Leveraging the provisions of Open Banking to fight financial crimes

With its over-reliance on compliance by the reporting entities through various reporting obligations, the present anti-money laundering framework has failed to produce the desired result of curbing financial crime and recovering laundered money. In such a context, the sharing of customer data would be highly valuable to combat financial crimes like anti-money laundering and terrorism financing. Not only the risky transactions would be flagged, and immediate action taken, but it would also save banks millions of dollars in transaction monitoring, which then can be spent on innovative solutions ensuring the financial well-being of the general customers. Australian Consumer Data Right (CDR) and its implementation in the banking sector allow customer data to be shared between the banks and other accredited participants of Open Banking. However, under the present Open Banking framework, data-sharing cannot be initiated without the explicit consent of the customer. While this consent requirement empowers customers to control and use their own data, it limits the use of data. Moreover, there is uncertainty about whether all the entities accredited as data recipients under Open Banking are obligated to report suspicious transactions. As a result, in its current form, Open Banking suffers from the limitation that inhibits its potential to fight financial crimes effectively. This chapter is an initial exploration of the developments needed not only in the in the existing anti-money laundering framework but also in the organizational culture of the financial service providers. This will help the financial institutions and regulators collaborate better and deliver the promise of Open Banking- a differentiated positive customer experience while maintaining and improving customer trust in the system.