In recent years, the fight against financial crime has shifted towards an intelligence-led approach as effective fuel for the risk-based model favored by regulators.1 This paradigm focuses on leveraging data, technology, and analytical insights to preemptively identify and mitigate risks before they materialize within your organization.
In this article, we look at how you can leverage the intelligence-led approach to better combat financial crime and stop compliance standing in the way of business.
Traditional methods, often reactive and siloed, have proven insufficient in combating the sophisticated and evolving tactics employed by financial criminals. The intelligence-led approach, however, provides a more dynamic and effective strategy in ensuring that your actual risks form the basis of your anti-financial crime program.
At its core, the intelligence-led approach is predicated on a triangular framework, categorized into three distinct levels: strategic, tactical, and operational. Each level plays a pivotal role in the overarching strategy to combat financial crime and offer a layered defense mechanism that is robust and adaptable.
To understand the intelligence-led approach, imagine that your business is a ship on a voyage from point A to point B. The journey's success depends on whether you manage to navigate to the right place, avoid any icebergs that might be floating around in the middle of the ocean, and have enough fuel.
Strategic intelligence: the bridge’s compass
Occupying the tip of our triangle, strategic intelligence serves as the compass for your institution, guiding policy formulation and risk management strategies over extended timeframes.
Intelligence on this level is usually based on comprehensive analyses of national risk assessments and large numbers of typology reports, which, like setting a true north, provide a strategic outlook on potential threats and vulnerabilities relevant to your organization. It also includes strategic analyses of threats and risks found in the two layers below, and should provide relevant, detailed guidance to allow your organization to sail in the right direction.
Tactical intelligence: the agile spotter
Positioned at the midpoint of the triangle, tactical intelligence is akin to the spotter aboard the ship, offering medium-term insights that help you steer clear of icebergs and other imminent threats. This intelligence layer often harnesses daily news feeds from various sources and information from public-private partnerships to identify more imminent threats and risks. If used correctly, it facilitates nimble adjustments of your strategy, ensuring that your institution can sail around potential hazards you didn’t know about when you left port.
Operational intelligence: the engine room
Forming the base of the triangle, operational intelligence is the engine that propels daily functions. It’s constituted of granular data such as KYC information, transaction records, adverse media screenings, and sanction lists.
Operational intelligence ensures the continuous and effective functioning of anti-financial crime measures, enabling institutions to respond to immediate threats and maintain compliance with regulatory standards. This level requires the most resources and for this reason it’s imperative that operational intelligence is guided by the levels above. Failing to do so will usually lead to huge costs with little to no value in return. In other words, you risk running out of fuel before your ship reaches its destination.
Lessons from cybersecurity and law enforcement
The transition to an intelligence-led approach in the financial sector is informed by methodologies and best practices honed over decades within the cybersecurity and law enforcement realms.2 These disciplines underscore the importance of structured governance, using harmonized taxonomies, the deployment of advanced technological solutions, and the cultivation of skilled intelligence teams capable of professional analysis. The synthesis of automatic threat detection and collaborative intelligence-sharing models from these fields imbues the financial sector's anti-crime efforts with greater dynamism and efficacy.
The need for collaboration
The intelligence-led approach underscores the necessity for extensive collaboration across the financial landscape. This collective endeavor not only amplifies the capacity for threat and risk detection but also enhances the resilience of the financial system against criminal exploits. It necessitates the formation of alliances that span regulatory bodies, financial institutions, law enforcement agencies, and intelligence communities, fostering an environment where strategic, tactical, and operational intelligence flows seamlessly among stakeholders.
Today, most collaborations focus mainly on operational or tactical intelligence—exchange of names, specific cases, or trends—which serves some purpose, but rarely results in any effective strategic actions that could have a significant impact. The reason for this is not an unwillingness to do so, instead the culprit is likely lack of a common taxonomy and technology to effectively exchange information on threats and risk indicators.
Strategic framework and implementation
Embarking on the implementation of an intelligence-led approach demands the establishment of a structured framework that harmonizes strategic, tactical, and operational intelligence. This alignment is crucial for ensuring that anti-financial crime measures are not only proactive but also comprehensive and targeted. Financial institutions must therefore invest in the development of their intelligence capabilities, emphasizing the acquisition of sophisticated analytical technologies and the training of personnel to navigate the complex terrain of financial crime effectively.
Building a true risk-based financial crime program
The intelligence-led approach to combating financial crime represents the key to implementing a true risk-based approach in your organization. It’s a paradigm shift towards a more informed, agile, and collaborative methodology. Drawing from the lessons of cybersecurity and law enforcement, this approach accentuates the value of structured governance, advanced technology, and skilled human capital.
As your institution navigates through the challenging waters of global finance, the intelligence-led approach stands as a beacon of much-needed (r)evolution, guiding your efforts towards a much more effective fight against financial crime.
Sources:
1. See for example:
Delivering a risk-based approach, February 24 2024
Reducing and preventing financial crime, February 8 2024
OPINION: Growing threats of money laundering, fraud and cyber crime now less distinguishable – how financial institutions can combat them using tech while navigating privacy, November 17 2020
2. CBEST Threat Intelligence-Led Assessments, accessed on March 21 2024
