Why data sharing is the key to battling financial crime

That colossal figure represents a very real threat to the financial stability of the country. How can the flow of money through our financial system be deemed credible if much is derived from criminal activity?

The answer to the question lies in better data sharing. New regulations will herald a new era for financial crime prevention, giving businesses a previously unattainable view of what is actually occurring in the financial system.

The current landscape

The recently passed Economic Crime and Corporate Transparency Act (ECCTA) will make it easier for anti-money laundering (AML) regulated businesses to share customer information with each other for the purposes of preventing, investigating and detecting economic crime.

Make no mistake, this is an important and crucial step.  Historically, there have been several barriers to information sharing financial crime data between financial institutions, including privacy and data protection concerns, reluctance to share data that could potentially erode competitive advantage, and no way of sharing that information in a consistent, standardised manner.

Overcoming these barriers requires robust data sharing frameworks that both ensure privacy and clear guidance to encourage organisations to share.

CAIS and fraud Information

Experian has long-established expertise in the area of data sharing and management. In the early 1980s, we introduced Credit Account Information Sharing (CAIS) allowing UK banks to share payment behaviours on their customers.

This data sharing was central to understanding UK consumers’ levels of indebtedness and their ability to repay credit agreements. By understanding who could make their repayments and who could not at an aggregated level, models could be developed to train all available data to accurately predict a consumer’s propensity to default.

In 2002, we extended data sharing to cover fraud, offering a trusted framework for exchanging intelligence. This allowed organisations to share details on customers suspected of committing fraud and make a positive impact to addressing fraud losses.

In the same way ‘outcome’ data was essential for predicting payment delinquency in credit almost two decades earlier, fraud data sharing was pivotal to developing predictive models that could calculate an individual’s likelihood of being a fraudster.

A financial crime bureau

Just as bureau data was central to spearheading credit data sharing 40 years ago and fraud data sharing 30 years ago, we believe the same will be true for economic crime data. Embracing a new fraud and AML bureau that builds on our existing expertise offers both private and public sectors organisations the opportunity to accelerate broader economic crime data sharing for the benefit of everyone.

Experian estimate that the creation of a single, national database could improve coverage by between 15% and 30%, and in return help reduce UK losses by up to £700m per annum.

A singular bureau would revolutionise AML systems. It would increase confidence in matching individual’s information, reduce false positives, and help address the perceived barriers to participating and sharing data. Currently each organisation interested in sharing fraud information is tasked with choosing their preferred data consortium, giving rise to cases where the business feels the choice is too much and so decides not to share at all.

We are on the first step of this journey but by harnessing the power of technology and data management, authorities disrupt and dismantle criminal networks, an ambition which can only be achieved through having a fuller, complete picture of what is happening.