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Andres Knobel ■ Data on bank transfers: Complementing automatic exchange of information and detecting illicit financial flows in real time

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Tax justice reports
Tax justice reports

Data on bank transfers: Complementing automatic exchange of information and detecting illicit financial flows in real time

Financial secrecy is the common denominator that enables illicit financial flows related to tax evasion, tax avoidance, corruption, money laundering and the financing of terrorism, among others. These illicit activities flourish whenever the identity of criminals, their assets and their income manage to remain secret.  The SWIFT messaging standard currently used by thousands of financial institutions represents a low-hanging fruit because it already centralises information on cross-border transfers which allows SWIFT to offer compliance products for banks and financial data to the US to fight terrorism. 

The lack of transparency in the international financial system facilitates illicit financial flows related to money laundering, corruption and tax abuse. Illegal and illicit activities have become increasingly sophisticated while countries struggle to detect them. To tackle this, authorities should apply advanced data analytics to the millions of daily financial transfers to discover suspicious transactions. The SWIFT messaging standard currently used by thousands of financial institutions represents a low-hanging fruit because it already centralises information on cross-border transfers which allows SWIFT to offer compliance products for banks and financial data to the US to fight terrorism.

Information about wealth is indispensable to identify tax evasion, corruption and money laundering. For example, finding out about someone’s real wealth could indicate not only whether they have paid all applicable income and wealth taxes, but also if they can justify the legal origin of that wealth (“how do you have so much money in the bank and own so many mansions if you only declared a public officer’s salary?”).

Of all the possible forms of wealth (such as cash, art, gold, real estate, investments in securities, etc.), countries have only really made progress on beneficial ownership transparency at a global level in relation to financial accounts, (for example, banking information), in addition to some incipient local measures1 for real estate. There is little or no beneficial ownership transparency with respect to wealth held in other forms.

Key findings

  • Several successful national experiences and proposals demonstrate how to use financial information to detect illicit financial flows and can inform an improved path forward in combatting financial secrecy.
  • for many years SWIFT has been sharing analytics on the details of the millions of bank transfers to detect money laundering schemes with the US for purposes of the fight against terrorism.
  • SWIFT already publishes some statistical data on the number of SWIFT messages sent, their distribution by market and on their distribution by region

Key recommendations

  • Establish Public beneficial ownership registries which verify any registered data are essential
  • Countries should collect and analyse all financial transaction data, either domestic or those coming in and out of their territories (including those that don’t use SWIFT messaging).
  • An international organisation should have access to anonymised SWIFT data in order to take the wider picture into account and detect red flags involving multiple jurisdiction
  • Reported statistics should allow observers to sort through financial transactions depending on the type of account holder (eg individual, company or trust) in order to detect patterns based on the type of legal vehicle involved in the financial transaction.

Additional resources