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Striking the right balance between privacy and fighting financial crime

Written by Ben Cowdock on Wednesday, 31 October 2018

What price should the anti-corruption movement put on privacy? This question is quickly becoming unavoidable for all involved in the fight against corruption and money laundering as we seek a balance between the effective use of information to expose wrongdoing and the responsible use of personal data.

It’s important to note these principles are not contradictory. It is possible – in fact necessary – to use personal information to tackle money laundering whilst taking into account concerns around privacy and data protection. Indeed it is vital that these issues do not get in the way of anti-money laundering efforts; criminals must not be given yet another advantage over those trying to bring them to justice.

Central to the fight against corruption is ending financial secrecy. This allows money launderers to hide identities and assets behind shell companies to evade justice. The UK’s answer to this – its Persons of Significant Control (PSC) register – which publishes the names of the true owners of UK companies has now been operational for over two years.

Whilst there is a way to go in terms of achieving fully accurate data, it is already being used to tackle financial crime. In just one example, 2017 saw Amnesty International expose the owner of a UK company behind a multinational weapons smuggling operation, thanks to the public nature of ownership data.

However the law firm, Mishcon de Reya, recently suggested they may challenge the legality of publishing company ownership information, citing concerns around ‘sensitive data’ being published. Such assertions are unlikely to gain traction in the UK due to the robust ‘protection regime’ of the PSC register – those who are at risk of harm can have their data removed from public display.

Mishcon de Reya also contend that public access to this information is not necessary to fight financial crime, a position which can be disputed on a number of levels.

  • Public access to company ownership information is a deterrent to money launderers. The use of the now notorious Scottish Limited Partnerships fell 80 per cent after they were included in the UK’s public beneficial ownership register.
  • Public access also ensures accuracy of the data. Work done by Global Witness has highlighted tens of thousands of cases of non-compliance with the UK’s PSC register whilst TI-UK report individual cases of suspicious company filings on a regular basis.

If the UK’s register were not public, neither of these activities could happen, therefore making this a vital component in fighting financial crime.

In addition to publishing data, sharing information is another way in which the fight against money laundering is evolving. The UK has seen the introduction of a public/private partnership between Government, the police and banks with the creation of the Joint Money Laundering Intelligence Taskforce (JMLIT) two years ago. This forum sees information on live cases being issued to banks who can then check their own databases and feed in supporting intelligence.

Meanwhile the 2017 Criminal Finances Act created new ‘super SARs’ – suspicious activity reports containing information from a number of professionals in a single package. These would provide law enforcement with a fuller picture on potential cases from different firms involved in connected financial activity.

There are concerns that these initiatives will be hampered by the General Data Protection Regulation (GDPR) which came into force in May 2018 and requires firms to put in place comprehensive systems to maintain privacy and the data security of their customers. Overly cautious firms may now be reluctant to share information due to the potential repercussions of GDPR sanctions.

Any such precautions around information sharing are misplaced. Firms should be made aware of the specific provisions within the UK’s 2018 Data Protection Act contains which address money laundering regulations, enabling firms to continue adhering to their duties without falling foul of GDPR. As UK Finance note – money laundering falls under the legitimate interest category where it would not be appropriate to seek customers’ permission before sharing data.

Data protection and privacy will also be at the forefront of investigative journalists’ minds after Cliff Richard was awarded damages over the BBC’s reporting of a police raid on his house in 2014. Whilst this case might not appear relevant to corruption and money laundering, it may have ramifications on how cases involving illicit finance are reported.

In light of the success of Cliff Richard, the lawyers of corrupt individuals with deep pockets may feel emboldened to ask journalists to refrain from reporting their involvement in criminal cases.

It’s important that journalists do not let the precedent set by the Cliff Richard case spell the end of reporting on emerging corruption cases. Unlike Cliff Richard, corrupt individuals are often individuals with prominent public functions and are therefore naturally exposed to higher degrees of public scrutiny. Furthermore Sir Cliff was not informed of the BBC’s coverage until moments before broadcast, whereas reporters investigating corruption and money laundering often seek right of reply days – if not weeks – before publishing.

Scandals involving privacy and data protection are unlikely to abate, they are symptoms of the new digital age we live in. It is crucial however that governments, regulators, the private sector and journalists strike continue to responsibly use data to tackle money laundering and end the UK’s role as a safe haven for the corrupt and their assets.


Read 969 times Last modified on Wednesday, 31 October 2018 10:58

Ben Cowdock

Ben is Investigations Lead at Transparency International UK, responsible for leading research into corrupt money entering the UK. He holds an MA in Governance and Corruption from the University of Sussex.

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