There is increasing international cooperation in the fight against financial crime – and increasing expectations that businesses play their part.
Information and intelligence sharing between law-enforcement authorities and financial regulators has improved significantly in recent years. That’s true both domestically and, perhaps more significantly, internationally.
The channels are both formal and informal. The latter are used most often early on in investigations, with informal discussions helping overseas agencies navigate the legal and administrative requirements to request information or push for action. The range of formal mechanism and tools for cooperation, meanwhile, has expanded, perhaps most significantly in tax evasion: Bilateral tax information exchange agreements (TIEAs) are widespread and used regularly, while the Organization for Economic Co-operation and Development’s (OECD) Common Reporting Standard allows tax information to be shared automatically.
Even in bribery and corruption, though, where cross-border cooperation is frequently used, we see improvements: In France, for example, which has long been criticized for a lack of enforcement by the OECD and others, Sapin II has brought the law into line with the likes of Britain and the U.S. The new anti-corruption agency (Agence Française Anti-Corruption) is now considered a serious partner in the fight against corruption and is actively liaising with its overseas counterparts as a result.
This increased cooperation is evidenced by a joint U.S. and French bribery resolution announced in early June 2018 that they had agreed separate deferred prosecution agreements (DPAs) totaling US$585 million with Société Générale in relation to allegations that the bank’s executives bribed officials in Libya’s development fund.
There are, of course, still barriers. Most obviously, politics plays a role, and the sharing of information and cooperation between countries suffers when diplomatic relationships break down. More commonly, the issue is simply one of resources. Where multiple jurisdictions are involved in building a case against an individual or business, the ability to do so – and the speed with which it can be done – depends heavily on the capabilities of the agencies involved. These continue to vary widely, particularly between the developed and developing world.
Nevertheless, the overall trend is towards a greater willingness and ability for regulators and law enforcement agencies to work together to tackle financial crime.
The increased sharing of information is not limited to state agencies, however; it increasingly involves private enterprise, too. The Joint Money Laundering Intelligence Taskforce (JMLIT) set up by the UK in 2016 to tackle money laundering is a good example, bringing together more than 40 UK and international banks, the British Bankers Association and law enforcement agencies.
The initiative reflects an increasing recognition on the part of law enforcement that sharing focused intelligence with banks and others can help increase its understanding of the methods being used in financial crime. It is a two-way street, however, and the desire to cooperate with the private sector comes with greater expectations in terms of the standards of governance and recordkeeping within those businesses. And increasingly this is an obligation.
Again, it is efforts to tackle tax evasion that provide probably the best examples. In particular, the UK’s Criminal Finance Act last year introduced strict liability for organizations failing to put in place reasonable procedures to prevent the facilitation of tax evasion directly by the organization or by an “associated person”.
The Act introduces the prospect of unlimited fines, and, critically, even if the offence is in another jurisdiction, it may still be pursued in the UK. Firms therefore need to ensure they have the proper records, due diligence, governance and compliance systems in place to prevent tax evasion and other financial crimes – not just so they can help UK authorities and its foreign partners get the information they need, but also to avoid prosecution themselves.