiral. It is about avoiding a 1930s moment, in which inaction, insularity, and rigid ideology combine to cause a collapse in global demand.
The longer we wait, the worse it will get. The only solution is to move forward together. Our collective economic future depends on it.
More than most, Germany understands the virtues of determined solidarity. Through its experiences with its Soziale Marktwirtschaft and unification, it showed what can be accomplished by bringing everybody together in service of the common good. The world needs a strong leadership role from Germany today, and it is Germany’s core interest to provide such a role.
Let me end with a quote from Goethe: “It is not enough to know, we must apply. It is not enough to will, we must do.” (Es ist nicht genug, zu wissen, man muß auch anwenden; es ist nicht genug, zu wollen, man muß auch tun). This is the challenge of our year ahead.

Source: www.imf.org

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Taking control of compliance: how FS institutions can keep up with the ever-changing regulatory landscape

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By Charles Southwood, Regional VP – Northern Europe and MEA at Denodo

The wide-spread digital transformation that has swept the financial services (FS) sector in recent years has brought with it a world of possibilities. As traditional financial institutions compete with a fresh wave of challenger banks and fintech startups, innovation is increasing at an unprecedented pace.

Emerging technologies – alongside the ever-evolving concept of online banking – have provided a platform in which the majority of customer interactions now take place in a digital format. The result of this is a never-ending stream of data and digital information. If used correctly, this data can help drive customer experience initiatives and shape wider business strategies, giving organisations a competitive edge.

However, before FS organisations can utilise data-driven insights, they need to ensure that they can adequately protect and secure that data, whilst also complying with mandatory regulatory requirements and governance laws.

The regulation minefield

Regulatory compliance in the FS sector is a complex field to navigate. Whether its potential financial fraud or money laundering, risk comes in many different forms. Due to their very nature – and the type of data that they hold – FS businesses are usually placed under the heaviest of scrutiny when it comes to achieving compliance and data governance, arguably held to a higher standard than those operating in any other industry.

In fact, research undertaken last month discovered that the General Data Protection Regulation (GDPR) has had a greater impact on FS organisations than any other sector. Every respondent working in finance reported that the changes made to their organisation’s cyber security strategies in the last three years were, at least to some extent, as a result of the regulation.

To make matters even more confusing, the goalpost for 100% compliance is continually moving. In fact, between 2008 and 2016, there was a 500% increase in regulatory changes in developed markets. So even when organisations think they are on the right track, they cannot afford to become complacent. The Markets in Financial Instruments Directive (MiFID II), the requirements for central clearing and the second Payment Service Directive (PSD2), are just some examples of the regulations that have forced significant changes on the banking environment in recent years.

Keeping a handle on this legal minefield is only made more challenging by the fact that many FS organisations are juggling an unimaginable amount of data. This data is often complex and of poor quality. Structured, semi-structured and unstructured, it is stored in many different places – whether that’s in data lakes, on premise or in multi-cloud environments. FS organisations can find it extremely difficult just to find out exactly what information they are storing, let alone ensure that they are meeting the many requirements laid out by industry regulations.

A secret weapon

Modern technologies, such as data virtualisation, can help FS organisations to get a handle on their data – regardless of where it is stored or what format it is in. Through a single logical view of all data across an organisation, it boosts visibility and real-time availability of data. This means that governance, security and compliance can be centralised, vastly improving control and removing the need for repeatedly moving and copying the data around the enterprise. This can have an immediate impact in terms of enabling FS organisations to avoid data proliferation and ‘shadow’ IT.

In addition to this, when a new regulation is put in place, data virtualisation provides a way to easily find and access that data, so FS organisations can respond – without having to worry about alternative versions of that data – and ensures that they remain compliant from the offset. This level of control can be reflected even down to the finest details. For example, it is possible to set up access to governance rules through which operators can easily select who has access to what information across the organisation. They can alter settings for sharing, removing silos, masking and filtering through defined, role-based data access. In terms of governance, this feature is essential, ensuring that only those who have the correct permissions to access sensitive information are able to do so.

Compliance is a requirement that will be there forever. In fact, its role is only likely to increase as law catches up with technological advancement and the regulatory landscape continues to change. For FS organisations, failure to meet the latest legal requirements could be devastating. The monetary fines – although substantial – come second to the potential reputation damage associated with non-compliance. It could be the difference between an organisation surviving and failing in today’s climate.

No one knows what is around the corner. Whilst some companies may think they are ahead of the compliance game today, that could all change with the introduction of a new regulation tomorrow. The best way to ensure future compliance is to get a handle on your data. By providing total visibility, data virtualisation is helping organisations to gain back control and win the war for compliance.

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TCI: A time of critical importance

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By Fabrice Desnos, head of Northern Europe Region, Euler Hermes, the world’s leading trade credit insurer, outlines the importance of less publicised measures for the journey ahead.

After months of lockdown, Europe is shifting towards rebuilding economies and resuming trade. Amongst the multibillion-euro stimulus packages provided by governments to businesses to help them resume their engines of growth, the cooperation between the state and private sector trade credit insurance underwriters has perhaps missed the headlines. However, this cooperation will be vital when navigating the uncertain road ahead.

Covid-19 has created a global economic crisis of unprecedented scale and speed. Consequently, we’re experiencing unprecedented levels of support from national governments. Far-reaching fiscal intervention, job retention and business interruption loan schemes are providing a lifeline for businesses that have suffered reductions in turnovers to support national lockdowns.

However, it’s becoming clear the worst is still to come. The unintended consequence of government support measures is delaying the inevitable fallout in trade and commerce. Euler Hermes is already seeing increase in claims for late payments and expects this trend to accelerate as government support measures are progressively removed.

The Covid-19 crisis will have long lasting and sometimes irreversible effects on a number of sectors. It has accelerated transformations that were already underway and had radically changed the landscape for a number of businesses. This means we are seeing a growing number of “zombie” companies, currently under life support, but whose business models are no longer adapted for the post-crisis world. All factors which add up to what is best described as a corporate insolvency “time bomb”.

The effects of the crisis are already visible. In the second quarter of 2020, 147 large companies (those with a turnover above €50 million) failed; up from 77 in the first quarter, and compared to 163 for the whole of the first half of 2019. Retail, services, energy and automotive were the most impacted sectors this year, with the hotspots in retail and services in Western Europe and North America, energy in North America, and automotive in Western Europe

We expect this trend to accelerate and predict a +35% rise in corporate insolvencies globally by the end of 2021. European economies will be among the hardest hit. For example, Spain (+41%) and Italy (+27%) will see the most significant increases – alongside the UK (+43%), which will also feel the impact of Brexit – compared to France (+25%) or Germany (+12%).

Companies are restarting trade, often providing open credit to their clients. However, there can be no credit if there is no confidence. It is increasingly difficult for companies to identify which of their clients will emerge from the crisis from those that won’t, and whether or when they will be paid. In the immediate post-lockdown period, without visibility and confidence, the risk was that inter-company credit could evaporate, placing an additional liquidity strain on the companies that depend on it. This, in turn, would significantly put at risk the speed and extent of the economic recovery.

In recent months, Euler Hermes has co-operated with government agencies, trade associations and private sector trade credit insurance underwriters to create state support for intercompany trade, notably in France, Germany, Belgium, Denmark, the Netherlands and the UK. All with the same goal: to allow companies to trade with each other in confidence.

By providing additional reinsurance capacity to the trade credit insurers, governments help them continue to provide cover to their clients at pre-crisis levels.

The beneficiaries are the thousands of businesses – clients of credit insurers and their buyers – that depend upon intercompany trade as a source of financing. Over 70% of Euler Hermes policyholders are SMEs, which are the lifeblood of our economies and major providers of jobs. These agreements are not without costs or constraints for the insurers, but the industry has chosen to place the interests of its clients and of the economy ahead of other considerations, mindful of the important role credit insurance and inter-company trade will play in the recovery.

Taking the UK as an example, trade credit insurers provide cover for more than £171billion of intercompany transactions, covering 13,000 suppliers and 650,000 buyers. The government has put in place a temporary scheme of £10billion to enable trade credit insurers, including Euler Hermes, to continue supporting businesses at risk due to the impact of coronavirus. This landmark agreement represents an important alliance between the public and private sectors to support trade and prevent the domino effect that payment defaults can create within critical supply chains.

But, as with all of the other government support measures, these schemes will not exist in the long term. It is already time for credit insurers and their clients to plan ahead, and prepare for a new normal in which the level and cost of credit risk will be heightened and where identifying the right counterparts, diversifying and insuring credit risk will be of paramount importance for businesses.

Trade credit insurance plays an understated role in the economy but is critical to its health. In normal circumstances, it tends to go unnoticed because it is doing its job. Government support schemes helped maintain confidence between companies and their customers in the immediate aftermath of the crisis.

However, as government support measures are progressively removed, this crisis will have a lasting impact. Accelerating transformations, leading to an increasing number of company restructurings and, in all likelihood, increasing the level of credit risk. To succeed in the post-crisis environment, bbusinesses have to move fast from resilience to adaptation. They have to adopt bold measures to protect their businesses against future crises (or another wave of this pandemic), minimize risk, and drive future growth. By maintaining trust to trade, with or without government support, credit insurance will have an increasing role to play in this.

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What Does the FinCEN File Leak Tell Us?

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By Ted Sausen, Subject Matter Expert, NICE Actimize

On September 20, 2020, just four days after the Financial Crimes Enforcement Network (FinCEN) issued a much-anticipated Advance Notice of Proposed Rulemaking, the financial industry was shaken and their stock prices saw significant declines when the markets opened on Monday. So what caused this? Buzzfeed News in cooperation with the International Consortium of Investigative Journalists (ICIJ) released what is now being tagged the FinCEN files. These files and summarized reports describe over 200,000 transactions with a total over $2 trillion USD that has been reported to FinCEN as being suspicious in nature from the time periods 1999 to 2017. Buzzfeed obtained over 2,100 Suspicious Activity Reports (SARs) and over 2,600 confidential documents financial institutions had filed with FinCEN over that span of time.

Similar such leaks have occurred previously, such as the Panama Papers in 2016 where over 11 million documents containing personal financial information on over 200,000 entities that belonged to a Panamanian law firm. This was followed up a year and a half later by the Paradise Papers in 2017. This leak contained even more documents and contained the names of more than 120,000 persons and entities. There are three factors that make the FinCEN Files leak significantly different than those mentioned. First, they are highly confidential documents leaked from a government agency. Secondly, they weren’t leaked from a single source. The leaked documents came from nearly 90 financial institutions facilitating financial transactions in more than 150 countries. Lastly, some high-profile names were released in this leak; however, the focus of this leak centered more around the transactions themselves and the financial institutions involved, not necessarily the names of individuals involved.

FinCEN Files and the Impact

What does this mean for the financial institutions? As mentioned above, many experienced a negative impact to their stocks. The next biggest impact is their reputation. Leaders of the highlighted institutions do not enjoy having potential shortcomings in their operations be exposed, nor do customers of those institutions appreciate seeing the institution managing their funds being published adversely in the media.

Where did the financial institutions go wrong? Based on the information, it is actually hard to say where they went wrong, or even ‘if’ they went wrong. Financial institutions are obligated to monitor transactional activity, both inbound and outbound, for suspicious or unusual behavior, especially those that could appear to be illicit activities related to money laundering. If such behavior is identified, the financial institution is required to complete a Suspicious Activity Report, or a SAR, and file it with FinCEN. The SAR contains all relevant information such as the parties involved, transaction(s), account(s), and details describing why the activity is deemed to be suspicious. In some cases, financial institutions will file a SAR if there is no direct suspicion; however, there also was not a logical explanation found either.

So what deems certain activities to be suspicious and how do financial institutions detect them? Most financial institutions have sophisticated solutions in place that monitor transactions over a period of time, and determine typical behavioral patterns for that client, and that client compared to their peers. If any activity falls disproportionately beyond those norms, the financial institution is notified, and an investigation is conducted. Because of the nature of this detection, incorporating multiple transactions, and comparing it to historical “norms”, it is very difficult to stop a transaction related to money laundering real-time. It is not uncommon for a transaction or series of transactions to occur and later be identified as suspicious, and a SAR is filed after the transaction has been completed.

FinCEN Files: Who’s at Fault?

Going back to my original question, was there any wrong doing? In this case, they were doing exactly what they were required to do. When suspicion was identified, SARs were filed. There are two things that are important to note. Suspicion does not equate to guilt, and individual financial institutions have a very limited view as to the overall flow of funds. They have visibility of where funds are coming from, or where they are going to; however, they don’t have an overall picture of the original source, or the final destination. The area where financial institutions may have fault is if multiple suspicions or probable guilt is found, but they fail to take appropriate action. According to Buzzfeed News, instances of transactions to or from sanctioned parties occurred, and known suspicious activity was allowed to continue after it was discovered.

Moving Forward

How do we do better? First and foremost, FinCEN needs to identify the source of the leak and fix it immediately. This is very sensitive data. Even within a financial institution, this information is only exposed to individuals with a high-level clearance on a need-to-know basis. This leak may result in relationship strains with some of the banks’ customers. Some people already have a fear of being watched or tracked, and releasing publicly that all these reports are being filed from financial institutions to the federal government won’t make that any better – especially if their financial institution was highlighted as one of those filing the most reports. Next, there has been more discussion around real-time AML. Many experts are still working on defining what that truly means, especially when some activities deal with multiple transactions over a period of time; however, there is definitely a place for certain money laundering transactions to be held in real time.

Lastly, the ability to share information between financial institutions more easily will go a long way in fighting financial crime overall. For those of you who are AML professionals, you may be thinking we already have such a mechanism in place with 314b. However, the feedback I have received is that it does not do an adequate job. It’s voluntary and getting responses to requests can be a challenge. Financial institutions need a consortium to effectively communicate with each other, while being able to exchange critical data needed for financial institutions to see the complete picture of financial transactions and all associated activities. That, combined with some type of feedback loop from law enforcement indicating which SARs are “useful” versus which are either “inadequate” or “unnecessary” will allow institutions to focus on those where criminal activity is really occurring.

We will continue to post updates as we learn more.

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