What is Information Sharing in Anti-Money Laundering?

Definition

Information Sharing in Anti-Money Laundering (AML) is the process by which relevant and timely data and intelligence are exchanged among financial institutions, regulatory authorities, law enforcement agencies, and other stakeholders. This exchange aims to enhance the detection, prevention, and investigation of money laundering and related financial crimes by facilitating the sharing of intelligence, suspicious transaction reports, customer due diligence data, and other pertinent information necessary for AML efforts.

Purpose and Regulatory Basis

The core purpose of Information Sharing in AML is to break down silos between institutions and authorities, fostering a cooperative approach to identifying and combating money laundering risks and schemes. By sharing information voluntarily or under regulatory frameworks, organizations improve their ability to spot suspicious patterns, coordinate investigations, and disrupt illicit financial activities.

Key global and national regulations underpinning information sharing in AML include:

• The Financial Action Task Force (FATF) Recommendations, which emphasize collaboration between private and public sectors globally.
• The USA PATRIOT Act, mandating financial institutions to report suspicious activities and enabling information sharing to combat terrorism financing.
• The European Union’s Anti-Money Laundering Directives (AMLD), providing a comprehensive legal basis for data exchange among members.
• The Economic Crime and Corporate Transparency Act (ECCTA) 2023 in the UK, which offers legal protections for regulated firms sharing customer information to prevent economic crime without civil liability risks.

When and How it Applies

Information Sharing is applied in various real-world scenarios within AML frameworks, including:

• Filing Suspicious Transaction Reports (STRs), which are shared with Financial Intelligence Units (FIUs) and relevant agencies for further examination.
• Sharing Know Your Customer (KYC) data between institutions to verify identities and assess risks.
• Public-private partnerships like the Joint Money Laundering Intelligence Taskforce (JMLIT) that encourage voluntary information sharing to counter complex money laundering schemes.
• Cross-border cooperation through international treaties, enabling exchange between jurisdictions to tackle global money laundering networks.
• Sharing insights and alerts on emerging threats and typologies within AML forums and industry training.

Types or Variants

Information Sharing in AML can take several forms:

• Direct sharing: One regulated firm shares information directly with another, typically regarding suspicious activities or customer risks.
• Indirect sharing: Information is exchanged via a third-party intermediary, allowing broader dissemination while maintaining confidentiality.
• Suspicious Activity Reports (SARs) and STRs: Formal reports submitted to authorities, often consolidating intelligence from multiple sources.
• Financial Intelligence Units (FIUs) as central hubs that receive, analyze, and disseminate information domestically and internationally.
• Public-private information exchanges for collaborative threat intelligence.
• International cooperation mechanisms such as mutual legal assistance treaties (MLATs).

Procedures and Implementation

To comply with Information Sharing requirements, financial institutions and regulated entities should:

• Establish internal policies aligned with regulatory obligations for when and how to share AML-related information.
• Implement secure, controlled communication channels and platforms for safe and confidential data exchange.
• Conduct proper due diligence on the recipient of shared information to ensure compliance with data protection laws such as GDPR.
• Train staff regularly on identifying suspicious activities and the protocols for information exchange.
• Document and maintain records of all information exchanges, including the rationale and consent where required.
• Use technologies such as transaction monitoring systems, data analytics, and intelligence platforms to gather and disseminate relevant information efficiently.

Impact on Customers/Clients

From the customer perspective, Information Sharing:

• May lead to enhanced scrutiny, especially in cases of high-risk profiles or suspicious activity.
• Imposes restrictions such as account monitoring, access limitation to financial products, or relationship termination if money laundering risks are suspected.
• Requires institutions to maintain confidentiality and avoid “tipping off” customers about investigations.
• Balances the need for data protection and privacy rights with regulatory compliance, ensuring data is shared only when justified and under legal bases.
• Customers have rights under data protection laws to understand how their information is processed and shared within AML frameworks.

Duration, Review, and Resolution

Information shared for AML purposes is subject to:

• Retention periods mandated by law and organizational policy, often several years to allow for audits and investigations.
• Ongoing review processes to evaluate the relevance and accuracy of shared information.
• Updates or correction protocols if new evidence arises or information changes.
• Resolution through law enforcement or regulatory closure of cases related to shared data.
• Continuous obligations by institutions to monitor customers and transactions post-information sharing to maintain effective AML oversight.

Reporting and Compliance Duties

Regulated entities have several responsibilities related to Information Sharing, including:

• Reporting suspicious transactions promptly through Suspicious Activity Reports (SARs) or Suspicious Transaction Reports (STRs).
• Ensuring that information sharing complies with AML laws, data privacy regulations, and internal control measures.
• Maintaining detailed documentation and audit trails for shared information.
• Being aware of and utilizing legal protections against civil or criminal liability when sharing in good faith under laws like the ECCTA 2023.
• Cooperating with supervisory authorities during inspections or investigations.
• Implementing corrective actions and periodic training based on compliance findings.

Related AML Terms

Information Sharing is closely linked with:

• Customer Due Diligence (CDD) and Know Your Customer (KYC) processes, which provide the foundational customer information.
• Suspicious Activity Reports (SARs) and Suspicious Transaction Reports (STRs), the formal outputs of information sharing.
• Financial Intelligence Units (FIUs) that receive and analyze shared information.
• Public-Private Partnerships (PPP) where institutions collaborate on shared intelligence.
• Enhanced Due Diligence (EDD) which uses shared info to assess higher risk customers more rigorously.
• Ongoing Monitoring and Transaction Monitoring systems that benefit from shared data inputs.

Challenges and Best Practices

Common challenges in Information Sharing include:

• Legal and regulatory complexities, especially concerning data privacy and cross-border sharing.
• Risk of breaches of confidentiality and customer trust.
• Inconsistent standards and lack of interoperability between institutions and jurisdictions.
• Operational difficulties in timely and accurate data exchange.

Best practices to address these include:

• Developing clear policies and training focused on lawful and secure sharing.
• Utilizing standardized formats, protocols, and platforms for seamless communication.
• Building trust through transparency and collaboration among stakeholders.
• Leveraging technology like artificial intelligence and blockchain for secure and reliable data handling.
• Regular audits and updates to information sharing practices to keep pace with evolving regulations and threats.

Recent Developments

Recent trends in AML Information Sharing include:

• Legal reforms such as the UK’s Economic Crime and Corporate Transparency Act 2023, providing clarity and immunity for good faith sharing.
• Increasing use of advanced analytics and AI to enhance information processing and early detection of suspicious patterns.
• Expansion of global networks such as the Egmont Group for secure, international FIU communication.
• Enhanced integration of private sector firms into intelligence sharing, beyond traditional reporting to authorities.
• Growth in public-private partnership models and industry consortiums for proactive AML threat intelligence.

Information Sharing is a cornerstone of effective Anti-Money Laundering strategies, facilitating collaboration across financial institutions, regulators, and law enforcement. By exchanging relevant intelligence, entities strengthen their ability to detect and disrupt money laundering activities, comply with global regulatory frameworks, and protect the integrity of financial systems. Ongoing enhancements in legal frameworks, technology, and cooperative models make Information Sharing increasingly vital for AML compliance and financial crime prevention.