Economic crime is a growing global challenge, costing businesses and governments billions each year.
The fight against economic crime
Despite efforts to combat fraud, money laundering and financial misconduct, criminals continue to exploit regulatory gaps and outdated technology.
A recent report by Global Counsel and Enveil highlights a crucial solution: improved data sharing between financial institutions, regulators and law enforcement.
With economic crime on the rise, leveraging technology and fostering collaboration are essential to creating a safer, more transparent financial ecosystem.
The Cost of Economic Crime
Economic crime imposes staggering costs on the global economy.
In the UK alone, it is estimated to cause annual losses of over £8.5 billion, with fraud accounting for more than £1 billion of that figure.
The true impact extends beyond financial losses, with victims experiencing emotional distress and long-term repercussions.
Despite these figures, combating economic crime has not always been a political or regulatory priority.
However, as technology-enabled fraud becomes more sophisticated, urgent action is needed.
The Challenges of Combating Financial Crime
One of the most significant obstacles to tackling economic crime is the fragmented nature of fraud prevention efforts.
Various agencies, including banks, law enforcement, and regulatory bodies, collect vital data, but a lack of coordination prevents them from sharing intelligence effectively.
This disjointed approach allows criminals to exploit regulatory loopholes and remain undetected.
Four primary barriers to effective data sharing have been identified:
- Lack of clear incentives – Many firms hesitate to participate in data-sharing initiatives due to compliance costs and regulatory risks. Without a clear framework, companies fear legal repercussions from sharing sensitive information.
- Legal ambiguity – Uncertainty around data privacy laws creates hesitation among businesses. Financial institutions require clearer legal definitions and guidance to mitigate potential liabilities.
- Limited adoption of new technologies – Criminals rapidly adapt to new technologies, while financial institutions are often slow to adopt advanced tools like Privacy Enhancing Technologies (PETs).
- Fragmented data-sharing landscape – Existing initiatives lack consistency in governance and data-sharing standards, making participation difficult and costly for businesses.
Leveraging Technology to Strengthen Defences
Privacy Enhancing Technologies (PETs) offer a promising solution to these challenges.
PETs allow institutions to analyse and share data securely while preserving privacy and compliance standards.
These technologies enable:
- Cross-institutional data analysis – Organisations can detect suspicious transactions without exposing sensitive customer information.
- Secure collaboration – Banks and law enforcement can work together to track illicit financial activities while maintaining regulatory compliance.
- Greater fraud detection capabilities – PETs help institutions proactively identify fraud patterns, reducing financial crime at its root.
Despite the benefits of PETs, adoption remains slow due to a lack of education and outdated infrastructure within many financial institutions.
Encouraging the adoption of these tools is crucial to enhancing the industry’s ability to combat economic crime.
The Case for Regulatory Action
To address these challenges, the report recommends a three-stage approach:
- Operational Pilots – The Financial Conduct Authority (FCA), Information Commissioner’s Office (ICO), and National Economic Crime Centre (NECC) should initiate pilots to test new data-sharing technologies, including PETs. By involving both public and private stakeholders, these trials can help establish best practices.
- Mandated Data Sharing in Financial Services – Voluntary data-sharing agreements have proven insufficient. The UK government should require major financial institutions to share information on economic crime within a regulatory framework.
- Standardised Industry Guidelines – The financial sector needs a uniform lexicon for economic crime, with standardised governance and data-sharing protocols. This would simplify compliance and encourage participation across industries.
A Safer Financial System
Global efforts to combat economic crime must shift from reactive to proactive strategies.
By embracing data-sharing frameworks and leveraging advanced technologies, financial institutions and regulators can make it more difficult for criminals to operate.
A more cohesive and technologically advanced approach will not only protect consumers and businesses but also enhance trust in the financial system.
Economic crime will continue to evolve, but with stronger collaboration, better data sharing and increased use of cutting-edge technology, the financial sector can build a more resilient and secure future.
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