In a recent article, Theo Normanton from Waters Technology expands on the use of Privacy Enhancing Technology (PET) and Data Pooling in the fight against financial crime. Money laundering has become an ever-growing challenge in recent years. With criminals becoming increasingly sophisticated in their techniques, financial institutions have sought ways to combat the issue, including through data sharing.
The ability to share data across financial institutions, and even across borders, can help detect more money laundering in the system. Francisco Mainez, Lucinity’s Financial Crime and Regulatory Transformation SME says:
"The reality is that the bad guys share data, and they also know that financial institutions don’t share data. That creates a huge gap."
Technological developments have enabled the development of privacy-enhancing technologies (PETs), allowing users to contribute and analyze their data in an encrypted environment. Lucinity has patented technology including the “Secure Lockbox” which leverages homomorphic encryption to encrypt personally identifiable information (PII). As PET technology continues to evolve within the industry, it will soon enable cross-institutional collaboration, allowing AML officers to identify suspicious transactions not only between accounts, but between banks, and even across borders.
The bird's-eye view of the banking system offered by pooled transactional datasets could help train artificial intelligence to distinguish a real suspicious transaction from a false positive alert with greater accuracy. According to Francisco, the latest AML technology combined with political willingness will enable data sharing and thus benefit the entire financial ecosystem.
“Fifty years ago, we put two people on the moon’s surface with a computer the size of a Volkswagen Beetle. So we can fight financial crime together.”